Connecticut Seal

General Assembly

File No. 623

    February Session, 2018

Substitute Senate Bill No. 10

Senate, April 23, 2018

The Committee on Finance, Revenue and Bonding reported through SEN. FONFARA of the 1st Dist. and SEN. FRANTZ, L. of the 36th Dist., Chairpersons of the Committee on the part of the Senate, that the substitute bill ought to pass.

AN ACT MAKING ADJUSTMENTS TO STATE REVENUE AND CONCERNING THE AMBULATORY SURGICAL CENTERS TAX.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 12-578j of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

Not later than June 30, [2019] 2020, MMCT Venture, LLC, as defined in subsection (a) of section 12-578f, shall pay to the state thirty million dollars for deposit in the General Fund. Such money shall be credited against any unpaid required payments pursuant to subsection (c) of section 12-578g for each month in which the casino gaming facility is conducting authorized games in such amount and manner as determined pursuant to an agreement between the Secretary of the Office of Policy and Management and MMCT Venture, LLC. No interest shall be charged.

Sec. 2. Section 657 of public act 17-2 of the June special session is repealed and the following is substituted in lieu thereof (Effective from passage):

Notwithstanding any provision of the general statutes, the Secretary of the Office of Policy and Management may transfer up to $20,000,000 from nonappropriated accounts in the General Fund, excluding the community investment account established pursuant to section 4-66aa of the general statutes, that do not receive (1) gifts, grants or donations from public or private sources, or (2) other revenues from individuals to support a particular interest or purpose, to the resources of the General Fund for the fiscal year ending June 30, 2019.

Sec. 3. (NEW) (Effective July 1, 2018, and applicable to taxable years commencing on or after January 1, 2018) (a) Any taxpayer that (1) grows or produces agricultural food commodities such as fruits, vegetables, dairy, eggs, poultry or meat, and (2) donates such agricultural food commodities to food banks, food pantries or soup kitchens in the state that, as part of their ongoing services, provide food resources to low-income individuals and families and are exempt from taxation under Section 501(c)(3) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as amended from time to time, shall be allowed a deduction from such taxpayer's adjusted gross income, for purposes of the tax imposed under chapter 229 of the general statutes. Such deduction shall not exceed forty thousand dollars of the wholesale value of the agricultural food commodities donated during the taxable year for which the deduction is claimed. Any taxpayer claiming the deduction shall make available to the Department of Revenue Services documentation supporting such deduction in the form and manner prescribed by the Commissioner of Revenue Services.

(b) No taxpayer shall donate agricultural food commodities that the Department of Public Health or a local director of health, or an authorized agent thereof, has embargoed or ordered destroyed, are adulterated, as defined in section 21a-101 of the general statutes, or are not fit for human consumption.

(c) No taxpayer shall receive remuneration for a donation made pursuant to this section.

Sec. 4. Subparagraph (B) of subdivision (20) of subsection (a) of section 12-701 of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2018, and applicable to taxable years commencing on or after January 1, 2018):

(B) There shall be subtracted therefrom:

(i) [to] To the extent properly includable in gross income for federal income tax purposes, any income with respect to which taxation by any state is prohibited by federal law; [,]

(ii) [to] To the extent allowable under section 12-718, exempt dividends paid by a regulated investment company; [,]

(iii) To the extent properly includable in gross income for federal income tax purposes, the amount of any refund or credit for overpayment of income taxes imposed by this state, or any other state of the United States or a political subdivision thereof, or the District of Columbia; [, to the extent properly includable in gross income for federal income tax purposes,]

(iv) [to] To the extent properly includable in gross income for federal income tax purposes and not otherwise subtracted from federal adjusted gross income pursuant to clause (x) of this subparagraph in computing Connecticut adjusted gross income, any tier 1 railroad retirement benefits; [,]

(v) [to] To the extent any additional allowance for depreciation under Section 168(k) of the Internal Revenue Code, as provided by Section 101 of the Job Creation and Worker Assistance Act of 2002, for property placed in service after December 31, 2001, but prior to September 10, 2004, was added to federal adjusted gross income pursuant to subparagraph (A)(ix) of this subdivision in computing Connecticut adjusted gross income for a taxable year ending after December 31, 2001, twenty-five per cent of such additional allowance for depreciation in each of the four succeeding taxable years; [,]

(vi) [to] To the extent properly includable in gross income for federal income tax purposes, any interest income from obligations issued by or on behalf of the state of Connecticut, any political subdivision thereof, or public instrumentality, state or local authority, district or similar public entity created under the laws of the state of Connecticut; [,]

(vii) [to] To the extent properly includable in determining the net gain or loss from the sale or other disposition of capital assets for federal income tax purposes, any gain from the sale or exchange of obligations issued by or on behalf of the state of Connecticut, any political subdivision thereof, or public instrumentality, state or local authority, district or similar public entity created under the laws of the state of Connecticut, in the income year such gain was recognized; [,]

(viii) [any] Any interest on indebtedness incurred or continued to purchase or carry obligations or securities the interest on which is subject to tax under this chapter but exempt from federal income tax, to the extent that such interest on indebtedness is not deductible in determining federal adjusted gross income and is attributable to a trade or business carried on by such individual; [,]

(ix) [ordinary] Ordinary and necessary expenses paid or incurred during the taxable year for the production or collection of income which is subject to taxation under this chapter but exempt from federal income tax, or the management, conservation or maintenance of property held for the production of such income, and the amortizable bond premium for the taxable year on any bond the interest on which is subject to tax under this chapter but exempt from federal income tax, to the extent that such expenses and premiums are not deductible in determining federal adjusted gross income and are attributable to a trade or business carried on by such individual; [,]

(x) (I) [for] For taxable years commencing prior to January 1, 2019, for a person who files a return under the federal income tax as an unmarried individual whose federal adjusted gross income for such taxable year is less than fifty thousand dollars, or as a married individual filing separately whose federal adjusted gross income for such taxable year is less than fifty thousand dollars, or for a husband and wife who file a return under the federal income tax as married individuals filing jointly whose federal adjusted gross income for such taxable year is less than sixty thousand dollars or a person who files a return under the federal income tax as a head of household whose federal adjusted gross income for such taxable year is less than sixty thousand dollars, an amount equal to the Social Security benefits includable for federal income tax purposes;

(II) [for] For taxable years commencing prior to January 1, 2019, for a person who files a return under the federal income tax as an unmarried individual whose federal adjusted gross income for such taxable year is fifty thousand dollars or more, or as a married individual filing separately whose federal adjusted gross income for such taxable year is fifty thousand dollars or more, or for a husband and wife who file a return under the federal income tax as married individuals filing jointly whose federal adjusted gross income from such taxable year is sixty thousand dollars or more or for a person who files a return under the federal income tax as a head of household whose federal adjusted gross income for such taxable year is sixty thousand dollars or more, an amount equal to the difference between the amount of Social Security benefits includable for federal income tax purposes and the lesser of twenty-five per cent of the Social Security benefits received during the taxable year, or twenty-five per cent of the excess described in Section 86(b)(1) of the Internal Revenue Code;

(III) [for] For the taxable year commencing January 1, 2019, and each taxable year thereafter, for a person who files a return under the federal income tax as an unmarried individual whose federal adjusted gross income for such taxable year is less than seventy-five thousand dollars, or as a married individual filing separately whose federal adjusted gross income for such taxable year is less than seventy-five thousand dollars, or for a husband and wife who file a return under the federal income tax as married individuals filing jointly whose federal adjusted gross income for such taxable year is less than one hundred thousand dollars or a person who files a return under the federal income tax as a head of household whose federal adjusted gross income for such taxable year is less than one hundred thousand dollars, an amount equal to the Social Security benefits includable for federal income tax purposes; and

(IV) [for] For the taxable year commencing January 1, 2019, and each taxable year thereafter, for a person who files a return under the federal income tax as an unmarried individual whose federal adjusted gross income for such taxable year is seventy-five thousand dollars or more, or as a married individual filing separately whose federal adjusted gross income for such taxable year is seventy-five thousand dollars or more, or for a husband and wife who file a return under the federal income tax as married individuals filing jointly whose federal adjusted gross income from such taxable year is one hundred thousand dollars or more or for a person who files a return under the federal income tax as a head of household whose federal adjusted gross income for such taxable year is one hundred thousand dollars or more, an amount equal to the difference between the amount of Social Security benefits includable for federal income tax purposes and the lesser of twenty-five per cent of the Social Security benefits received during the taxable year, or twenty-five per cent of the excess described in Section 86(b)(1) of the Internal Revenue Code; [,]

(xi) [to] To the extent properly includable in gross income for federal income tax purposes, any amount rebated to a taxpayer pursuant to section 12-746; [,]

(xii) [to] To the extent properly includable in the gross income for federal income tax purposes of a designated beneficiary, any distribution to such beneficiary from any qualified state tuition program, as defined in Section 529(b) of the Internal Revenue Code, established and maintained by this state or any official, agency or instrumentality of the state; [,]

(xiii) [to] To the extent allowable under section 12-701a, contributions to accounts established pursuant to any qualified state tuition program, as defined in Section 529(b) of the Internal Revenue Code, established and maintained by this state or any official, agency or instrumentality of the state; [,]

(xiv) [to] To the extent properly includable in gross income for federal income tax purposes, the amount of any Holocaust victims' settlement payment received in the taxable year by a Holocaust victim; [,]

(xv) [to] To the extent properly includable in gross income for federal income tax purposes of an account holder, as defined in section 31-51ww, interest earned on funds deposited in the individual development account, as defined in section 31-51ww, of such account holder; [,]

(xvi) [to] To the extent properly includable in the gross income for federal income tax purposes of a designated beneficiary, as defined in section 3-123aa, interest, dividends or capital gains earned on contributions to accounts established for the designated beneficiary pursuant to the Connecticut Homecare Option Program for the Elderly established by sections 3-123aa to 3-123ff, inclusive; [,]

(xvii) [to] To the extent properly includable in gross income for federal income tax purposes, any income received from the United States government as retirement pay for a retired member of (I) the Armed Forces of the United States, as defined in Section 101 of Title 10 of the United States Code, or (II) the National Guard, as defined in Section 101 of Title 10 of the United States Code; [,]

(xviii) [to] To the extent properly includable in gross income for federal income tax purposes for the taxable year, any income from the discharge of indebtedness in connection with any reacquisition, after December 31, 2008, and before January 1, 2011, of an applicable debt instrument or instruments, as those terms are defined in Section 108 of the Internal Revenue Code, as amended by Section 1231 of the American Recovery and Reinvestment Act of 2009, to the extent any such income was added to federal adjusted gross income pursuant to subparagraph (A)(xi) of this subdivision in computing Connecticut adjusted gross income for a preceding taxable year; [,]

(xix) [to] To the extent not deductible in determining federal adjusted gross income, the amount of any contribution to a manufacturing reinvestment account established pursuant to section 32-9zz in the taxable year that such contribution is made; [,]

(xx) [to] To the extent properly includable in gross income for federal income tax purposes, (I) for the taxable year commencing January 1, 2015, ten per cent of the income received from the state teachers' retirement system, (II) for the taxable years commencing January 1, 2016, January 1, 2017, and January 1, 2018, twenty-five per cent of the income received from the state teachers' retirement system, and (III) for the taxable year commencing January 1, 2019, and each taxable year thereafter, fifty per cent of the income received from the state teachers' retirement system or the percentage, if applicable, pursuant to clause (xxi) of this subparagraph; [,]

(xxi) [to] To the extent properly includable in gross income for federal income tax purposes, except for retirement benefits under clause (iv) of this subparagraph and retirement pay under clause (xvii) of this subparagraph, for a person who files a return under the federal income tax as an unmarried individual whose federal adjusted gross income for such taxable year is less than seventy-five thousand dollars, or as a married individual filing separately whose federal adjusted gross income for such taxable year is less than seventy-five thousand dollars, or as a head of household whose federal adjusted gross income for such taxable year is less than seventy-five thousand dollars, or for a husband and wife who file a return under the federal income tax as married individuals filing jointly whose federal adjusted gross income for such taxable year is less than one hundred thousand dollars, (I) for the taxable year commencing January 1, 2019, fourteen per cent of any pension or annuity income, (II) for the taxable year commencing January 1, 2020, twenty-eight per cent of any pension or annuity income, (III) for the taxable year commencing January 1, 2021, forty-two per cent of any pension or annuity income, (IV) for the taxable year commencing January 1, 2022, fifty-six per cent of any pension or annuity income, (V) for the taxable year commencing January 1, 2023, seventy per cent of any pension or annuity income, (VI) for the taxable year commencing January 1, 2024, eighty-four per cent of any pension or annuity income, and (VII) for the taxable year commencing January 1, 2025, and each taxable year thereafter, any pension or annuity income; [,]

(xxii) [the] The amount of lost wages and medical, travel and housing expenses, not to exceed ten thousand dollars in the aggregate, incurred by a taxpayer during the taxable year in connection with the donation to another person of an organ for organ transplantation occurring on or after January 1, 2017; [, and]

(xxiii) [to] To the extent properly includable in gross income for federal income tax purposes, the amount of any financial assistance received from the Crumbling Foundations Assistance Fund or paid to or on behalf of the owner of a residential building pursuant to sections 8-442 and 8-443; and

(xxiv) The applicable amount of the wholesale value of the agricultural food commodities donated pursuant to section 3 of this act during the taxable year.

Sec. 5. Section 12-330c of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2018):

(a) (1) A tax is imposed on all untaxed tobacco products held in this state by any person. Except as otherwise provided in [subdivision] subdivisions (2) and (3) of this subsection, [with respect to the tax on cigars, or in subdivision (3) of this subsection with respect to the rate of tax on snuff tobacco products,] the tax shall be imposed at the rate of fifty per cent of the wholesale sales price of such products.

(2) Notwithstanding the provisions of subdivision (1) of this subsection, in the case of cigars the tax shall not exceed fifty cents per cigar.

(3) The tax shall be imposed on snuff tobacco products, on the net weight as listed by the manufacturer, as follows: Three dollars per ounce of snuff and a proportionate tax at the like rate on all fractional parts of an ounce of snuff.

(b) [Such] (1) Except as provided in subdivision (2) of this subsection, such tax shall be imposed on the distributor or the unclassified importer at the time the tobacco product is manufactured, purchased, imported, received or acquired in this state.

(2) Cigars owned by a distributor that are located on the premises of a person who performs fulfillment services in this state for such distributor and (A) are exported from this state shall not be subject to the tax imposed by this chapter, or (B) are shipped, delivered or otherwise transferred to a Connecticut address shall be subject to the tax imposed by this chapter and such tax shall be imposed on the date of such shipment, delivery or transfer and paid with, and reported by such distributor on, the return prescribed under section 12-330d that corresponds to the month such shipment, delivery or transfer occurred. For purposes of this subdivision, "fulfillment services" means services that are performed by a person on the premises of such person on behalf of a distributor and that involve the receipt of orders from such distributor or an agent thereof, which orders are to be filled by the person from an inventory of cigars that are offered for sale by such distributor, and the shipment of such orders to customers of such distributor.

(3) The commissioner may require the person who performs fulfillment services to file a quarterly informational return with the commissioner with respect to cigars located on the premises of such person, containing such information as the commissioner may prescribe.

(c) Such tax shall not be imposed on any tobacco products that (1) are exported from [the] this state, or (2) are not subject to taxation by this state pursuant to any laws of the United States.

(d) Any tax imposed under this chapter shall be reduced by fifty per cent for any product the Secretary of the United States Department of Health and Human Services determines to be a modified risk tobacco product pursuant to 21 USC 387k, as amended from time to time.

Sec. 6. Section 12-263p of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

As used in sections 12-263p to 12-263x, inclusive, unless the context otherwise requires:

(1) "Commissioner" means the Commissioner of Revenue Services;

(2) "Department" means the Department of Revenue Services;

(3) "Taxpayer" means any health care provider subject to any tax or fee under section 12-263q, as amended by this act, or 12-263r, as amended by this act;

(4) "Health care provider" means an individual or entity that receives any payment or payments for health care items or services provided;

(5) "Gross receipts" means the amount received, whether in cash or in kind, from patients, third-party payers and others for taxable health care items or services provided by the taxpayer in the state, including retroactive adjustments under reimbursement agreements with third-party payers, without any deduction for any expenses of any kind;

(6) "Net revenue" means gross receipts less payer discounts, charity care and bad debts, to the extent the taxpayer previously paid tax under section 12-263q, as amended by this act, on the amount of such bad debts;

(7) "Payer discounts" means the difference between a health care provider's published charges and the payments received by the health care provider from one or more health care payers for a rate or method of payment that is different than or discounted from such published charges. "Payer discounts" does not include charity care or bad debts;

(8) "Charity care" means free or discounted health care services rendered by a health care provider to an individual who cannot afford to pay for such services, including, but not limited to, health care services provided to an uninsured patient who is not expected to pay all or part of a health care provider's bill based on income guidelines and other financial criteria set forth in the general statutes or in a health care provider's charity care policies on file at the office of such provider. "Charity care" does not include bad debts or payer discounts;

(9) "Received" means "received" or "accrued", construed according to the method of accounting customarily employed by the taxpayer;

(10) "Hospital" means any health care facility, as defined in section 19a-630, that (A) is licensed by the Department of Public Health as a short-term general hospital; (B) is maintained primarily for the care and treatment of patients with disorders other than mental diseases; (C) meets the requirements for participation in Medicare as a hospital; and (D) has in effect a utilization review plan, applicable to all Medicaid patients, that meets the requirements of 42 CFR 482.30, as amended from time to time, unless a waiver has been granted by the Secretary of the United States Department of Health and Human Services;

(11) "Inpatient hospital services" means, in accordance with federal law, all services that are (A) ordinarily furnished in a hospital for the care and treatment of inpatients; (B) furnished under the direction of a physician or dentist; and (C) furnished in a hospital. "Inpatient hospital services" does not include skilled nursing facility services and intermediate care facility services furnished by a hospital with swing bed approval;

(12) "Inpatient" means a patient who has been admitted to a medical institution as an inpatient on the recommendation of a physician or dentist and who (A) receives room, board and professional services in the institution for a twenty-four-hour period or longer, or (B) is expected by the institution to receive room, board and professional services in the institution for a twenty-four-hour period or longer, even if the patient does not actually stay in the institution for a twenty-four-hour period or longer;

(13) "Outpatient hospital services" means, in accordance with federal law, preventive, diagnostic, therapeutic, rehabilitative or palliative services that are (A) furnished to an outpatient; (B) furnished by or under the direction of a physician or dentist; and (C) furnished by a hospital;

(14) "Outpatient" means a patient of an organized medical facility or a distinct part of such facility, who is expected by the facility to receive, and who does receive, professional services for less than a twenty-four-hour period regardless of the hour of admission, whether or not a bed is used or the patient remains in the facility past midnight;

(15) "Nursing home" means any licensed chronic and convalescent nursing home or a rest home with nursing supervision;

(16) "Intermediate care facility for individuals with intellectual disabilities" or "intermediate care facility" means a residential facility for persons with intellectual disability that is certified to meet the requirements of 42 CFR 442, Subpart C, as amended from time to time, and, in the case of a private facility, licensed pursuant to section 17a-227;

(17) "Medicare day" means a day of nursing home care service provided to an individual who is eligible for payment, in full or with a coinsurance requirement, under the federal Medicare program, including fee for service and managed care coverage;

(18) "Nursing home resident day" means a day of nursing home care service provided to an individual and includes the day a resident is admitted and any day for which the nursing home is eligible for payment for reserving a resident's bed due to hospitalization or temporary leave and for the date of death. For purposes of this subdivision, a day of nursing home care service shall be the period of time between the census-taking hour in a nursing home on two successive calendar days. "Nursing home resident day" does not include a Medicare day or the day a resident is discharged;

(19) "Intermediate care facility resident day" means a day of intermediate care facility residential care provided to an individual and includes the day a resident is admitted and any day for which the intermediate care facility is eligible for payment for reserving a resident's bed due to hospitalization or temporary leave and for the date of death. For purposes of this subdivision, a day of intermediate care facility residential care shall be the period of time between the census-taking hour in a facility on two successive calendar days. "Intermediate care facility resident day" does not include the day a resident is discharged;

(20) "Medicaid" means the program operated by the Department of Social Services pursuant to section 17b-260 and authorized by Title XIX of the Social Security Act, as amended from time to time; [and]

(21) "Medicare" means the program operated by the Centers for Medicare and Medicaid Services in accordance with Title XVIII of the Social Security Act, as amended from time to time; [.]

(22) "Ambulatory surgical center" means any distinct entity that (A) operates exclusively for the purpose of providing surgical services to patients not requiring hospitalization and in which the expected duration of services would not exceed twenty-four hours following an admission; (B) has an agreement with the Centers for Medicare and Medicaid Services to participate in Medicare as an ambulatory surgical center; and (C) meets the general and specific conditions for participation in Medicare set forth in 42 CFR Part 416, Subparts B and C, as amended from time to time; and

(23) "Ambulatory surgical center services" means only those items and services included in a facility fee payment to an ambulatory surgical center associated with each surgical procedure, that are not separately reimbursable ancillary or professional services. "Ambulatory surgical center services" does not include surgical procedures, physicians' services, anesthetists' services, radiology services, diagnostic services or ambulance services, that are reimbursed separately from the facility fee payment to an ambulatory surgical center.

Sec. 7. Subdivision (1) of subsection (a) of section 12-263q of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

(a) (1) For each calendar quarter commencing on or after July 1, 2017, each hospital shall pay a tax on the total net revenue received by such hospital for the provision of inpatient hospital services and outpatient hospital services. For each calendar quarter commencing on or after July 1, 2018, each ambulatory surgical center shall pay a tax on the total net revenue received by such ambulatory surgical center for the provision of ambulatory surgical center services.

(A) On and after July 1, 2017, and prior to July 1, 2019, the rate of tax for the provision of inpatient hospital services shall be six per cent of each hospital's audited net revenue for fiscal year 2016 attributable to inpatient hospital services.

(B) On and after July 1, 2017, and prior to July 1, 2019, the rate of tax for the provision of outpatient hospital services shall be nine hundred million dollars less the total tax imposed on all hospitals for the provision of inpatient hospital services, which sum shall be divided by the total audited net revenue for fiscal year 2016 attributable to outpatient hospital services, of all hospitals that are required to pay such tax.

(C) On and after July 1, 2019, the rate of tax for the provision of inpatient hospital services and outpatient hospital services shall be three hundred eighty-four million dollars divided by the total audited net revenue for fiscal year 2016, of all hospitals that are required to pay such tax.

(D) On and after July 1, 2018, the rate of tax for the provision of ambulatory surgical center services shall be six per cent, except that revenue from Medicaid and Medicare payments for the provision of ambulatory surgical center services and the first million dollars of gross receipts of an ambulatory surgical center, excluding such Medicaid and Medicare payments, in the applicable fiscal year shall be exempt from tax, except as provided in subdivision (2) of subsection (c) of section 12-263q, as amended by this act. Nothing in this section shall prohibit an ambulatory surgical center from seeking remuneration for the tax imposed by this section.

Sec. 8. Subsection (c) of section 12-263q of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

(c) (1) Prior to January 1, 2018, and every three years thereafter, the Commissioner of Social Services shall seek approval from the Centers for Medicare and Medicaid Services to exempt financially distressed hospitals from the net revenue tax imposed on outpatient hospital services. Any such hospital for which the Centers for Medicare and Medicaid Services grants an exemption shall be exempt from the net revenue tax imposed on outpatient hospital services under subsection (a) of this section. Any hospital for which the Centers for Medicare and Medicaid Services denies an exemption shall be required to pay the net revenue tax imposed on outpatient hospital services under subsection (a) of this section. For purposes of this subsection, "financially distressed hospital" means a hospital that has experienced over a five-year period an average net loss of more than five per cent of aggregate revenue. A hospital has an average net loss of more than five per cent of aggregate revenue if such a loss is reflected in the five most recent years of financial reporting that have been made available by the Office of Health Care Access for such hospital in accordance with section 19a-670 as of the effective date of the request for approval which effective date shall be July first of the year in which the request is made.

(2) (A) Prior to July 1, 2018, and annually thereafter, the Commissioner of Social Services shall seek approval from the Centers for Medicare and Medicaid Services to exempt the first million dollars of net revenue an ambulatory surgical center receives during each state fiscal year from the tax imposed on the provision of ambulatory surgical center services. If the Centers for Medicare and Medicaid Services does not grant such exemption, the Commissioner of Social Services shall seek approval from the Centers for Medicare and Medicaid Services to exempt the amount of net revenue closest to one million dollars that will meet the applicable waiver provisions set forth in 42 CFR 433.72, as amended from time to time, provided such amount shall not be less than five hundred thousand dollars nor more than one million five hundred thousand dollars. If the Centers for Medicare and Medicaid Services does not grant such exemption or grants the exemption for less or more than the first million dollars of net revenue, the exemption set forth in subparagraph (D) of subdivision (1) of subsection (a) of section 12-263q, as amended by this act, shall, as applicable, cease to be effective or shall be effective for the lesser or greater amount for which the exemption was granted, as of the first day of the calendar quarter next succeeding such decision by the Centers for Medicare and Medicaid Services.

(B) Each ambulatory surgical center shall provide to the Commissioner of Social Services, annually upon request, the following information for the prior calendar year to enable the commissioner to make any computations necessary to seek approval for the exemption under this subdivision: (i) The net revenue received by such ambulatory surgical center for the provision of ambulatory surgical center services; (ii) the Medicaid payments received by such ambulatory surgical center for the provision of ambulatory surgical center services; and (iii) the Medicare payments received by such ambulatory surgical center for the provision of ambulatory surgical center services. Such information shall be provided, if requested, not later than April thirtieth, and shall be considered return information subject to the provisions of section 12-15.

Sec. 9. (Effective from passage) The Commissioner of Social Services, in consultation with the Connecticut Association of Ambulatory Surgical Centers, shall establish a pilot program to study ways to increase access to medical care and decrease costs for such care under the Medicaid program by having certain medical procedures performed at ambulatory surgical centers. Such pilot program shall include the establishment of an application procedure and participation criteria for the program, the medical procedures to be considered and the appropriate reimbursement rates for such procedures. Not later than December 31, 2019, the commissioner shall submit a report, in accordance with the provisions of section 11-4a of the general statutes, regarding the pilot program and the commissioner's finding and recommendations to the joint standing committee of the General Assembly having cognizance of matters relating to finance, revenue and bonding.

Sec. 10. Subdivision (1) of subsection (b) of section 12-263i of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

(b) (1) For each calendar quarter commencing on or after October 1, 2015, and prior to July 1, 2018, there is hereby imposed a tax on each ambulatory surgical center in this state to be paid each calendar quarter. The tax imposed by this section shall be at the rate of six per cent of the gross receipts of each ambulatory surgical center, except that such tax shall not be imposed on any amount of such gross receipts that constitutes [either] any of the following: (A) [the] The first million dollars of gross receipts of the ambulatory surgical center in the applicable fiscal year, [or] excluding Medicaid and Medicare payments, (B) net revenue of a hospital that is subject to the tax imposed under section [602 of public act 17-2 of the June special session] 12-263q, as amended by this act, (C) Medicaid payments received by the ambulatory surgical center, and (D) Medicare payments received by the ambulatory surgical center. Nothing in this section shall prohibit an ambulatory surgical center from seeking remuneration for the tax imposed by this section.

Sec. 11. Subsection (a) of section 12-263s of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

(a) [No] Except for any exemption approved by the Centers for Medicare and Medicaid Services, tax credit or credits shall be allowable against any tax or fee imposed under section 12-263q, as amended by this act, or 12-263r. Notwithstanding any other provision of the general statutes, any health care provider that has been assigned tax credits under section 32-9t for application against the taxes imposed under chapter 211a may further assign such tax credits to another taxpayer or taxpayers one time, provided such other taxpayer or taxpayers may claim such credit only with respect to a taxable year for which the assigning health care provider would have been eligible to claim such credit and such other taxpayer or taxpayers may not further assign such credit. The assigning health care provider shall file with the commissioner information requested by the commissioner regarding such assignments, including but not limited to, the current holders of credits as of the end of the preceding calendar year.

Sec. 12. Sections 658 and 659 of public act 17-2 of the June special session are repealed. (Effective from passage)

This act shall take effect as follows and shall amend the following sections:

Section 1

from passage

12-578j

Sec. 2

from passage

PA 17-2 of the June Sp. Sess., Sec. 657

Sec. 3

July 1, 2018, and applicable to taxable years commencing on or after January 1, 2018

New section

Sec. 4

July 1, 2018, and applicable to taxable years commencing on or after January 1, 2018

12-701(a)(20)(B)

Sec. 5

July 1, 2018

12-330c

Sec. 6

from passage

12-263p

Sec. 7

from passage

12-263q(a)(1)

Sec. 8

from passage

12-263q(c)

Sec. 9

from passage

New section

Sec. 10

from passage

12-263i(b)(1)

Sec. 11

from passage

12-263s(a)

Sec. 12

from passage

Repealer section

FIN

Joint Favorable Subst.

 

The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or either chamber thereof for any purpose. In general, fiscal impacts are based upon a variety of informational sources, including the analyst's professional knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.


OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 18 $

FY 19 $

FY 20 $

Social Services, Dept.

GF - Potential Cost

See Below

See Below

See Below

Revenue Serv., Dept.

GF - Cost

None

5,000

None

Department of Revenue Services

GF - Revenue Loss

(200,000)

(63,700,000)

(3,700,000)

Note: GF=General Fund

Municipal Impact: None

Explanation

Section 1 delays by 1 year (from FY 19 to FY 20) the $30 million advanced payment required from MMCT Venture LLC (a company jointly owned and operated by the Mashantucket Pequot and Mohegan tribes) for the right to conduct authorized games at a new off-reservation commercial casino. The 2018-2019 Budget assumes a one-time $30 million revenue gain in FY 19 due to advanced payment.

Section 2 prohibits the Secretary of the Office of Policy and Management from transferring funds from the (non-appropriated) Community Investment Account (CIA) as part of the budget initiative to identify $20 million total in transfers from various non-appropriated accounts in FY 19. It is anticipated that the Secretary of the Office of Policy and Management will meet the $20 million target even though the CIA is unavailable.

Sections 3 – 4 establish a tax deduction of up to $40,000 for certain food donations, which results in a General Fund revenue loss estimated to be less than $10,000 annually beginning in FY 19.

Section 4 also extends the 100% income tax deduction for pension and annuity income for qualifying taxpayers which results in an annualized revenue loss of $57.5 million in FY 26 and $115 million in FY 27 and annually thereafter.

Section 5 does not result in any net fiscal impact as it clarifies the exemption process for certain tobacco taxes.

Sections 6 - 8 result in a General Fund revenue loss of $3.7 million in FY 19 and annually thereafter by modifying the ambulatory surgical center (ASC) tax.

Specifically the bill results in (1) a $3.2 million revenue loss annually by applying the ASC tax to certain items and services included in a facility fee payment (rather than gross receipts as under current law) and (2) a $500,000 revenue loss annually by exempting revenue from Medicaid and Medicare payments from the ASC tax. The bill continues an exemption for the first $1 million in gross receipts similar to current law so there is no fiscal impact to this provision. 

Section 9 may result in a fiscal impact to the Department of Social Services to establish a pilot program to study Medicaid services at Ambulatory Surgical Centers.  The fiscal impact will depend on implementation of the pilot program which is uncertain based on the parameters specified in the bill. 

Section 10 results in a General Fund revenue loss of $125,000 in FY 18 only by exempting gross receipts from Medicaid and Medicare payments from the ASC tax effective from passage. This provision is anticipated to impact the second quarterly payment due July 30th only. The first quarterly payment for this calendar year is due April 30th.

Section 11 has no fiscal impact by restricting the use of tax credits against the ASC tax. Per the Department of Revenue Services Annual Reports, no credits were claimed against ASC tax since its enactment in FY 16.

Section 12 repeals the $20 million fee revenues target in Section 659 of the Budget Act; and the $10 million tax expenditure target in Section 658 of PA 17-2 JSS.

The bill also results one-time cost of less than $5,000 to the Department of Revenue Services (DRS) in FY 19 only for updates to the DRS' online Taxpayer Service Center and the agency's internal Integrated Tax Administration System.

The Out Years

General Fund revenue losses from various provisions of the bill are projected to be $43.7 million in FY 21 and thereafter. In addition, Section 4 of the bill results in an annualized revenue loss of $57.5 million in FY 26 and $115 million in FY 27 and annually thereafter.

OLR Bill Analysis

sSB 10

AN ACT MAKING ADJUSTMENTS TO STATE REVENUE AND CONCERNING THE AMBULATORY SURGICAL CENTERS TAX.

SUMMARY

This bill makes various changes to state tax laws. Specifically, the bill:

The bill also makes the following adjustments to the FY 18-19 biennial budget:

EFFECTIVE DATE: Upon passage, except the income tax provisions are effective July 1, 2018, and applicable to tax years beginning on or after January 1, 2018.

1 — MMCT VENTURE, LLC PAYMENT

The bill delays, by one year, from June 30, 2019, to June 30, 2020, the date by which MMCT Venture, LLC must provide a $30 million advance to the state, which will be credited against required future monthly casino gross gaming revenue payments to the state.

Existing law authorizes MMCT Venture, LLC, a company jointly owned and operated by the Mashantucket Pequot and Mohegan tribes, to conduct authorized games at a new off-reservation commercial casino, once certain conditions are met, and requires MMCT to pay the state 25% of its gross gaming revenue once the casino is operational.

2 — TRANSFERS FROM NONAPPROPRIATED ACCOUNTS

Current law authorizes the OPM secretary, for FY 19, to transfer to the General Fund up to $20 million from nonappropriated accounts that do not receive (1) gifts, grants, or donations from public or private sources or (2) other revenues from individuals to support a particular interest or purpose. The bill prohibits him from transferring any such funds from the Community Investment Account (CIA).

By law, the CIA is a separate, nonlapsing General Fund account that provides funding for open space, farmland preservation, historic preservation, affordable housing, and promoting agriculture, among other things. The account is capitalized by land recording fees.

3 & 4 — INCOME TAX DEDUCTION FOR AGRICULTURAL FOOD DONATIONS

The bill establishes a personal income tax deduction for businesses that donate agricultural food commodities they grew or produced to nonprofit (i.e., 501(c)(3)) food banks, food pantries, or soup kitchens providing food resources to low-income individuals and families. The donated commodities may include fruit, vegetables, dairy, eggs, poultry, or meat.

Under the bill, the deduction is equal to the wholesale value of the commodities donated during the tax year for which the taxpayer claims the deduction, up to $40,000. Taxpayers claiming the deduction must provide documentation supporting the deduction to the Department of Revenue Services (DRS), in the form and manner the commissioner prescribes.

The bill prohibits a taxpayer from donating commodities that are adulterated, are unfit for human consumption, or were embargoed or ordered destroyed by the Department of Public Health. It also prohibits a taxpayer from claiming a deduction if it received any remuneration for a donated commodity.

4 — INCOME TAX DEDUCTION FOR PENSION AND ANNUITY INCOME

The bill makes permanent the personal income tax deduction for pension and annuity income currently scheduled to phase in from the 2019 to 2025 tax years, and end after 2025. Under the bill, eligible taxpayers may deduct 100% of such income for tax years beginning in 2025, and each tax year thereafter. By law, the deduction applies to taxpayers with federal adjusted gross incomes below (1) $75,000 for single filers, married people filing separately, and heads of households and (2) $100,000 for married people filing jointly. 

5 — TOBACCO PRODUCTS TAX EXEMPTION FOR CERTAIN EXPORTED CIGARS

The bill exempts from the tobacco products tax cigars that are (1) exported from Connecticut and (2) owned by a distributor located on the premises of a company performing “fulfillment services” for the distributor. A company provides “fulfillment services” when it receives orders from a distributor or its agent, fills them with the distributor's inventory stored on its premises, and ships them to the distributor's customers. By law, exported tobacco products are already exempt from tobacco products tax and distributors are eligible for a refund for any taxes paid on products that are subsequently exported.

Under the bill, cigars owned by such distributors are subject to the tax if they are shipped, delivered, or transferred to a Connecticut address. The tax must be (1) imposed on the date the cigars are shipped, delivered, or transferred and (2) reported and paid on the tobacco products tax return corresponding to the month the shipment, delivery, or transfer occurred.

The bill authorizes the DRS commissioner to require the fulfillment company to file a quarterly informational return, containing the information the commissioner prescribes, for the cigars located on the company's premises.

6-11 — ASC TAX

Sunset of ASC Gross Receipts Tax

Beginning July 1, 2018, the bill sunsets the current 6% gross receipts tax on ASCs and imposes on them a 6% net revenue tax, with certain exclusions.

Under current law, the tax is based on an ASC's gross receipts for each quarter, excluding the first $1 million in the applicable fiscal year and any portion of the ASC's gross receipts that constitutes net patient revenue of a hospital subject to the hospital provider tax. Although the bill sunsets the gross receipts tax on June 30, 2018, it (1) excludes from the tax gross receipts from any Medicaid and Medicare payments the ASC receives and (2) specifies that the existing exclusion for the first $1 million of an ASC's gross receipts excludes Medicaid and Medicare payments. In doing so, it appears to limit the tax base for the gross receipts tax due for the calendar quarter in which the bill takes effect, but before July 1, 2018 (i.e., the second quarter of 2018).

ASCs Subject to the Tax

By law, and under the bill, an ASC is a distinct entity that (1) operates exclusively to provide surgical services to patients not requiring hospitalization, where the services are not expected to take more than 24 hours, (2) has an agreement with the Centers for Medicare and Medicaid Services (CMS) to participate in Medicare as an ASC, and (3) meets the federal requirements to do so.

Tax Base and Rate

Under current law, the ASC tax is based on an ASC's gross receipts for each quarter, excluding the first $1 million in the applicable fiscal year and any portion of the ASC's gross receipts that constitutes net patient revenue of a hospital subject to the hospital provider tax. For calendar quarters beginning July 1, 2018, the bill instead bases the tax on the total net revenue the ASC receives for providing ASC services, excluding the (1) revenue from Medicaid and Medicare payments and (2) first $1 million of gross receipts (other than Medicaid and Medicare payments) in the applicable fiscal year, subject to the approval of the federal waiver described below. The bill maintains the tax rate at 6%.

Under the bill, the same definitions of net revenue and gross receipts that apply under the hospital provider tax apply to the ASC tax. “Net revenue” means gross receipts minus payer discounts, charity care, and bad debts on which the taxpayer previously paid the tax and “gross receipts” means the amount received (cash or in-kind) from patients, third-party payers, and others for taxable health care items or services the taxpayer provides in the state. It includes retroactive adjustments under reimbursement agreements with third-party payers, with no deduction for expenses.

Under the bill, “ASC services” are the items and services included in a facility fee payment to an ASC that are (1) associated with a surgical procedure and (2) not separately reimbursable ancillary or professional services. They exclude surgical procedures and physicians', anesthetists', radiology, diagnostic, and ambulance services that are separately reimbursed to an ASC from the facility fee payment.

As is the case under the current ASC tax, the bill does not prohibit an ASC from seeking remuneration for the tax it imposes.

Request for Federal Waiver

The bill requires the Department of Social Services (DSS) commissioner, before July 1, 2018, and annually thereafter, to seek approval from the Centers for Medicare and Medicaid (CMS) to exempt from the ASC tax the first $1 million of net revenue an ASC receives during the fiscal year. (However, the bill excludes the first $1 million of gross receipts, rather than net revenue, an ASC receives during the fiscal year.)

If CMS denies the exemption, the DSS commissioner must seek its approval to exempt the amount closest to $1 million, but between $500,000 and $1.5 million, that meets the applicable federal waiver provisions applicable to health care-related taxes (see BACKGROUND). If CMS denies the exemption or grants it for an amount other than $1 million, the exemption terminates or equals the approved amount, as applicable, as of the first day of the quarter following CMS's decision.

Annually, upon request, the bill requires each ASC to provide the DSS commissioner with certain information to allow him to make the calculations necessary for the annual waiver request. Specifically, each ASC must indicate, for the prior calendar year, the amount of net revenue and Medicaid and Medicare payments it received for providing ASC services. The ASCs must provide this information, if requested, by April 30.

Under the bill, the information the ASCs provide to DSS is considered confidential tax return information. The law establishes narrow conditions under which return information may be disclosed and sets penalties for unauthorized disclosures (a fine of up to $1,000, up to one year in prison, or both (CGS 12-15(g)).

Tax Credits

The bill extends to ASCs the prohibition against using tax credits that applies under existing law to hospitals, nursing homes, and ICF-IDs. Under current law, ASCs may apply urban and industrial site reinvestment tax credits against the ASC gross receipts tax.

Administrative Requirements

The bill extends to ASCs the same administrative requirements that apply to the hospital provider tax and nursing home and ICF-ID user fees. Among other things, these provisions:

Pilot Program ( 9)

The bill requires the DSS commissioner, in consultation with the Connecticut Association of Ambulatory Surgical Centers, to establish a pilot program to study ways of increasing access to, and decreasing the cost of, medical care under the Medicaid program by having certain medical procedures performed at ASCs. The program must establish the (1) application procedure, (2) participation criteria, (3) applicable medical procedures, and (4) appropriate reimbursement rates for the procedures.

By December 31, 2019, the commissioner must report on the pilot program and his findings and recommendations to the Finance, Revenue and Bonding Committee.

BACKGROUND

Federal Waiver Provisions Applicable to Health Care-Related Taxes

As a condition of receiving federal matching funds, federal law generally requires state provider taxes to be both broad-based (i.e., imposed on all providers within a specified class of providers) and uniform (i.e., the same tax for all providers within a specified class of providers). But states may submit a waiver request to CMS if a provider tax does not meet these requirements.

In order to waive either the broad-based or uniform requirement, a state needs to prove that the (1) net impact of the tax is generally redistributive, (2) amount of the tax is not directly correlated to Medicaid payments, and (3) tax program does not guarantee that providers receive their money back (or be “held harmless”) (42 CFR 433.72).

Related Bills

sSB 414 and sHB 5433, favorably reported by the Finance, Revenue and Bonding Committee, contain identical provisions that make permanent the personal income tax deduction for pension and annuity income.

COMMITTEE ACTION

Finance, Revenue and Bonding Committee

Joint Favorable Substitute

Yea

51

Nay

0

(04/05/2018)

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