Download HF2935

MINNESOTACARE TAXES
Rate Reduction
March 29, 2006
Yes
DOR Administrative
Costs/Savings
No
X
Department of Revenue
Analysis of H.F. 2935 (Bradley) / S.F. 2640 (LeClair)
F.Y. 2006
Health Care Access Fund
$0
Fund Impact
F.Y. 2007
F.Y. 2008
(000’s)
$0
($34,900)
F.Y. 2009
($118,100)
Effective August 1, 2006.
EXPLANATION OF THE BILL
Current Law: MinnesotaCare taxes on health care providers, hospitals, surgical centers, and
wholesale drug distributors are imposed at the rate of 2% on gross revenues. Tax revenues are
deposited in the health care access fund (HCAF).
Proposed Law: Beginning September 1, 2007, and subsequently on September 1 of every oddnumbered year thereafter, the Commissioner of Finance is to determine the projected balance of
the health care access fund as of the end of the current biennium using the February state
forecast adjusted for any legislative session changes. If a surplus is expected, the rate of tax is to
be adjusted (effective the following January 1st) so that amount of the expected surplus will be
minimized. The tax rate adjustment on the 2% tax to hospitals, surgical centers, providers, and
wholesale drug distributors is to be in one-tenth of one percent increments. If a rate adjustment
is implemented, it will be imposed for the next two calendar years.
REVENUE ANALYSIS DETAIL
•
•
•
Baseline revenues are from the February 2006 forecast. It is assumed that forecast revenues
are unchanged for the February 2007 forecast to provide an illustration of the calculation as it
would be completed in September 2007, assuming no legislative changes.
The balance in the HCAF is currently projected to be $176 million at the end of the fiscal
year 2008-2009 biennium.
Reducing the tax rate from 2% to 1.5% for the two year period January 1, 2008, to December
31, 2009, is calculated to reduce the balance to $24 million at the end of the biennium (i.e. at
the end of fiscal year 2009).
Department of Revenue
Analysis of H.F. 2935 / S.F. 2640
Page two
March 29, 2006
REVENUE ANALYSIS DETAIL (cont.)
•
Changing the tax rate for CY 2008 and CY 2009 affects only part of FY 2008 revenue, but it
also affects FY 2010 revenue. Hospitals and surgical centers pay five of their 12 CY
payments in one fiscal year, and the other seven payments in the second fiscal year.
Providers and wholesale drug distributors pay one of their four CY payments in one fiscal
year, and the other three payments in the second fiscal year.
Number of Taxpayers: Approximately 200 hospitals and surgical centers, 200 wholesale drug
distributors, and 8,100 health providers.
Source: Minnesota Department of Revenue
Tax Research Division
http://www.taxes.state.mn.us/taxes/legal_policy
hf2935(sf2640)_1 / rrs