FISCAL NOTE

Date Requested: January 14, 2019
Time Requested: 03:32 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
1656 Introduced HB2375
CBD Subject: Taxation


FUND(S):

General Revenue Fund

Sources of Revenue:

General Fund

Legislation creates:

Decreases Existing Revenue, Increases Existing Expenses



Fiscal Note Summary


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


The stated purpose of this bill is to create the Save the Hospitals Act; exempting nonprofit hospitals that provide a certain amount of uncompensated care from sales tax and requiring West Virginia Hospital Finance Authority to promulgate rules to effectuate this section. According to our interpretation, the bill provides a Consumers Sales Tax and Use Tax exemption for the next taxable year for nonprofit hospitals that incur uncompensated care costs equal to or greater than 4 percent of the hospital’s total net patient revenue. The following estimate of revenue loss was derived from 2017 reports filed with the West Virginia Health Care Authority. Passage of this bill would result in a decrease in revenue for the General Revenue Fund due to the blanket exemption for hospitals that provide 4 percent or more of uncompensated care costs. Based on data for the 2017 reports, the decrease in General Revenue if the bill had been active this year would be approximately $5.3 million. The administrative costs to the Tax Department would be $2,000 in FY2019 and $40,000 per year in subsequent fiscal years.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2019
Increase/Decrease
(use"-")
2020
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 2,000 40,000 40,000
Personal Services 1,000 40,000 40,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 1,000 0 0
2. Estimated Total Revenues 0 -5,300,000 -5,300,000


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


According to our interpretation, the bill provides a Consumers Sales Tax and Use Tax exemption for the next taxable year for nonprofit hospitals that incur uncompensated care costs equal to or greater than 4 percent of the hospital’s total net patient revenue. The following estimate of revenue loss was derived from 2017 reports filed with the West Virginia Health Care Authority. Passage of this bill would result in a decrease in revenue for the General Revenue Fund due to the blanket exemption for hospitals that provide 4 percent or more of uncompensated care costs. Based on data for the 2017 reports, the decrease in General Revenue if the bill had been active this year would be approximately $5.3 million. The administrative costs to the Tax Department would be $2,000 in FY2019 and $40,000 per year in subsequent fiscal years.



Memorandum


The stated purpose of this bill is to create the Save the Hospitals Act; exempting nonprofit hospitals that provide a certain amount of uncompensated care from sales tax and requiring West Virginia Hospital Finance Authority to promulgate rules to effectuate this section. Terms and definitions are unclear. “Total net patient revenue” is an estimate, meaning that adjustments may be made that negatively affect revenue streams. “Taxable year” is defined so that an entity could change from a fiscal year to calendar year when calculating the applicability of the exemption. The bill requires the West Virginia Hospital Finance Authority to issue the form for a hospital to apply for the credit and to promulgate rules no later than July 1, 2019 “to effectuate and administer this section.” It is the Tax Commissioner who administers state and local taxes. Further, the Tax Commissioner has the duty to prescribe all forms and may make all rules and regulations as provided in the State Administrative Procedure Act under W. Va. Code §11-10-5. There is no other tax where the taxpayer has authority to set the rules or even to provide a form.



    Person submitting Fiscal Note: Mark Muchow
    Email Address: kerri.r.petry@wv.gov