Last week Hartford Financial Services Group Inc said it expected to incur a $20 million first-quarter charge related to tax changes under the new federal healthcare act. In a Securities and Exchange Commission (SEC) filing, the company said on Friday it expects to incur the charge due to recent federal legislation that will reduce the tax deduction related to retiree health care costs beginning in 2013.
Also on Friday grocer Kroger Co said it expects its tax expenses this year to be higher than previously thought, because of the new healthcare legislation. Kroger said it would be unable to take a tax deduction for expresses related to prescription drug coverage for its retired employees, resulting in a fiscal 2010 tax expense $1.5 million to $2 million higher than it otherwise would have been, according to Reuters.
Under the 2003 Medicare prescription drug program, companies that provide prescription drug benefits for retirees receive subsidies covering 28% of eligible costs, but are allowed to deduct the entire amount they spent on these drug benefits — including the subsidies — from their taxable income. The new bill allows companies to only deduct the 72% they spent on those programs. While that tax deduction is not scheduled to be eliminated until 2013, but the impact relating to future retiree drug costs must be recorded in the period in which the legislation was enacted (see More Companies Report Health Reform Impact).
Other firms that announced impacts last week:
Ingersoll-Rand Plc, which said it expects to record a non-cash charge of $41 million.
Exelon Corp said it expects a non-cash charge of about $65 million in the first quarter of 2010 due to the recently passed healthcare reform law. According to Reuters, the reduced income tax deductions are also estimated to increase Exelon’s total annual income tax expense by about $10 million to $15 million, the company said in a filing with the U.S. Securities and Exchange Commission.