Radiologists say tax provision in reconciliation bill will harm private practices
Radiologists and other physicians are voicing concern that a tax provision in the recently passed reconciliation bill will harm private practices.
The U.S. House approved the budget package on May 22 in a 215 to 214 vote, including a Medicare pay hike for physicians next year. Lawmakers in the U.S. Senate are now mulling the measure, while the Society of Interventional Radiology and others have announced their opposition to one element.
House leaders are proposing to increase the itemized deduction for state and local income taxes (SALT) from $10,000 to $40,000. In addition, the bill would eliminate the ability of physician practices and other businesses to use the “pass-through entity tax” structure or PTET.
“This change creates an additional federal tax disadvantage for small physician-owned practices compared to corporations, which retain deductibility, and could increase the federal tax burden on these practices making it harder for them to sustain independent operations,” the American Academy of Otolaryngology–Head and Neck Surgery (AAO-HNS) noted in a recent breakdown of the bill.
Given these concerns, the Society of Interventional Radiology, the AAO-HNS, and 20 other medical societies wrote to House leaders on May 20 ahead of its passage. They emphasized that these tax changes would “harm small businesses” and “jeopardize patient care across the country.” Many medical practices operate as pass-through entities, they noted, with their income taxes at the individual level. And the number of such pass-through businesses has tripled in the past 45 years, employing over 50% of the private sector workforce.
“To be clear: the [pass-through entity tax] deduction is not a loophole, nor a workaround. It reflects the original intent of Congress to preserve fair treatment for all small businesses, regardless of structure,” the Society of Interventional Radiology et al. wrote to Speaker Mike Johnson, R-La., and Majority Leader Steve Scalise, R-La. “Its elimination would unfairly single out service professionals and further widen the tax disparity between them and larger corporations. Our professions already face rising costs for staffing, equipment, technology, and continuing education efforts. Any added tax burden will make it difficult for small practices to survive. Eliminating the PTET deduction could lead to staff reductions, service limitations, and even practice closures, directly affecting patients’ access to care.”
SIR also highlighted the advocacy push in a news update to its members published May 28. The society said it’s unclear why the House Ways and Means Committee has “singled out certain service-based professions for unfair tax treatment.” It’s likely that many mid- to high-level-income, physician-owned practices will be “especially harmed” by this new provision.
“The effect will be a ‘double tax’ on small medical practices, without the protections enjoyed by other small businesses or corporations,” SIR said.
The U.S. Senate is now taking up House Resolution 1, with further amendments anticipated. Any revisions will necessitate a second vote in the House before the bill makes it to the president, the American Academy of Otolaryngology–Head and Neck Surgery said.
Others signing the letter to House leaders included the American Dental Association, American Urological Association, Congress of Neurological Surgeons, and the Society for Vascular Surgery. The American College of Physicians also shared concern about these tax changes in a separate letter dated May 20.
Marty Stempniak has covered healthcare since 2012, with his byline appearing in the American Hospital Association's member magazine, Modern Healthcare and McKnight's. Prior to that, he wrote about village government and local business for his hometown newspaper in Oak Park, Illinois. He won a Peter Lisagor and Gold EXCEL awards in 2017 for his coverage of the opioid epidemic.