Report Title:

Tax Credit; Federally Qualified Health Centers

Description:

Provides a tax credit for improvements made to federally qualified health centers.

THE SENATE

S.B. NO.

607

TWENTY-SECOND LEGISLATURE, 2003

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to qualified improvement tax credit.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that it is in the public's interest to encourage the development of health care in the State.

Hawaii's federally qualified health centers, which are all not-for-profit Hawaii corporations, are in various stages of developing and improving their health care facilities. A new federally mandated medicaid prospective payment system that began on January 1, 2001, for federally qualified health centers has effectively eliminated a mechanism for federally qualified health centers to recoup costs associated with future capital improvements, thus severely limiting the ability of health centers to serve the public.

The legislature further finds that federally qualified health centers are "safety net" primary health service providers serving predominantly uninsured, poor, and indigent people of Hawaii regardless of their ability to pay. Funding or financing capital improvement is one of the critical elements that fosters the growth of federally qualified health centers and that contributes to Hawaii's economy. Federally qualified health centers are not only susceptible to low compensation, increasing operating costs for uninsured patients, and increasing government regulation, but are also affected by poor access to capital markets. Loans to not-for-profit federally qualified health centers pose higher risks in comparison to conventional commercial lending.

The purpose of this Act is to provide a tax credit for qualified capital improvements made to federally qualified health centers.

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235-   Qualified improvement tax credit. (a) Whenever used in this chapter, unless the context otherwise requires:

"Federally qualified health center" or "center" means an entity that has entered into an agreement with the Centers for Medicare and Medicaid Services, formerly known as the Health Care Financing Administration, to meet Medicare program requirements under title 42 Code of Federal Regulations section 405.2434, and is receiving a grant under section 330 of the Public Health Service Act, or is receiving funding from the recipient of a grant under section 330 of the Public Health Service Act.

"Qualified equipment" means any device, instrument, appliance, system, or apparatus that is intended for use in the diagnosis, mitigation, treatment, cure, or prevention of disease or the promotion of wellness of body, or medical record-keeping, which has a useful life of more than one year and costs more than $50,000 each.

"Qualified facility" means any building or structure owned or leased by a federally qualified health center.

"Qualified improvement costs" means the costs, including costs for plans, design, construction, or equipment permanently affixed to the building or structure, related to new construction, alteration, or modifications to a qualified facility and purchases of qualified equipment.

(b) There shall be allowed to each federally qualified health center, a qualified improvement tax credit, which shall be deductible from the center's net income tax liability, if any, imposed by this chapter for the year in which the credit is properly claimed.

(c) To claim a credit under this section, the taxpayer shall incur qualified improvement costs that exceed $300,000 in the taxable year for which the credit is claimed. All qualified improvement costs including the first $300,000 shall be eligible for the qualified improvement tax credit; provided that qualified improvement costs shall be reduced by an amount equal to state or county funding, or both.

The amount of the qualified improvement tax credit shall be equal to ten per cent of the qualified improvement costs incurred in the taxable year; provided that each federally qualified health center's tax credit shall be limited to an amount totaling thirty-five per cent of its total audited expenditures for its fiscal year ending 2003, or $300,000, whichever is greater.

The total tax credits claimed under this section, during the ten consecutive taxable years beginning after December 31, 2002, and before January 1, 2012, shall not exceed $9,000,000 in the aggregate for each federally qualified health center.

(d) If a deduction is taken under section 179 (with respect to election to expense depreciable business assets) of the Internal Revenue Code of 1986, as amended, no tax credit shall be allowed for that portion of the qualified improvement costs for which the deduction is taken.

(e) The basis of eligible property for depreciation or accelerated cost recovery system purposes for state income taxes shall be reduced by the amount of credit allowed and claimed under this chapter.

(f) If the amount of the tax credit claimed in any year exceeds the total of the federally qualified health center's net income tax liability for that taxable year, the excess of credit over liability shall be refunded to the center; provided that no refunds or payment on account of the tax credit allowed by this section shall be made for amounts less than $1.

All claims for a tax credit under this chapter shall be filed on or before the end of the twelfth month following the close of the initial taxable year for which the credit may be claimed. Failure to comply with this section shall constitute a waiver of the right to claim the credit.

(g) The director of taxation shall prepare forms that may be necessary to claim a tax credit under this chapter. The director of taxation may also require the taxpayer to furnish information to ascertain the validity of a claim for a tax credit made under this section.

(h) The tax credit allowed under this chapter shall be available for qualified improvement costs incurred during taxable years beginning after December 31, 2002, and before January 1, 2012.

(i) If a tax credit is claimed under this section, no other tax credit under this chapter may be claimed for the same qualified improvement costs."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2002.

INTRODUCED BY:

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