Tax, Accounting Firms See Opportunity in Health Law
Early this year, officials at Littler Mendelson, the largest US-based law firm representing management in employee benefits and labor law, surveyed the landscape as the Obama administration began implementing the Affordable Care Act. They knew big money was to be made.
Businesses large and small were grappling with how – or even whether – to comply with the new federal mandates for providing health insurance to full-time workers. Many feared the costs would be staggering and could put them at a competitive disadvantage or even drive them out of business.
Littler Mendelson responded by forming a separate health care consulting group with over 20 top attorneys to advise clients on how to minimize their costs and taxes. The giant firm – with more than 900 lawyers operating from 55 offices nationwide – also created an online service to help companies determine liabilities and costs under Obamacare. New business started pouring in.
“We’re advising hundreds and hundreds if not thousands of businesses,” Steven Friedman, co-chair of the firm’s employee benefits practice group, told The Fiscal Times. “We’re working with employers to determine if there are strategies they can employ to somehow mitigate the effects of the law . . . and we’re coming up with some innovative solutions.”
This strategic expansion is part of a cottage industry thanks to the new health-care reform law. President Barack Obama signed the law in March 2010, but it won’t fully take effect until January. With a new slew of complicated laws and regulations on the books, someone has to interpret them for average Americans and the business community.
Leading law firms like Littler Mendelson, Proskauer, and others continue to eye the possibilities. H&R Block and other tax preparation firms are expected to hire additional accountants to help individuals file their tax returns, which will provide vital information to comply with Obamacare. And certified public accounts and data management firms are poised to assist businesses with record keeping and other assistance.
Without question, tax professionals and tax form preparers are among the most important cogs in the Obamacare machine. The Supreme Court held last year that Congress could regulate health care under its ability to tax. That gave the IRS a leading role in implementing the new law, along with the Department of Health and Human Services. There are 47 tax provisions – including the small business health care credit and the medical devices tax – that will take effect. The agency will have to administer those provisions and collect taxes where due.
• The IRS determines whether people qualify for a health insurance premium tax credit as part of the minimum coverage requirement.
• Americans will report their insurance status when they file their tax forms.
• The IRS will collect a $95 penalty on those without insurance.
• Businesses with 50 or more full-time workers must provide health care insurance to their employees or face a $2,000 per-head penalty.
• The agency will collect the penalties when businesses do not comply.
Tax preparers play such an important role in Obamacare that HHS Secretary Kathleen Sebelius reportedly solicited a $500,000 donation from H&R Block to fund a marketing campaign to sell Americans on health reform. Gene King, a company spokesman, said yesterday that while Sebelius contacted H&R Block, the firm had yet to commit to any donation.
H&R Block CEO Bill Cobb said last week in a conference call with investors that the company has “begun to invest in resources and technology that we expect will enable us to roll out initiatives this year that will benefit our clients.”
The potential for revenue growth by H&R Block and other tax-prep firms is tremendous. The tax preparation industry generated $9 billion in revenues in 2012 while employing 302,931 people at 109,758 firms, according to IBIS World. Hundreds of millions of dollars or more could easily be generated by those companies’ outreach on Obamacare.
Those Who Stand To Gain
Some accounting firms that don’t directly advise on the new health insurance law still stand to make a lot of money because of it.
Peisner Johnson & Co., a Dallas-area certified public accounting firm, specializes in handling companies’ state and local sales tax obligations. Because many firms are trying to keep their workforces below 50 employees, they are outsourcing some work – including handling sales tax records and payments.
Many Texas companies are outsourcing that work to Peisner Johnson, says Michael Fleming, the firm’s director of partner relations.
“Our out-sourced [state and local] tax returns business is growing by leaps and bounds,” Fleming told The Fiscal Times. “I’m not looking at exact figures here, but I would say year over year we’re probably up 20 percent this year.”
Sources: The Fiscal Times