Summary
Norfolk Southern Corporation (NSC) filed an 8-K on April 5, 2010, to disclose the impact of the Patient Protection and Affordable Care Act (ACA), signed into law on March 23, 2010. The legislation alters the tax deductibility of Medicare Part D retiree drug subsidies for employers. Specifically, beginning in 2013, employer expenses reimbursed by the Medicare Part D subsidy will no longer be tax deductible. As a result, Norfolk Southern will record a non-cash charge in the first quarter of 2010 to reflect the full impact of this tax law change on its deferred tax effects for retiree health care liabilities. This will result in an increase in income tax expense of approximately $27 million for the first quarter of 2010.
Key Highlights
- 1Disclosure of a non-cash charge related to new healthcare legislation (ACA).
- 2The charge is due to changes in the tax treatment of the Medicare Part D retiree drug subsidy.
- 3After 2012, reimbursed Medicare Part D drug expenses will no longer be tax deductible.
- 4Norfolk Southern will recognize the full impact of this tax change in the first quarter of 2010.
- 5An estimated increase in income tax expense of approximately $27 million for Q1 2010 is expected.
- 6This is a non-cash accounting event, not an operational cash outflow.
- 7The legislation was enacted on March 23, 2010, with subsequent modifications on March 30, 2010.