Date Requested:February 17, 2013
Time Requested:01:41 PM
Agency: State Tax & Revenue Department
CBD Number: Version: Bill Number: Resolution Number:
2013R2098 Introduced SB166
CBD Subject: FREE MEDICAL SERVICES
FUND(S)
General Revenue Fund
Sources of Revenue
General 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 of this bill is to establish a tax credit for physicians who provide physician’s services at no charge to free health facilities in West Virginia.
    
     As written, this bill would provide a tax credit of $10,000 for an eligible taxpayer (i.e., a physician who provides 300 hundred hours or more of physician’s services at no charge in free health care facilities in West Virginia). The credit would be available to reduce the Personal Income Tax of the eligible taxpayer, but any tax credit in any tax year in excess of the taxpayer’s Personal Income Tax liability would be forfeited (i.e., any unused tax credit cannot be carried back to any prior tax year nor carried forward to any subsequent tax year). The credit would be effective for tax years beginning after December 31, 2013. Eligible taxpayers would be required to add to West Virginia taxable income, for purposes of the Personal Income Tax, certain deductions, decreasing adjustments, or decreasing modifications used in determining federal or West Virginia taxable income, if the deduction, adjustment, or modification is the result of physician’s service provided at no charge in a free health care facility in West Virginia. According to our interpretation and based upon information from a survey by the West Virginia Association of Free Clinics, passage of this bill would reduce General Revenue Fund collections by at least $120,000 per year at current participation levels with the annual reduction beginning in FY2015. The availability of the tax credit may encourage additional qualifying service which would increase the annual reduction in the General Revenue Fund. If the proposed tax credit effectively encourages more physicians to increase their hours of free service to free health facilities to at least the 300 hour minimum, the cost of the tax credit would rise from the $120,000 level without behavior change to a higher level that could increase significantly given that roughly 2,000 individuals provide at least some free services in the State.
    
     Under the assumption that the State Tax Department would not be expected to evaluate the effectiveness of this proposed tax credit program, additional administrative costs to the State Tax Department associated with passage of this bill would be $36,100.
    

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2013
Increase/Decrease
(use"-")
2014
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 36,100 0
Personal Services 0 0 0
Current Expenses 0 36,100 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 -120,000
3. Explanation of above estimates (including long-range effect):
     As written, this bill would provide a tax credit of $10,000 for an eligible taxpayer (i.e., a physician who provides 300 hundred hours or more of physician’s services at no charge in free health care facilities in West Virginia). The credit would be available to reduce the Personal Income Tax of the eligible taxpayer, but any tax credit in any tax year in excess of the taxpayer’s Personal Income Tax liability would be forfeited (i.e., any unused tax credit cannot be carried back to any prior tax year nor carried forward to any subsequent tax year). The credit would be effective for tax years beginning after December 31, 2013. Eligible taxpayers would be required to add to West Virginia taxable income, for purposes of the Personal Income Tax, certain deductions, decreasing adjustments, or decreasing modifications used in determining federal or West Virginia taxable income, if the deduction, adjustment, or modification is the result of physician’s service provided at no charge in a free health care facility in West Virginia. According to our interpretation and based upon information from a survey by the West Virginia Association of Free Clinics, passage of this bill would reduce General Revenue Fund collections by roughly $120,000 per year at current participation levels with the annual reduction beginning in FY2015. The availability of the tax credit may encourage additional qualifying service which would increase the annual reduction in the General Revenue Fund.
    
     According to information on the Web page of the Department of Health and Human Resources Division of Primary Care, West Virginia has 11 free clinics that receive grants administered through the Division. While a survey by the West Virginia Association of Free Clinics indicated only 12 physicians volunteered more than 300 hours at the 11 free clinics, other sources estimated that roughly 2,000 professionals routinely volunteer their services. If these professionals increase their hours of free service, the cost of the tax credit could increase significantly.
    
     Under the assumption that the State Tax Department would not be expected to evaluate the effectiveness of this proposed tax credit program, additional administrative costs to the State Tax Department associated with passage of this bill would be $36,100. If professional physicians increased their hours of free services, additional administrative costs to the State Tax Department associated with passage of this bill could be significant. Incorporating the add back and tax credit provision included in the bill will require substantial modification to tax forms and computer programs. Also, in order to reduce potential abuse of the tax credit provided by this bill, the State Tax Department would need to conduct tax audits on a representative sample of credit claimants.
    


Memorandum
Person submitting Fiscal Note:
Mark B. Muchow
Email Address:
Roger.D.Cox@wv.gov