STAND. COM. REP. NO. 2792
RE: S.B. No. 2542
Honorable Ronald D. Kouchi
President of the Senate
Thirtieth State Legislature
Regular Session of 2020
State of Hawaii
Your Committee on Commerce, Consumer Protection, and Health, to which was referred S.B. No. 2542 entitled:
"A BILL FOR AN ACT RELATING TO THE GENERAL EXCISE TAX EXEMPTIONS,"
begs leave to report as follows:
The purpose and intent of this measure is to, beginning July 1, 2020, provide a general excise tax exemption for medical services by physicians and advanced practice registered nurses acting in the capacity as a primary care provider.
Your Committee received testimony in support of this measure from the Office of the Mayor of the County of Hawai‘i; Hawaii Medical Association; Hawaii – American Nurses Association; Hawaii Radiological Society; Hawaii Physician Shortage Crisis Task Force; Hawai‘i Association of Professional Nurses; United Public Workers, AFSCME, Local 646, AFL-CIO; East Hawaii IPA; Hawaii Society of Clinical Oncology; Hawai‘i Academy of Family Physicians; and fifteen individuals. Your Committee received testimony in opposition to this measure from one individual. Your Committee received comments on this measure from the Department of Taxation, Tax Foundation of Hawaii, Grassroot Institute of Hawaii, and Hawai‘i State Center for Nursing.
Your Committee finds that the general excise tax and related county surcharges are levied on Hawaii businesses on the sale of goods and services, including medical services provided by group and private practice physicians, making Hawaii the only state taxing medical services in this way.
Your Committee further finds that community physicians are often operating small businesses with narrow profit margins, and Medicare, Medicaid, and private insurer payments for medical services are well below national levels. The general excise tax and related county surcharges make medical practices unviable, resulting in practice closures and challenges in recruiting and retaining new or younger physicians. Therefore, in order to safeguard patient access to care and reduce the impact of the general excise tax on the shortage of physicians and advanced practice registered nurses, medical services performed within group and private practice should be exempt from the general excise tax and related county surcharges.
Your Committee has amended this measure by:
(1) Specifying that the exemption for medical services from the general excise tax shall be made effective for gross receipts received on or after January 1, 2021;
(2) Clarifying the definition of "medical services" by referencing chapter 457, Hawaii Revised Statutes, as it relates to advanced practice registered nurses; and
(3) Making technical, nonsubstantive amendments for the purposes of clarity and consistency.
As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection, and Health that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2542, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2542, S.D. 1, and be referred to your Committee on Ways and Means.
Respectfully submitted on behalf of the members of the Committee on Commerce, Consumer Protection, and Health,
ROSALYN H. BAKER, Chair