Employee Benefits-IRS Obsoletes Revenue Ruling Permitting Tax-Free Reimbursement of Over-The-Counter Drugs

As a follow up to yesterday’s blog, in Rev. Rul. 2010-23, the Internal Revenue Service (the “IRS”) obsoleted Rev. Rul. 2003-102. That Ruling had held that reimbursements by the employer of amounts expended for medicines or drugs available without a prescription are excludable from gross income under Section 105(b) of the Internal Revenue Code (the “Code”). Section 9003 of the Affordable Care Act, enacted March 23, 2010, changed the Code, so that a medicine or a drug may be treated as a medical expense, and eligible for tax-free reimbursement, only if it is prescribed. Due to this change, to avoid confusion, the IRS said that Rev. Rul. 2003-102 is not longer determinative, and is declared obsolete as of the effective date of Section 9003 of the Affordable Care Act (generally for medicines and drugs purchased after 2010).