BILL ANALYSIS Ó
AB 248
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Date of Hearing: January 19, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 248 (Perea) - As Amended: January 11, 2012
Policy Committee: Revenue and
Taxation Vote: 6-3
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill allows a personal income tax credit equal to 25% of
the value of medical services personally provided by physicians
at a reduced rate or free of charge. The credit is limited to
services provided at emergency departments or at community
clinics, which include free clinics and nonprofit clinics.
Specifically, this bill:
1)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 and limits it to a
physician or surgeon licensed by the Medical Board of
California or the Osteopathic Medical Board of California.
2)Specifies the value of medical services provided shall be
determined according to the usual, reasonable and customary
rate described in Section 1300.71 (a)(3)(B) of Title 28 of the
California Code of Regulations (CCR) and calculates the credit
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.
3)Requires the facility in which the services were rendered to
provide documentation to the physician regarding the value of
services provided.
4)Reduces the cap on the existing new jobs tax credit from $400
million to $250 million to provide $150 million for the tax
credit created by this bill.
5)Takes immediate effect as a tax levy.
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FISCAL EFFECT
The current hiring credit is capped at $400 million and the
funds for this credit would come from that capped allocation,
thus it does not result in any additional revenue loss.
However, it is likely to accelerate revenue loss, aggravating
the current budget deficit. 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)Background. Current state law, SBX 3 15 (Calderon, Stats.
2009, Third Extraordinary Session, Ch. 17) allows a credit for
taxable years beginning on or after January 1, 2009, for a
qualified employer in the amount of $3,000 for each qualified
full-time employee hired in the taxable year, determined on an
annual full-time basis equivalent. This credit is allocated
by the FTB and has a cap of $400 million for all taxable
years.
The FTB reports that, as of December 3, 2011, 12,903 personal
income tax and business entity returns had been filed, with
cumulative hiring credits totaling only $76 million. At this
rate, it could take until the 2015-2016 tax year for the
existing $400 million cap to be reached, absent significant
growth in the economy.
3)This bill's tax credits not well targeted. The tax credit is
for medical providers who provide uncompensated care, a common
occurrence when reimbursements are less than the usual,
reasonable and customary rate. Providers who are receiving
reimbursements from Medi-Cal and private insurers will incur
uncompensated costs and would be eligible for the tax credit.
Physicians eligible for the credit would not limited to those
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providing services to the uninsured or low income groups.
4)Cost effectiveness of tax credits. This bill provides tax
credits to physicians for uncompensated costs incurred in
emergency rooms and community clinics. Questions the
committee may want to consider are: (a) Will credits improve
the chances of these emergency departments and community
clinics staying open or even expanding, and (b) is a tax
credit the most efficient way to bring about the change? The
level of funding to support the credit could be spent on
increased Medi-Cal rates or increases to the Maddy fund, which
is a state fund that reimburses physicians and hospitals for
emergency department uncompensated costs.
5)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, regulations that are promulgated for health plans.
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 complex
standard could result in substantial differences in the value
of the same medical services depending on where they were
provided and by whom.
6)Difficulty of compliance. The bill requires the clinic or
hospital to provide documentation to the physician regarding
the value of services provided. In most cases, the clinic or
hospital will not be able to comply as they will not have the
information and have no reason or ability to make the
calculations required to arrive at the usual, reasonable and
customary rate.
7)Related legislation. The following related bills have been
introduced in the current session:
a) AB 11 (Portantino) transfers $200 million of the
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allocation for the existing small business hiring credit
for a new credit equal to 20% of annual workers'
compensation premiums paid by qualified taxpayers. AB 11
was held on the Assembly Revenue and Taxation Committee's
Suspense File.
b) AB 234 (Wieckowski) expands the existing small business
hiring credit to encourage the employment of the
chronically unemployed. AB 234 was held on the Assembly
Revenue and Taxation Committee's Suspense File.
c) AB 236 (Swanson) provides a tax credit for hiring of
unemployed workers. AB 236 is before this Committee today.
d) AB 1009 (Wieckowski) modifies the jobs tax credit to
allow employers with 100 or fewer employees to be eligible.
AB 1009 was held on the Assembly Revenue and Taxation
Committee's Suspense File.
e) AB 1195 (Allen) would expand the pool of eligible
claimants for the Jobs Tax Credit from taxpayers with 20 or
fewer employees to those with 50 or fewer employees. AB
1195 is on the Senate Appropriations Committee Suspense
File.
f) SB 640 (Runner) enacts a new employment tax credit of up
to $6,000 per qualified full-time employee hired by a
taxpayer that employ 50 of fewer employees for taxable
years on or after January 1, 2011 until the calendar
quarter in which a cumulative credit amount of $50 million
is reached. SB 640 is on the Senate Appropriations
Committee Suspense File.
g) 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 on the Assembly Revenue and Taxation Committee's
Suspense File.
8)Prior legislation.
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a) 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 this committee.
b) 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 in the Senate Health Committee.
c) 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.
d) There is no registered opposition to this bill.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081