BILL ANALYSIS
AB 2148
Page 1
Date of Hearing: April 12, 2010
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Anthony J. Portantino, Chair
AB 2148 (Tran) - As Introduced: February 18, 2010
Majority vote. Tax levy. Fiscal committee.
SUBJECT : Personal income tax: charitable contribution
deduction: physician
SUMMARY : Allows a deduction for medical services contributed
free of charge by a physician to a community clinic.
Specifically, this bill :
1) Allows an income tax deduction equal to the value of
medical services contributed free of charge by a physician
to a local community clinic during the taxable year.
2) Defines a "local community clinic" to mean a community
clinic or free clinic as defined by Health and Safety Code
Section (HSC) 1204(a).
3) Defines a "physician" as a person authorized to practice
medicine or osteopathy under the laws of any state.
4) Provides that the deduction shall not exceed either of
the following:
a. The value of any contribution that exceeds a
rate of $50 per hour for any medical services
rendered; and,
b. A maximum deduction of $1,500 per taxable
year.
5) Provides that no other deduction shall be allowed for
the same contribution of medical services.
6) Takes effect immediately as a tax levy.
EXISTING LAW allows for various deductions in computing taxable
income, including a deduction for charitable contribution made
by a taxpayer during the taxable year. Existing law does not
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provide any consideration for practicing physicians.
FISCAL EFFECT : The Franchise Tax Board (FTB) estimates General
Fund revenue losses of $900,000 in fiscal year (FY) 2010-11,
$600,000 in FY 2011-12, and $610,000 in FY 2012-13.
COMMENTS :
1) The author states, "It is no surprise to anyone that our
health care system is broken. As legislators, it is our
responsibility to provide appropriate incentives for
doctors to bring their knowledge and expertise to meet the
needs of underserved populations in California communities.
I have introduced AB 2148 to do just that. This bill
will allow doctors to take a deduction on their personal
income taxes, up to $1,500, for serving in a local
community clinic without charging patients for their
services. This will encourage doctors to serve patients
that may not be able to afford health care. With more
doctors serving in local community clinics, more patrons
will be treated, promoting greater health in our
communities."
2) Committee Staff Comments:
a. Value of Contribution. This bill does not
include a standard for valuing services and
procedures, but does provide that the deduction may
not exceed a rate of $50 per hour. Assuming that
certain procedures and services cost less than $50 per
hour, exact pricing may be difficult to discern.
According to the Medi-Cal Policy Institute's report,
"Comparing CPT Code Payments for Medi-Cal and other
California Payers," even under the Medi-Cal
reimbursement plan, a single procedure or service can
be paid at different rates depending on the patient
and setting (e.g., hospital/clinic). Rates may also
change if certain procedures or services are combined.
Finally, individual physicians have varying levels of
experience and expertise that affect that valuation of
services they perform. To avoid the difficulty of
assessing the value of procedures and services, this
bill should adopt a clear standard of valuation.
AB 2148
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b. Hourly Rate. Some of the medical
reimbursement rates are based on a per service basis.
There are a wide range of reimbursement rates set
forth by both public and private insurance providers.
Some of these services may be billed under an hourly
rate while other services are reimbursed based on
procedure performed. If every doctor set their hourly
rate at $50, regardless of the procedure or service
being performed, it would render a total of 30 hours
of volunteer time before reaching the limit of $1,500.
A flat rate of $50 per hour may, however, incentivize
physicians to perform certain types of work. A
physician may choose to perform 30 hours prescribing
medication or performing general physical exams. The
cap on hourly rate discourages doctors from performing
more expensive procedures and services. If the hourly
rate is changed to a per service rate or combination
of the two, physicians may be more willing to perform
services and procedures that take up much less time
but would otherwise be barred by the $50 per hour
rate. A physician may instead decide to cast a broken
limb or perform minor surgery even though it requires
much less volunteer time. Under both scenarios, the
$1,500 cap would still apply.
c. Ensuring Compliance. AB 2148 encourages
physicians to volunteer their time at a community
clinic but does not require any record keeping for
purposes of claiming deductions. Even with an audit,
there is no method for ensuring that a physician in
fact volunteered the number of hours claimed for the
deduction.
d. Sunset Date. The purpose of this bill is to
encourage physicians to work and provide services to
individuals who may otherwise not have access to such
services. The incentive is accomplished by a tax
expenditure in the form of a deduction. However, as
the Department of Finance noted in its Tax Expenditure
Report for 2008-09, there are key differences between
tax expenditures and direct expenditures. First, tax
expenditures are reviewed less frequently than
appropriations. Second, there is generally no control
over the amount of revenue losses associated with any
given tax expenditure. Finally, tax expenditures only
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require a majority vote and an appropriation requires
a two-thirds vote. Most importantly, it generally
takes a two-thirds vote to rescind a tax expenditure,
making it much more difficult to correct an
ineffective tax expenditure.
Though the Legislature may consider physician
volunteer work to be good policy, this bill should
have a sunset date so the Legislature can periodically
review this program's effectiveness.
3) FTB comments:
a. This bill is unclear as to whether the
physician is required to perform the services in the
clinic or whether the physician can appoint someone,
even an unlicensed professional to appoint the
services. Potentially, the physician could hire a
professional at a lower rate than $50 per hour and
still claim the maximum deduction amount. The author
should amend the bill to prevent possible disputes
between the taxpayer and the department.
b. This bill's definition of "physician" includes
physicians licensed by any state. Not all states have
the same license requirements, which may lead to
services that do not meet California's high standards.
The author may want to amend the definition so as to
include only physicians licensed by the Medical Board
of California or the Osteopathic Medical Board of
California.
c. This bill lacks a definition of "local." HSC
Section 1204(a) provides the requirements for
licensing a community clinic or free clinic. The
author may wish to define a local community clinic as
one licensed in California per the requirements of HSC
Section 1204(a).
4) Related Legislation. There have been a couple of bills
introduced that would provide a tax credit to physicians
that promote services to specific groups of individuals.
SB 92(Aanestad, 2009/2010) would have allowed a credit
equal to 25% of the tax of a qualified medical individual
providing medical services in a rural area, as defined.
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This bill failed to pass out of the house of ( ) by the
Constitutional deadline.
AB 1592 (Huff, 2007/2008) 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.
This bill failed to pass out of the house of ( ) by the
Constitutional deadline.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None on file
Analysis Prepared by : Carlos Anguiano/Oksana Jaffe / REV. &
TAX. / (916) 319-2098