BY Mary Katharine Ham
If Verizon weren't in the mix, I'd be tempted to say this was a rural dudes with heavy machinery tax.
Farm equipment maker Deere & Co (DE.N) expects after-tax expenses to rise by $150 million this year as a result of the healthcare reform law President Barack Obama signed this week. Most of the higher expense will come in Deere's second quarter, the company said on Thursday. The expense was not included in the company's earlier 2010 forecast, which called for net income of about $1.3 billion.
Earlier this week, Caterpillar announced it would take a $100 million hit:
The charge is expected to be a one-time cost, but Caterpillar has argued that higher taxes and other potential cost increases related to insurance coverage mandates in the legislation will hinder the company's recovery this year after a 75% plunge in income during 2009. "From our point of view, a tax increase like this cannot come at a worse time," said Jim Dugan, a Caterpillar spokesman.
Although the tax doesn't take effect until 2011, the company said it is required to recognize the impact in the period in which the law was signed. Industry analysts estimated the charge at about 13 cents a share.
That ought to do wonders for the construction sector.
The National Review got its hands on an e-mail from Verizon to employees:
...due to the varying effective dates included in the legislation, we expect that Verizon’s costs will increase in the short-term. These cost increases are primarily driven by two provisions.
The first is a provision that affects the Medicare Part D subsidy for prescription drug coverage. Because Verizon offers retiree prescription drug coverage today, the government provides a 28 percent subsidy to help offset the financial burden of offering that coverage. The subsidy was intended to help employers continue to offer prescription drug coverage for retirees so that these retirees would not have to use the Government Medicare Part D program.
However, changes affecting the Part D subsidy will make it less valuable to employers, like Verizon, and as a result, may have significant implications for both retirees and employers.
Some of its generous plans will also be subject to the "Cadillac" tax, which may or may not go into effect in 2018, but Verizon has to be more responsible than Congress by actually planning for it.