Originally published on Passive Activities and Other Oxymorons on February 11, 2011.
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Announcement 2011-14
As yesterdays post compared with todays shows tax issues cover the gamut of human phenomena. I don’t make this stuff up though. There is obviously selection on my part, but I work with the material that is thrown at me.
Normally I don’t post on things that I pick up from other blogs. I review original source material for items of interest either because of practical importance, humour or opportunity for reflection. This particular item hit the news more quickly because a bunch of legislators are patting themselves on the back for persuading the IRS into reversing its position. To give credit where it is due, I first noticed this in Accounting and Tax Tips. Although he didn’t give a citation. I found that in Accounting Today along with a link to the full text. This is one of those very rare occasions where something gets into the blogosphere before it gets into Checkpoint.
The announcement which I reproduce below indicates that breast pumps and related supplies are deductible as medical expenses. Possibly of more practical significance it also makes them reimbursable under flexible spending arrangements.
The Internal Revenue Service has concluded that breast pumps and supplies that assist lactation are medical care under § 213(d) of the Internal Revenue Code because, like obstetric care, they are for the purpose of affecting a structure or function of the body of the lactating woman. Therefore, if the remaining requirements of § 213(a) are met (for example, the taxpayer’s total medical expenses exceed 7.5 percent of adjusted gross income), expenses paid for breast pumps and supplies that assist lactation are deductible medical expenses. Amounts reimbursed for these expenses under flexible spending arrangements, Archer medical savings accounts, health reimbursement arrangements, or health savings accounts are not income to the taxpayer.
The Service will revise Publication 502, Medical and Dental Expenses, to include this
information.
In INFO 2010-0173, the IRS had reached the opposite conclusion :
I am responding your letter of March 30, 2009, to Commissioner Douglas H. Schulman about the treatment of costs associated with breast pumps and related equipment. You recommend that the Service allow the costs of breast pumps and related equipment to be reimbursable under a tax favored health care flexible spending account (FSA).
In general, funds from an FSA are to be used for medical care. The Internal Revenue Code defines medical care to include the diagnosis, cure, mitigation, treatment or prevention of disease. Medical care includes medicine and drugs, but does not include goods or services that are merely beneficial to general health and do not mitigate or treat a disease. Under current law, therefore, the cost of purchasing or renting a breast pump and related equipment would not come within the definition of a medical care expense for FSA purposes, even though the mother’s usage of the breast pump may have the health benefits mentioned in your letter.
It is not within the authority of the Internal Revenue Service to classify breastfeeding equipment as medical care in contravention of current law. A change to the Internal Revenue Code must be made by Congress.
Since “everybody else” is writing about this, I would normally pass it by except that one of my earliest blog posts was on a lactation issue that I thought the IRS had gotten wrong. It had a very clever title, so you should click the link just to find out. The IRS had disallowed a deduction for infant formula by a woman who had had a double mastectomy. So the tax geek response to the stories about this announcement is “Well does that mean the Service will revisit its holding in PLR 200941003 ?”