Report Title:

General Excise Tax; Health Care; Uniformed Service Members

 

Description:

Exempts from the general excise tax amounts received by managed care support contractors as reimbursements of costs or advances made pursuant to a contract for the administration of the federal TRICARE program.  Effective 07/01/2020.  (HB2306 HD2)

 


HOUSE OF REPRESENTATIVES

H.B. NO.

2306

TWENTY-FOURTH LEGISLATURE, 2008

H.D. 2

STATE OF HAWAII

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO GENERAL EXCISE TAXATION.

 

 

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

 


     SECTION 1.  The legislature finds that pursuant to the authority granted by Congress under 10 United States Code 1071 et seq., the United States Department of Defense established the TRICARE program as the managed care component of the Military Health System, a federal government program that provides health care services to over 9,000,000 Americans, composed of active duty, reserve, and retired members of the United States uniformed services, their family members, and survivors, including approximately 150,000 current and former service members and their family members who reside in Hawaii.

     The legislature further finds that the purpose and mission of the TRICARE program is to ensure the availability of high- quality, low-cost health care services to members of the uniformed services and their families, which is crucial to ensuring military readiness, national defense, and the health and welfare of the residents of the state.

     The TRICARE program augments the health care services provided by the United States Department of Defense personnel at military treatment facilities.  TRICARE is a program of the Department of Defense, TRICARE Management Activity, which contracts with third-party administrators, known as "managed care support contractors," to establish and maintain networks of TRICARE-authorized civilian health care providers in various regions of the United States.  On behalf of the United States Department of Defense, managed care support contractors make advances to doctors, hospitals, and other providers (the "health care providers") for costs of health care services that health care providers provide to TRICARE beneficiaries.  The United States Department of Defense reimburses managed care support contractors the amounts they have advanced on the department's behalf.

     The legislature understands that some uncertainty may exist about whether the reimbursements received by managed care support contractors for advances made on behalf of the federal government might be subject to the Hawaii general excise tax.  The legislature finds that it is desirable to clarify that the reimbursements are not subject to the state general excise tax to avoid increasing the costs of health care services delivered through the TRICARE program and any adverse consequences on the members of our uniformed services and their families from the increased costs.

     The purpose of this Act is to clarify that any amounts received by a managed care support contractor as reimbursements of costs or advances made by the contractor, pursuant to a contract with the federal government for the administration of the TRICARE program, are exempt from the Hawaii general excise tax.

     SECTION 2.  Section 237-24.75, Hawaii Revised Statutes, is amended to read as follows:

     "§237-24.75  Additional exemptions.  In addition to the amounts exempt under section 237-24, this chapter shall not apply to:

     (1)  Amounts received as a beverage container deposit collected under chapter 342G, part VIII;

     (2)  Amounts received by the operator of the Hawaii convention center for reimbursement of costs or advances made pursuant to a contract with the Hawaii tourism authority under section 201B‑7[; and]

     (3)  Amounts received by a managed care support contractor of the TRICARE program that is established under 10 United States Code chapter 55, as amended, for reimbursement of costs or advances made to health care providers pursuant to a contract with the United States; and

   [[(3)] (4)  Amounts received[]] by a professional employment organization from a client company equal to amounts that are disbursed by the professional employment organization for employee wages, salaries, payroll taxes, insurance premiums, and benefits, including retirement, vacation, sick leave, health benefits, and similar employment benefits with respect to assigned employees at a client company; provided that this exemption shall not apply to a professional employment organization upon failure of the professional employment organization to collect, account for, and pay over any income tax withholding for assigned employees or any federal or state taxes for which the professional employment organization is responsible.  As used in this paragraph, "professional employment organization", "client company", and "assigned employee" shall have the meanings provided in section 373K-1."

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on July 1, 2020.