Why isn't the Internal Revenue Code written in English? Have you read IRC Section 45R yet on the health care tax credit?

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IRC Section 45d - as clear as mudWhy does the Internal Revenue Code read as clear as mud?  It must be deliberate.  I'm not complaining, because it's good for my business as a Certified Public Accountant.  Let's face it, if the average person could understand the tax code, why would they pay us $150/hour to do their taxes and resolve their tax issues?

But the FASBs, GASBs, APBs, SEC pronouncements, etc., don't read any better.  Leave it to attorneys and others on the FASB, AICPA, SEC, and in the Department of Treasury to muddy the waters always.  Like Delphic oracles of antiquity, these supreme bodies of accounting and taxation have a reputation for issuing statements veiled in ambiguity and incomprehensibility to the uninitiated, keeping tax attorneys and certified public accountants—the high priestesses of the accounting and tax mysteries—gainfully employed.  At times I feel that one has to be a biblical exegesis scholar in order to be able to interpret some of their esoteric pronouncements. 

Need an example?  Have you read Section 45R of the Code on the new health care tax credit enacted into law on March 23, 2010?

(a) General rule. For purposes of section 38 , in the case of an eligible small employer, the small employer health insurance credit determined under this section for any taxable year in the credit period is the amount determined under subsection (b) .
(b) Health insurance credit amount. Subject to subsection (c) , the amount determined under this subsection with respect to any eligible small employer is equal to 50 percent (35 percent in the case of a tax-exempt eligible small employer) of the lesser
of—
(1) the aggregate amount of nonelective contributions the employer made on behalf of its employees during the taxable year under the arrangement described in subsection (d)(4) for premiums for qualified health plans offered by the employer to its employees through an Exchange, or
(2) the aggregate amount of nonelective contributions which the employer would have made during the taxable year under the arrangement if each employee taken into account under paragraph (1) had enrolled in a qualified health plan which had a premium equal to the average premium (as determined by the Secretary of Health and Human Services) for the small group market in the
rating area in which the employee enrolls for coverage.
(c) Phaseout of credit amount based on number of employees and average wages. The amount of the credit determined under subsection (b) without regard to this subsection shall be reduced (but not below zero) by the sum of the following amounts:
(1) Such amount multiplied by a fraction the numerator of which is the total number of full-time equivalent employees of the employer in excess of 10 and the denominator of which is 15.
(2) Such amount multiplied by a fraction the numerator of which is the average annual wages of the employer in excess of the dollar amount in effect under subsection (d)(3)(B) and the denominator of which is such dollar amount.

Don't you just love it when these pronouncements fail to complete a thought without referring the reader to another section (or subsection, or sub-subsection) to understand what it is saying?  First the reader is informed that the credit is the amount determined under subsection (b).  Then in (b), the reader discovers that it is subject to subsection (c).  And then in (c), it is referred to subsection (d)(3)(B).  I feel as a reader that I can never catch up to what the pronouncement is attempting to say.  Perhaps it would make more sense by reading the Code from the end of the particular Section and working one's way backwards. 

My mother used to scold me in this fashion, always reprimanding me while referring to an earlier incident, and to another one before that one, and the one before the one before the earlier incident, and so on, until I had no idea why she was scolding me in the first place!  Don't you just hate that?!

Incidentally, for anyone interested in understanding Section 45R on the health care tax credit—which is why I ruined my Memorial Day weekend in the first place—please see my article, How to Calculate the Health Care Tax Credit, so you don't ruin your Memorial Day weekend, too.

This article is provided for informational purposes and is not intended to be construed as legal, accounting, or other professional advice.  For further information, please consult appropriate professional advice from your attorney and certified public accountant. 

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