Proposed regulations and Rev. Proc. 2025-9: Excise tax under section 5000D on designated drugs

Proposed regulations adopt rules consistent with substantive rules described in Notice 2023-52  

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December 31, 2024

The U.S. Treasury Department and IRS today released proposed regulations (REG-115560-23) relating to the excise tax imposed under section 5000D (introduced by the “Inflation Reduction Act of 2022” (IRA)) on sales of “designated drugs” during a “statutory period” with respect to such drugs, by manufacturers, producers, and importers on and after August 16, 2022.

The term “designated drug” means any negotiation-eligible drug (as defined in section 1192(d) of the Social Security Act (SSA)) included on the list published under section 1192(a) of the SSA that is manufactured or produced in the United States or entered into the United States for consumption, use, or warehousing.

The proposed regulations adopt rules consistent with the substantive rules described in Notice 2023–52, which the Treasury Department and IRS issued in August 2023 to provide interim guidance on the excise tax imposed under section 5000D.

The Treasury Department and IRS also issued final regulations (T.D. 10003) in July 2024 providing guidance on how taxpayers must report liability for the excise tax imposed under section 5000D, which are effective as of August 5, 2024. Read TaxNewsFlash

The proposed regulations are proposed to apply to tax years beginning on or after the date of the proposed regulations are finalized, but taxpayers may continue to rely on sections 3.01 and 3.02 of Notice 2023-52 until that date.

Comments on the proposed regulations and requests for a public hearing are due by the date that is 60 days after the proposed regulations are published in the Federal Register, which is scheduled to be January 2, 2025. 

Rev. Proc. 2025-9

The Treasury Department and the IRS today also released Rev. Proc. 2025-9 to provide a safe harbor that taxpayers may use to identify the subset of each sale in units of a designated drug made during a statutory period that is subject to the section 5000D tax.

Rev. Proc. 2025-9 is effective for returns filed on or after December 31, 2024.

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