BILL ANALYSIS AND FISCAL IMPACT REPORT	Page 1 of  2

DATE:  February 24, 2001	Submitted by: TAXATION AND REVENUE DEPT.
	T. GLENN ELLINGTON, SECRETARY
BILL NUMBER:  HBIC Substitute for HB – 202, HB – 253 and HB–370

SPONSOR: House Business and Industry Committee

BILL SHORT TITLE: Five-Year Phased Gross Receipts Tax Deduction for Receipts of Doctors and Osteopaths, Dentists and most other Health Practitioners.

CONFLICTS, DUPLICATES, COMPANIONS: for a complete listing of bills that adjust taxation of health care, see OTHER ISSUES AND IMPACTS below. 

DESCRIPTION: The bill provides five-year, phased-in 100% gross receipts tax deduction for receipts from services provided by almost all licensed health care practitioners. The bill lists as licensed health practitioners: physicians, osteopaths, chiropractic physicians, physician assistants, dentists, dental hygienists, doctors of oriental medicine, podiatrists, psychologists, RNs and LPNs, registered lay midwives, physical therapists, occupational therapists and respiratory care practitioners.  The deduction is scheduled as 20% from July 1, 2001 through June 30, 2002; 40% from July 1, 2002 through June 30, 2003; 60% from July 1, 2003 through June 30, 2004; 80% from July 1, 2004 through June 30, 2005; and 100% after July 1, 2005. The deduction excludes certain Medicare receipts (already deductible). 

EFFECTIVE DATE:  July 1, 2001, with phased implementation by July 1, 2005.

FISCAL IMPACT (Thousands of dollars):  		Note: Parenthesis ( ) indicate a revenue loss:

		Recurring or		
Estimated Impact on Revenues	Nonrecurring	Funds 	
 FY 2002 	FY 2003	FY 2004   	     Impact     t     	             Affected          .             	
(6,000)	(13,700)	(22,600)	Recurring	General Fund	
(4,900)	(11,000)	(18,200)	Recurring	Local  Governments	
(10,900)	(24,700)	(40,800)			

Full five-year estimate is included under “Other Issues” below.

ADMINISTRATIVE IMPACT: minimal impact. Forms and instructions, taxpayer seminar materials and technical advice memoranda and training for auditors. This change can be implemented with existing resources.

TECHNICAL ISSUES: Many practitioners have created pass-through entities (partnerships, professional corporations, etc.) to bill patients (or insurers or governments), receive payments and report and pay gross receipts tax.  The formula in this bill allows a gross receipts deduction whether the practitioner or the pass-through entity is the taxpayer.

OTHER IMPACTS AND ISSUES:
1.	
	FY 2002	FY 2003	FY 2004	FY 2005	FY 2006	
						
    General Fund	-6,000	-13,700	-22,600	-32,600	-43,900	
    Local Governments	-4,900	-11,000	-18,200	-26,300	-35,300	
        Total	-10,900	-24,700	-40,800	-58,900	-79,200	

2.	This bill includes doctors and osteopaths, chiropractors, dentists or dental hygienists, physician assistants, doctors of oriental medicine, podiatrists, psychologists, RNs or LPNs, midwife practitioners, physical therapists, occupational therapists, respiratory care technicians. However, services of optometrists, licensed massage therapists, non-PA emergency technicians and ambulance services, speech and auditory therapists and most home health care workers are excluded. 

3.	This continues a trend over the last decade of removing medical and hospital services from the gross receipts base. Cutting base by an industry this large, however, does shift a noticeable amount of tax burden to the remaining taxpayers. 

4.	A complete listing of  major and minor bills adjusting taxation of health care services is included with the review of SCORC/S SB-568 and HBIC/S HB-227.