BILL ANALYSIS
AB 2148
Page 1
Date of Hearing: May 10, 2010
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Anthony J. Portantino, Chair
AB 2148 (Tran) - As Introduced: February 18, 2010
VOTE ONLY
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
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income, including a deduction for a charitable contribution made
by a taxpayer during the taxable year. Currently, there is no
deduction for contributing free medical services to an
organization or clinic as proposed by this bill.
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, emergency/non-emergency). 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.
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b) Hourly Rate. The limit of $50 per hour may discourage
physicians from performing expensive procedures that take
up less time. Physicians may be more willing to perform a
wider range of services, including surgery, by eliminating
the $50 cap. However, because physicians will likely bill
all services at least $50 per hour under this bill, the
deduction would incentivize 30 hours of volunteer time
before reaching the maximum limit of $1,500. Understanding
that a $50 per hour cap discourages certain types of
services but encourages longer volunteer time, the author
may want to provide exceptions to the $50 limit for
procedures like surgery, or may want to eliminate the $50
per hour limitation altogether.
c) Classification of Contribution . It is unclear as to
whether this deduction is classified as a miscellaneous
itemized deduction or a charitable contribution deduction.
If this is a miscellaneous itemized deduction, the
deduction will be subject to the 2% Adjusted Gross Income
(AGI) limitation. Under this limitation, the deduction
would only be available for the portion in excess of 2% of
the AGI. If a physician's AGI is $200,000, the 2% floor
would only provide for a deduction in excess of $4,000,
rendering this $1,500 limit useless. Physicians will only
be allowed to claim a deduction under this bill if they
make under $75,000. If the deduction is classified as a
charitable contribution deduction, the deduction would not
be subject to the 2% limitation, allowing a physician to
deduct the $1,500, regardless of their AGI.
d) Ensuring Compliance. AB 2148 encourages physicians to
volunteer their time at a community clinic but does not
require any recordkeeping 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.
e) 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
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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 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 this 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), introduced in the current legislative session,
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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. This bill failed to pass in the
Health Committee and was returned to the Senate Desk.
AB 1592 (Huff), introduced in the 2007-2008 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. This bill was never heard in
committee and the bill was returned to the Assembly Desk.
REGISTERED SUPPORT / OPPOSITION :
Support
California Chapter of the American College of Emergency
Physicians
Opposition
None on file
Analysis Prepared by : Carlos Anguiano/Oksana Jaffe / REV. &
TAX. / (916) 319-2098