The health care changes will not affect PPG until 2013, but standard accounting practices dictate the company take the charge in the quarter in which the law was enacted, according to Reuters. The first-quarter charge does not involve any cash, but the changes will cost PPG $4 million in 2013 and trickle down after.
PPG joins a growing list of firms reporting an earnings hit related to changes resulting from the new healthcare legislation (see Healthcare-Related Earnings “Hit” List Continues to Expand). The tax charge results from a change in the treatment of payments to retiree prescription plans.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.
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