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 of this bill is to provide a tax of five percent of the gross receipts of a behavioral health service provider and to allow certain providers to reduce gross receipts by contractual allowances. As written, this bill would essentially remove behavioral health services from taxation under the Severance Tax (West Virginia Code §11-13A, et seq.), and subject the services to the Health Care Provider Tax (West Virginia Code §11-27, et seq.). Additionally, the conversion to the Health Care Provider Tax would establish a different definition of “gross receipts” for behavioral Health services compared to the definition used for the Severance Tax. However, the conversion to the Health Care Provider Tax may be in conflict with Public Law 102-234, the Medicaid Voluntary Contribution and Provider-Specific Tax Amendments of 1991. Federal law precludes the use of the general health care provider tax mechanism for highly Medicaid funded services, such as behavioral health services. According to our interpretation and due to the potential conflict with federal law, passage of this bill would have unknown but likely significant revenues consequences that go beyond the potential impact of permitting taxpayers to deduct contractual allowances from gross receipts. Additional administrative costs to the State Tax Department associated with this bill would be minimal.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2008 Increase/Decrease (use"-")	2009 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

Explanation of above estimates (including long-range effect):

As written, this bill would essentially remove behavioral health services from taxation under the Severance Tax (West Virginia Code §11-13A, et seq.), and subject the services to the Health Care Provider Tax (West Virginia Code §11-27, et seq.). Additionally, the conversion to the Health Care Provider Tax would establish a different definition of “gross receipts” for behavioral Health services compared to the definition used for the Severance Tax. However, the conversion to the Health Care Provider Tax may be in conflict with Public Law 102-234, the Medicaid Voluntary Contribution and Provider-Specific Tax Amendments of 1991. Federal law precludes the use of the general health care provider tax mechanism for highly Medicaid funded services, such as behavioral health services. According to our interpretation and due to the potential conflict with federal law, passage of this bill would have unknown but likely significant revenue consequences that go beyond the potential impact of permitting taxpayers to deduct contractual allowances from gross receipts. Additional administrative costs to the State Tax Department associated with this bill would be minimal.

Memorandum

The stated purpose of this bill is to provide a tax of five percent of the gross receipts of a behavioral health service provider and to allow certain providers to reduce gross receipts by contractual allowances. As written, this bill would essentially remove behavioral health services from taxation under the Severance Tax (West Virginia Code §11-13A, et seq.), and subject the services to the Health Care Provider Tax (West Virginia Code §11-27, et seq.). However, the conversion to the Health Care Provider Tax may be in conflict with Public Law 102-234, the Medicaid Voluntary Contribution and Provider-Specific Tax Amendments of 1991. Additionally, the bill provides that the Health Care Provider Tax on behavioral health services would be effective July 1, 2008. Absent a specific effective date, the removal of behavioral health services form taxation under the Severance Tax statute would be effective 90 days from passage. Thus, there would likely be a period in which behavioral health services would not be subject to either the Severance Tax or the Health Care Provider Tax.

Person submitting Fiscal Note: Mark Muchow
Email Address: kpetry@tax.state.wv.us