BILL ANALYSIS Ó
AB 248
Page 1
Date of Hearing: January 9, 2012
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Henry T. Perea, Chair
AB 248 (Perea) - As Amended: June 13, 2012
Majority vote. Tax levy. Fiscal committee.
SUBJECT : Personal income tax: physicians: qualified medical
services.
SUMMARY : Allows a personal income tax (PIT) credit equal to 25%
of the value of qualified medical services personally provided
by a physician free of charge or at a reduced rate.
Specifically, this bill :
1)Authorizes an income tax credit in an amount equal to 25% of
the value of qualified medical services personally provided by
a qualified taxpayer during the taxable year.
2)Applies to taxable years beginning on or after January 1,
2012, and before January 1, 2017, and caps the total credit
amount allowed at $5,000 per taxable year.
3)Defines "qualified taxpayer" as a physician or surgeon
licensed by the Medical Board of California or the Osteopathic
Medical Board of California.
4)Defines "qualified medical services" as medical services
provided by a qualified taxpayer free of charge or at a
reduced rate at a local community clinic, or emergency medical
services in an emergency department of a general acute care
hospital, as defined.
5)Defines the phrase "emergency medical services" by reference
to the definition of "emergency services and care" in Health
and Safety Code (H&SC) subdivision (a) of Section 1317.1.
6)Provides that "local community clinic" means a community
clinic or free clinic, as defined in H&SC Section
1204(a)(1)(A) and (B).
7)Specifies that the value of medical services provided shall be
determined according to the usual, reasonable, and customary
AB 248
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rate described in Section 1300.71 (a)(3)(B) of Title 28 of the
California Code of Regulations (CCR). States that, in the
case of medical services that were provided at a reduced rate,
the amount of the credit shall be based on the difference
between the value of the services provided, as determined by
CCR Section 1300.71(a)(3)(B), and the reduced rate charged.
8)Requires the facility in which the services were rendered to
submit documentation to the physician regarding the value of
services provided.
9)Provides that, in cases where the credit amount exceeds the
taxpayer's tax liability, the excess credit amount may be
carried over for up to eight years, or until the credit is
exhausted, whichever occurs first.
10)Takes immediate effect as a tax levy.
EXISTING LAW allows various tax credits designed to incentivize
socially beneficial behavior or to provide tax relief to those
incurring specified expenses.
FISCAL EFFECT : The Franchise Tax Board (FTB) staff estimates
that this bill will result in an annual revenue loss of $28
million in the 2011-12 fiscal year (FY), $50 million in FY
2012-13, and $50 million in FY 2013-14.
COMMENTS :
1)The Purpose of this Bill . AB 248 is intended to increase the
availability and accessibility of medical care to low-income
patients by allowing physicians to claim a tax credit for the
services provided to patients for free or at a reduced rate at
a local community clinic or an emergency department. The
credit will be operative for five taxable years, beginning on
January 1, 2012 and before on January 1, 2017.
2)Incentive or reward? Existing law provides various credits,
deductions, exclusions, and exemptions for particular taxpayer
groups. In the late 1960s, United States Treasury officials
began arguing that these features of the tax law should be
referred to as "expenditures," since they are generally
enacted to accomplish some governmental purpose and there is a
determinable cost associated with each (in the form of
foregone revenues). Each new tax expenditure further erodes
AB 248
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the tax base and reduces the General Fund revenue.
Furthermore, each individual tax expenditure establishes a
precedent for future legislation. Therefore, it is important
to examine whether it actually changes behavior or simply
subsidizes existing behavior.
This bill would enact a tax expenditure, in the form of a PIT
credit, to give financial relief to doctors who provide
uncompensated medical services. The amount of credit is capped
at $5,000 per taxable year. While the incentive will encourage
doctors to bring their knowledge and expertise to meet the
needs of underserved populations in California communities, it
is unclear whether the cap of $5,000 will provide a financial
incentive to contribute additional hours or simply will result
in modest tax savings to those who would have contributed the
services anyway.
3)Standard of valuation : This bill allows a credit equal to 25%
of the value of emergency medical services personally provided
by a physician. This bill specifies that the value of medical
services provided shall be determined according to the usual,
reasonable, and customary rate, as described in CCR Section
1300.71. CCR Section 1300.71, in turn, mandates the
consideration of the following factors: (i) the provider's
training, qualifications, and length of time in practice;
(ii) the nature of the services provided; (iii) the fees
usually charged by the provider; (iv) prevailing provider
rates charged in the general geographic area in which the
services were rendered; (v) other aspects of the economics of
the medical provider's practice that are relevant; and (vi)
any unusual circumstances in the case. Using this standard
may potentially result in substantial differences in the
valuation of the same medical services depending on where they
were provided and by whom.
4)Related legislation :
a) AB 895 (Halderman), introduced in the 2010-11
legislative session, would have provided a PIT credit equal
to 25% of the value of emergency medical services, not to
exceed $5,000 per taxable year, personally provided by a
physician who is eligible, but who has not received
reimbursement for those emergency medical services pursuant
to the Maddy Emergency Medical Services Fund. AB 895 was
held under submission in this Committee.
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b) AB 2148 (Tran), introduced in the 2009-10 legislative
session, would have provided a PIT deduction, not to exceed
$1,500 per taxable year, to physicians that provide free
medical services in clinic or hospital settings. AB 2148
was held in the Assembly Appropriations Committee.
c) SB 92 (Aanestad), introduced in the 2009-10 legislative
session, would have, among other things, allowed a credit
equal to 25% of the tax of a qualified medical individual
providing medical services in a rural area, as defined. SB
92 failed to pass in the Senate Health Committee.
d) AB 1592 (Huff), introduced in the 2007-08 legislative
session, would have allowed a credit equal to 50% of the
fair market value of uncompensated medical care provided by
a physician for an eligible individual. AB 1592 was never
heard in Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None of file
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098