Report Title:

Tax Exemption; Qualifying Medical Information Technology

Description:

Provides a general excise tax exemption for qualifying medical information technology costs to physicians.

HOUSE OF REPRESENTATIVES

H.B. NO.

964

TWENTY-THIRD LEGISLATURE, 2005

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO THE IMPLEMENTATION OF QUALIFYING MEDICAL INFORMATION TECHNOLOGY.

 

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

SECTION 1. The delivery of health care is becoming an increasingly complex process. However, unlike other information-based industries such as banking and finance, the health care industry has been slow to adopt information technology that would facilitate the rapid and accurate transmission of vital clinical information. One major reason for this delay in the adoption of medical information technology is the decentralized nature of health care delivery, relying as it does on scores of physicians operating in solo or small group practices. While decentralization in the delivery of health care has done much to preserve the traditional physician/patient relationship, which is the cornerstone of our care system, it has hampered the implementation of medical information technology that would yield great improvements in patient care and social benefits to employers, insurers, public health agencies and programs, as well as introduce efficiencies to the health care delivery system as a whole.

Most of the benefits of medical information technology will accrue to society as a whole in the form of increased efficiency of delivery, lower administration costs (and therefore lower costs to insurers and lower premiums to employers and employees). It will also reduce medical errors and provide a higher quality of care to the population of Hawaii as a whole. Nevertheless, medical information technology is expensive, and the cost of implementation falls primarily, almost exclusively, on physicians, many of whom are small businessmen and businesswomen, coping with educational debt, the rising cost of medical malpractice coverage, and shrinking reimbursement.

In order to encourage physicians to invest in medical information technology in their practices, the State should provide a limited rebate of the general excise tax on physician services to those physicians who are willing to invest their time, effort, and money in this technology. This modest self-limiting rebate will yield great dividends to the people of Hawaii both immediately and over time. It will facilitate the rapid and accurate transmission of information vital to the health of Hawaii's citizens, facilitate coordination of care, reduce the number of medical errors, reduce administrative overhead, reduce the need for duplicative testing, provide for accurate and timely billing and payments, and create highly skilled and well paying jobs in medical information technology in Hawaii.

SECTION 2. Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§237-   Medical information technology tax exemption. (a) There shall be allowed to each taxpayer licensed to practice medicine under chapter 453 a medical information technology exemption to the general excise tax that is imposed under this chapter.

To qualify for the exemption, the taxpayer shall:

(1) Be a sole proprietor, domestic corporation, domestic limited liability company, professional corporation, or any other legal entity;

(2) Have at least $500 in qualifying medical information technology costs in the taxable year in which the exemption is claimed; and

(3) Certify to the department of taxation that the qualifying medical information technology will be used in conjunction with the taxpayer's practice of medicine as that term is defined in section 453-1.

(b) The amount of the exemption shall be limited to $20,000 of the qualifying medical information technology costs incurred by the taxpayer; provided that any excess of the exemption in any taxable year may not be carried over to subsequent tax years.

(c) Every claim, including amended claims, for a tax exemption under this section shall be filed on or before the end of the twelfth month following the close of the taxable year for which the tax exemption may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the tax exemption.

(d) The director of taxation shall prepare any forms that may be necessary to claim a tax exemption under this section. The director may also require the taxpayer to furnish information to ascertain the validity of the claims for the tax exemption made under this section and may adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91.

(e) As used in this section, "qualifying medical information technology costs" means amounts paid for the purchase, lease, or licensing of hardware, software, or Internet access used in connection with the practice of medicine as defined in section 453-1, including training costs for physicians or staff, but shall not include amounts paid to third-party claims processing or billing services."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect on July 1, 2005, and apply to qualifying medical information technology costs incurred after December 31, 2004.

INTRODUCED BY:

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