More Big Companies Report Charges Spurred By Health Law
News regarding the health law's early impact on large companies millions of dollars in lost tax exemptions is continuing to emerge.
CNNMoney: "Boeing (BA, Fortune 500) became the latest company to disclose that the law, which was signed by President Obama last week, will negatively impact its financial results..." That news follows announcements from Deere, Caterpillar and other firms that they will take multi-million dollar charges. AT&T announced it would absorb a $1 billion charge last week (Rooney, 3/31).
The Wall Street Journal: "Also Wednesday, fellow aerospace company Lockheed Martin Corp. estimated that it will take a $96 million charge because of the health-care legislation ... The legislation prevents companies from deducting tax-free subsidies they receive from the government for providing prescription-drug benefits to retirees. The charges are noncash, meaning companies won't have to write a check, but ultimately their tax bills will be higher ... assuming their benefits don't change" (Cameron and Tita, 4/1).
The Associated Press: "Other announcements on Wednesday included a $41 million non-cash charge announced by diversified manufacturer Ingersoll-Rand PLC, and $10 million charge for aerospace supplier Goodrich Corp. ... Companies are announcing the charges now because accounting rules say they have to book them during the period a new law is enacted. In addition to the accounting charges, the companies will face a higher tax bill starting in 2013 if they keep paying for prescription drugs for retirees" (Freed, 3/31).
Reuters: The announcements have caused a political stir. "Some corporate leaders have complained that the change amounts to a tax increase. White House officials have countered that it essentially closes a tax loophole" (Baertlein, 3/31).
NPR examined the history of the deduction: "In 2003, when President George W. Bush and Congress were finalizing plans for the new Medicare prescription drug plan, one thing worried them: They feared that once the new plan kicked in, companies that offered drug coverage to retired employees might be tempted to cancel coverage and offload those workers into the Medicare plan - costing the government more money" (Zarroli, 3/31).