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IRS Provides Guidance on Eligible Products

by Liz Norton | Jul 27, 2009

Dear SIGIS Members,

On May 28, 2009, Outside Counsel for SIGIS sent a letter to the IRS requesting clarification on certain items that the List Working group has struggled with determining their eligibility. SIGIS requested clarification for 19 specific categories of items including:

  • Acne Treatments (including skin washes, skin toners and multi-step systems)
  • Anti-arthritics (glucosamine, joint free)
  • Diabetic hose and socks
  • Compression hose
  • Fluoride rinses
  • Food thickeners
  • Abdominal support braces (back braces, ankle, elbow, foot and arch supports and insoles)
  • Anti-bacterial hand sanitizers, incontinence products, dehydration relief (such as pedialyte), sunscreen (sun block, after sun lotions, sunburn relief), nasal strips (breathe right)
  • Skin moisturizers (lotions, creams and body washes) for skin conditions such as psoriasis, eczema and diabetes, including "crack crème" remedies
  • Orthopedic shoes and inserts
  • Orthotics
  • Petroleum jelly
  • Fiber supplements
  • Probiotics
  • Wheelchair cushions
  • Medical grade face masks

On July 14, 2009, the IRS responded with general clarification for informational purposes only and does not constitute a binding ruling. Although non-binding, the response provides valuable insight as to how the IRS would likely view these expenses. The response provides three (3) classifications of expense as follows:

(1) The IRS concludes that many of the items are dual purpose items, depending on the taxpayer's use. Examples of items classified as "dual purpose" include sunscreen, medical face masks, skin products, anti-bacterial hand sanitizers, fluoride rinses, petroleum jelly, fiber supplements and probiotics to maintain general health.

(2), Items that have no purpose other than to treat a disease, illness, or mental or physical defect may qualify as medical care. Examples of these items include treatments for acne, incontinence, arthritis, constipation, colds and sinus problems, dehydration, and indigestion and support braces and shoe inserts for injured and weakened body parts. These items most likely will qualify as medical care under IRS Code 213(d). Skin products whose only purpose is to treat a medical condition (in contrast to preventing development of the condition), like eczema would be considered eligible.

(3) The excess cost of an otherwise personal item that is specifically designed to treat or alleviate a medical condition, over the cost of the item without the special features, may be an allowable medical expense. Examples of these items would be diabetic hose and socks, compression hose and orthopedic shoes. Additionally, food thickeners as a medical expense must be determined on a case-by-case basis.

The List Working Group will be reviewing the current SIGIS list to review products that may need to be removed based on the IRS response. Specific areas the list working group will focus on includes fiber supplements (as opposed to bulk-forming laxatives), compression hose, food thickeners and orthopedic shoes. We invite the addition of products and we will review previously rejected submissions as indicated in the guidance.

Supplemental Criteria as provided by IRS July 2009 Guidance