BILL ANALYSIS �
AB 895
Page 1
Date of Hearing: May 16, 2011
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Henry T. Perea, Chair
AB 895 (Halderman) - As Amended: May 9, 2011
Majority vote. Tax levy. Fiscal committee.
SUBJECT : Personal income tax: credit: physicians: emergency
medical services
SUMMARY : Allows a personal income tax (PIT) credit equal to 25%
of the value of emergency medical services 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 (Maddy Fund).
Specifically, this bill :
1)Caps the total credit amount allowed at $5,000 per taxable
year.
2)Applies to taxable years beginning on or after January 1,
2012, and before January 1, 2017.
3)Applies only to physicians licensed by the Medical Board of
California or the Osteopathic Medical Board of California.
4)Specifies that the value of medical services provided shall be
determined according to the usual, reasonable, and customary
rate as described in Section 1300.71 (a)(3)(B) of Title 28 of
the California Code of Regulations (CCR). Provides that the
amount of the credit shall be based on a reasonable physician
fee, as defined in the same CCR section.
5)Requires the facility in which the services were rendered, as
described in Health and Safety Code Section 1797.98e (f), to
provide documentation to the physician regarding the value of
services provided.
6)Specifies that, to receive a tax credit, a physician must
submit his/her claim for emergency medical services provided
to a patient, who did not make a payment for services and for
whom a responsible third party did not make a payment.
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7)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, until the credit is
exhausted.
8)Sunsets on December 1, 2017.
9)Takes immediate effect as a tax levy.
EXISTING LAW :
1)Allows various tax credits designed to incentivize socially
beneficial behavior or to provide tax relief to those
incurring specified expenses.
2)Authorizes each county to establish a Maddy Fund, funded by
specified revenue penalties, and makes money in the fund
available for the reimbursement of physicians and hospitals
for losses incurred in the provision of emergency medical
services when payment is not otherwise made for those
services.
FISCAL EFFECT : The Franchise Tax Board (FTB) has not yet
provided a revenue estimate for the most recent version of this
bill.
COMMENTS :
1)The author has provided the following statement in support of
this bill:
Providing uncompensated care contributed to the closure of
my medical practice in underserved rural central
California. It was impossible to cover basic operating
costs when providing uncompensated care to a rural
population. As a result, these residents lost access to a
breast cancer surgeon in their community.
Unfortunately, this is a chronic problem endemic in rural
areas where the physician workforce is scarce.
Hospitals are required to accept all patients in need of
emergency care, regardless of their ability to pay.
California must offer some ability for Doctors who provide
the emergency care to recoup losses so we ensure hospitals
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are well staffed to treat emergency patients.
Right now, doctors seeking to help solve the problem of
lack of access to care in these areas cannot afford to do
so. Assembly Bill 895 is a modest cost-savings measure to
allow doctors to continue serving the people who need them
most.
2)Proponents state, "Those who lack health coverage often delay
obtaining care until a condition becomes urgent, ending up in
the emergency room (ER). Physicians who provide emergency
medical care to the uninsured in the ER receive little to no
compensation for these services, making �it] increasingly
difficult to get in-demand specialists such as OB/GYNs and
orthopedic surgeons to provide 'on call' services in ERs.
This negatively impacts these patients' access to medical care
when they are most in need."
3)Committee Staff Notes :
a) What is a "tax expenditure"? : Existing law provides
various credits, deductions, exclusions, and exemptions for
particular taxpayer groups. In the late 1960's, 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).
This bill would enact a tax expenditure, in the form of a
PIT credit, to give financial relief to doctors who provide
uncompensated emergency medical services.
b) How is a tax expenditure different from a direct
expenditure? : As the Department of Finance notes in its
annual Tax Expenditure Report, there are several key
differences between tax expenditures and direct
expenditures. First, tax expenditures are reviewed less
frequently than direct expenditures once they are put in
place. This can offer taxpayers greater certainty, but it
can also result in tax expenditures remaining a part of the
tax code without demonstrating any public benefit. Second,
there is generally no control over the amount of revenue
losses associated with any given tax expenditure. Finally,
it should also be noted that, once enacted, it generally
takes a two-thirds vote to rescind an existing tax
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expenditure absent a sunset date. This effectively results
in a "one-way ratchet" whereby tax expenditures can be
conferred by majority vote, but cannot be rescinded,
irrespective of their efficacy, without a supermajority
vote.
c) Should a standard "recapture provision" be added? : As
noted above, this bill allows a credit for emergency
medical services personally provided by a physician who is
eligible for, but who has not received, Maddy Fund
reimbursement. It is not clear, however, what would happen
if a doctor received reimbursement after the taxable year
in which the services were provided. The author may wish
to amend this bill to include a recapture requirement in
such cases.
d) 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 result in substantial differences
in the valuation of the same medical services depending on
where they were provided and by whom. In addition, it is
not clear to Committee staff how the FTB would ever be in a
position to review or audit the valuation of services,
given the seemingly inherent subjectivity involved. To
resolve these issues, Committee staff recommends adopting a
clearer and more objective standard of valuation.
e) Unclear provisions : This bill provides that "the
amount" of the tax credit shall be based on a reasonable
physician fee, as defined in CCR Section 1300.71(a)(3)(B).
It is not readily clear to Committee staff what this
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provision is designed to accomplish. The amount of the
credit is already based on the value of emergency medical
services provided, and capped at $5,000. The value of
these services, in turn, is based on the regulatory
criteria specified above. Moreover, CCR Section
1300.71(a)(3)(B) does not refer to a "reasonable physician
fee." Thus, Committee staff recommends amendments
clarifying this provision and its purpose.
f) Technical amendment : On page 2, line 6, strike "Article
2.5" and insert "Chapter 2.5 of Division 2.5".
g) Related legislation :
i) 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.
ii) 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.
iii) 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
California Medical Association
Opposition
None on file
AB 895
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Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098