BILL ANALYSIS �
AB 2514
Page 1
Date of Hearing: May 21, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 2514 (Pan) - As Amended: May 15, 2014
Policy Committee: Revenue &
Taxation Vote: 8-0
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill allows a personal income tax credit, for taxable years
beginning on or after January 1, 2015 and before January 1,
2020, to a qualified taxpayer based on the taxpayer's student
loans, to encourage health care professionals to locate in
medically underserved areas of California. In summary, this
bill:
1)Specifies that the credit amount shall be the amount of
student loan payments made by the qualifying taxpayer during
the taxable year, not to exceed one-third of the remaining
balance of the qualified taxpayer's student loan balance as at
January 1 of that year.
2)Allows the credit for five consecutive taxable years, and
allows any unused credit to be carried forward for up to six
years or until the credit has been exhausted.
3)Defines a "qualified taxpayer" as an individual who meets all
of the following conditions:
a) Is a dentist, physician, physician assistant, or
advanced practice nurse who is licensed or certified to
practice within California.
b) Resides and practices full-time in a "health care
professional shortage area" and has committed to residing
and practicing in that area for at least three years and up
to five years pursuant to an agreement with the State
Department of Health Care Services.
AB 2514
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c) Is a borrower on student loans under a recognized loan
program used for higher education opportunities resulting
in a degree that enables him or her to be licensed or
certified as a health care professional in California.
4)Specifies that if the qualified taxpayer ceases to reside and
practice in the health care professional shortage area, or the
taxpayer's loan is paid in full by means of any other loan
repayment program, any credit allowed for that year may be
recaptured, and any unused credit carried forward shall be
forfeited.
5)Clarifies that any credit allowed is in lieu of any other
deduction or credit the qualified taxpayer may otherwise claim
with respect to those student loan expenses, and is not
available if the taxpayer is delinquent on the loan.
6)Requires the Department of Health Care Services (HCS) and the
Franchise Tax Board (FTB) to promulgate rules and regulations
as necessary to implement the credit.
FISCAL EFFECT
1)Potentially significant GF costs to FTB and HCS to promulgate
rules and administer the changes to forms and systems.
2)Substantial GF revenue decreases, amounting to several
millions of dollars annually, over the duration of the
program.
COMMENTS
1) Purpose. According to the author, comprehensive physician-led
health care services need to be available in all regions of
California for the state to prosper. The federal government
has recognized a large number of communities in California as
"health professional shortage areas" (HPSAs). These
communities exhibit deficiencies of health care professionals
able to serve their residents. AB 2514 would allow a tax
credit to health care professionals who practice in HPSAs
based on their student loans with the aim of providing an
incentive for health care professionals to practice in
medically under-served regions.
Proponents argue this bill would help the state meet its need
for physicians to serve the growing number of newly-insured
AB 2514
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and Medi-Cal patients. They assert this need has become acute
following the expansion of coverage provided by the Affordable
Care Act, and that HPSAs will suffer the greatest shortage of
health care professionals.
2) Large Loans May Lead to Large Credits. Opponents of the bill,
including the California Tax Reform Association (CTRA), argue
the policy goal of encouraging doctors to locate to
underserved areas may be laudable, but the bill ultimately
provides a generous tax credit to many medical professionals
who are likely to earn substantial incomes. These
professionals take out significant loans to pay for medical
school on the expectation that future income will allow them
to repay the loans. CTRA argues the credit proposed in this
bill may provide a generous credit to doctors with expensive
loans who agree to reside in HPSAs only for a relatively short
period of time.
The Committee may wish to consider whether increased funding
for more targeted loan forgiveness or direct investment in
medical infrastructure and personnel in HPSAs would be a more
efficient approach to achieving these goals.
3) Implementation Issues. The FTB raised several implementation
concerns in its analysis, including that the bill: (i)
requires the FTB to comply with the Administrative Procedures
Act for the rulemaking required for implementation; (ii)
requires a qualified taxpayer to be current (i.e., not
delinquent) with his or her loans to qualify, but does not
specify how FTB would verify non-delinquency; (iii) lacks
details with respect to the commitment required to practice in
a HPSA in order for a taxpayer to qualify for the credit; and
(iv) is inconsistent with respect to the recapture provision
with other areas of the personal income tax law.
Analysis Prepared by : Joel Tashjian / APPR. / (916) 319-2081