Date Requested:February 21, 2011
Time Requested:02:03 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2011R2855 Introduced HB3218
CBD Subject: PRIVILEGE TAX
FUND(S)
Medicaid State Share Fund
Sources of Revenue
Other Fund Medicaid State Share Fund
Legislation creates:
Neither Program nor Fund

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

    The stated purpose is to reduce the tax on behavioral health services. The bill removes those services from the article on the taxing of the severance of minerals and places it in the article taxing health care providers. The bill also provides a definition of that term.
    
    As written, this bill removes references to “health care service” from the body of WV Code §11-13A-3 and revises WV Code §11-27-18 to include “behavioral health services” and to provide a definition of the term.
    
    According to our interpretation, the proposed changes to WV Code §11-13A-3 would eliminate the Severance Tax rate on gross receipts attributable to the provision of behavioral health services. The elimination of the Severance Tax on behavioral health services will result in a reduction in the Medicaid State Share Fund of roughly $12 million per year. Additionally, unless alternative matching funds are secured, the reduction in the Medicaid State Share Fund attributable to the elimination of the Severance Tax on behavioral health services will result in a reduction in Federal Funds of roughly three times the tax reduction. The reduction in matching funds attributable to the elimination of the Severance Tax on behavioral health services would be roughly $36 million per year.
    
    The proposed revisions to WV Code §11-27-18 to include “behavioral health services” and to provide a definition of the term would, according to our interpretation, subject behavioral health Services to the Health Care Provider Tax levied via that section. However, existing WV Code §11-27-36(j) eliminated the tax imposed under WV Code §11-27-18 effective July 1, 2010 thus the proposed change to WV Code §11-27-18 would have no revenue impact.
    
    Additional administrative costs for the State Tax Department associated with this bill would be minimal.
    

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2011
Increase/Decrease
(use"-")
2012
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0
3. Explanation of above estimates (including long-range effect):
    As written, this bill removes references to “health care service” from the body of WV Code §11-13A-3 and revises WV Code §11-27-18 to include “behavioral health services” and to provide a definition of the term.
    
    According to our interpretation, the proposed changes to WV Code §11-13A-3 would eliminate the Severance Tax rate on gross receipts attributable to the provision of behavioral health services. The elimination of the Severance Tax on behavioral health services will result in a reduction in the Medicaid State Share Fund of roughly $12 million per year. Additionally, unless alternative matching funds are secured, the reduction in the Medicaid State Share Fund attributable to the elimination of the Severance Tax on behavioral health services will result in a reduction in Federal Funds of roughly three times the tax reduction. The reduction in matching funds attributable to the elimination of the Severance Tax on behavioral health services would be roughly $36 million per year.
    The proposed revisions to WV Code §11-27-18 to include “behavioral health services” and to provide a definition of the term would, according to our interpretation, subject behavioral health Services to the Health Care Provider Tax levied via that section. However, existing WV Code §11-27-36(j) eliminated the tax imposed under WV Code §11-27-18 effective July 1, 2010 thus the proposed change to WV Code §11-27-18 would have no revenue impact.
    
    Additional administrative costs for the State Tax Department associated with this bill would be minimal.
    


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kerri.r.petry@wv.gov
    The stated purpose is to reduce the tax on behavioral health services. The bill removes those services from the article on the taxing of the severance of minerals and places it in the article taxing health care providers. The bill also provides a definition of that term.
    
    As written, this bill removes references to “health care service” from the body of WV Code §11-13A-3, however, a reference to “health care service” in the Section title was not changed.
    
    The proposed revisions to WV Code §11-27-18 to include “behavioral health services” and to provide a definition of the term would appear to subject behavioral health Services to the Health Care Provider Tax levied via that section. However, existing WV Code §11-27-36(j) eliminated the tax imposed under WV Code §11-27-18 effective July 1, 2010. It is not clear if this was the intent of the Legislation. In addition, federal rules regarding permissive services that may be taxed under a broad-based Health Care Provider Tax do not include behavioral health services among the permissive list.