PRINTER'S NO. 2305
No. 1727 Session of 2007
INTRODUCED BY REICHLEY, BAKER, BEAR, BOYD, CAPPELLI, CLYMER,
CREIGHTON, CUTLER, DALLY, DENLINGER, EVERETT, GEIST,
GINGRICH, GRELL, HENNESSEY, HUTCHINSON, MACKERETH,
McILHATTAN, MILNE, PICKETT, QUINN, RAPP, ROSS, RUBLEY,
SONNEY, THOMAS, VULAKOVICH, WALKO AND WATSON, JULY 13, 2007
REFERRED TO COMMITTEE ON FINANCE, JULY 13, 2007
AN ACT
1 Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
2 act relating to tax reform and State taxation by codifying
3 and enumerating certain subjects of taxation and imposing
4 taxes thereon; providing procedures for the payment,
5 collection, administration and enforcement thereof; providing
6 for tax credits in certain cases; conferring powers and
7 imposing duties upon the Department of Revenue, certain
8 employers, fiduciaries, individuals, persons, corporations
9 and other entities; prescribing crimes, offenses and
10 penalties," providing for a disease management tax credit.
11 The General Assembly of the Commonwealth of Pennsylvania
12 hereby enacts as follows:
13 Section 1. The act of March 4, 1971 (P.L.6, No.2), known as
14 the Tax Reform Code of 1971, is amended by adding an article to
15 read:
16 ARTICLE XVII-D
17 DISEASE MANAGEMENT TAX CREDIT
18 Section 1701-D. Scope.
19 This article relates to disease management insurance policy
20 tax credits.
1 Section 1702-D. Definitions.
2 The following words and phrases when used in this article
3 shall have the meanings given to them in this section unless the
4 context clearly indicates otherwise:
5 "Department." The Department of Revenue of the Commonwealth.
6 "Disease management insurance policy." A group or individual
7 health insurance policy that includes a disease management
8 program.
9 "Disease management program." A set of interventions
10 designed to improve the health of individuals, especially those
11 with certain ailments or diseases. A disease management program
12 may include:
13 (1) Identifying patients and matching the intervention
14 with need.
15 (2) Support for adherence to evidence-based medical
16 practice guidelines, including providing medical treatment
17 guidelines to physicians and other providers, and providing
18 support services to assist the physician in monitoring the
19 patient.
20 (3) Services designed to enhance patient management and
21 adherence to an individualized treatment plan, including
22 patient education, monitoring and reminders, and behavior
23 modification programs aimed at encouraging lifestyle changes.
24 (4) Routine reporting and feedback loops, including
25 communication with patient, physician, health plan and
26 ancillary providers, and practice profiling.
27 (5) Collection and analysis of process and outcome
28 measures.
29 "Pass-through entity." Any of the following:
30 (1) A partnership, limited partnership, limited
20070H1727B2305 - 2 -
1 liability company, business trust or other unincorporated
2 entity that for Federal income tax purposes is taxable as a
3 partnership.
4 (2) A Pennsylvania S corporation.
5 "Primary contractor." A person licensed to conduct business
6 in this Commonwealth that develops, implements or monitors
7 disease management programs.
8 "Qualified tax liability." The liability for taxes imposed
9 under Article III (relating to personal income tax), IV
10 (relating to corporate net income tax) or VI (relating to
11 capital stock franchise tax). The term includes the liability
12 for taxes imposed under Article III on a sole proprietor,
13 partner, shareholder, owner or member of a pass-through entity.
14 "Secretary." The Secretary of Revenue of the Commonwealth.
15 "Service provider." A person licensed to conduct business in
16 this Commonwealth that is selected by the primary contractor to
17 provide disease management programs.
18 "Small business." A taxpayer with fewer than 50 employees.
19 "Tax credit." The disease management insurance policy tax
20 credit authorized under this article.
21 "Taxpayer." An entity subject to tax under Article III
22 (relating to personal income tax), IV (relating to corporate net
23 income tax) or VI (relating to capital stock franchise tax). The
24 term includes:
25 (1) the partner, shareholder, owner or member of a pass-
26 through entity that receives a tax credit; or
27 (2) a sole proprietor.
28 Section 1703-D. Credit for disease management insurance
29 policies.
30 (a) Application.--(1) A taxpayer who purchases and provides
20070H1727B2305 - 3 -
1 a disease management insurance policy to employees in a
2 taxable year may apply for a tax credit as provided in this
3 article. By September 15, a taxpayer must submit an
4 application to the department for premiums paid in the
5 taxable year that ended in the prior calendar year.
6 (2) A taxpayer with 50 or more employees who purchases
7 and provides a disease management insurance policy to
8 employees in a taxable year may apply for a tax credit as
9 provided in this article. By September 15, a taxpayer must
10 submit an application to the department for premiums paid in
11 the taxable year that ended in the prior calendar year.
12 (b) Tax credit.--A taxpayer qualified under subsection
13 (a)(1) shall receive a tax credit for the taxable year in the
14 amount of $500 for each employee of the taxpayer covered by a
15 disease management insurance policy. A taxpayer qualified under
16 subsection (a)(2) shall receive a tax credit for the taxable
17 year in an amount equal to 50% of the cost to the taxpayer for
18 providing health care coverage for employees, contingent on
19 proof the purchased coverage utilizes disease management
20 protocols.
21 (c) Notification of credit.--By December 15 of the calendar
22 year following the close of the taxable year, the department
23 shall notify the taxpayer of the amount of the taxpayer's tax
24 credit approved by the department.
25 Section 1704-D. Certification requirement.
26 (a) Application.--In order to qualify for the tax credit, a
27 taxpayer, in conjunction with the Department of Labor and
28 Industry and the Insurance Department, shall make application
29 for the certification of the disease management program
30 purchased as part of the disease management insurance policy.
20070H1727B2305 - 4 -
1 The Insurance Department shall develop the certification
2 criteria.
3 (b) Reapplying.--In the subsequent tax year, a taxpayer
4 reapplying for the tax credit must provide verification to the
5 Department of Labor and Industry and the Insurance Department
6 that the disease management program meets the certification
7 requirements and continues to be purchased by the taxpayer.
8 Section 1705-D. Carryover, carryback, refund and assignment of
9 credit.
10 (a) General rule.--If the taxpayer cannot use the entire
11 amount of the tax credit for the taxable year in which the tax
12 credit is first approved because the amount of the tax credit
13 exceeds the tax liability of the taxpayer for the year in which
14 the tax credit under section 1703-D (relating to credit for
15 disease management insurance policies) is to be applied, the
16 excess may be carried over to succeeding taxable years and used
17 as a credit against the qualified tax liability of the taxpayer
18 for those taxable years. Each time the tax credit is carried
19 over to a succeeding taxable year, it shall be reduced by the
20 amount that was used as a credit during the immediately
21 preceding taxable year. The tax credit may be carried over and
22 applied to succeeding taxable years for no more than 15 taxable
23 years following the first taxable year for which the taxpayer
24 was entitled to claim the credit.
25 (b) Application of tax credit.--A tax credit approved by the
26 department for premiums incurred in a taxable year shall first
27 be applied against the taxpayer's qualified tax liability for
28 the current taxable year as of the date on which the credit was
29 approved before the tax credit may be applied against any tax
30 liability under subsection (a).
20070H1727B2305 - 5 -
1 (c) Unused tax credit.--A taxpayer is not entitled to
2 assign, carry back or obtain a refund of an unused tax credit.
3 Section 1706-D. Time limitations.
4 A taxpayer is not entitled to a tax credit for health
5 insurance premiums providing for disease management programs
6 incurred in taxable years ending after December 31, 2010.
7 Section 1707-D. Limitation on credits.
8 (a) Allocation for small businesses.--Forty percent of
9 available funds shall be allocated exclusively for small
10 businesses. However, if the total amounts allocated to either
11 the group of applicants exclusive of small businesses or the
12 group of small business applicants is not approved in any fiscal
13 year, the unused portion will become available for use by other
14 qualifying taxpayers.
15 (b) Proration of tax credits.--
16 (1) If the total amount of tax credits applied for by
17 all taxpayers, exclusive of small businesses, exceeds the
18 amount allocated for those credits, the tax credit to be
19 received by each applicant shall be prorated by the
20 department among all applicants, exclusive of small
21 businesses, who have qualified for the credit.
22 (2) If the total amount of tax credits applied for by
23 all small businesses exceeds the amount allocated for those
24 credits, the tax credit to be received by each small business
25 applicant shall be prorated by the department among all small
26 business applicants who have qualified for the credit.
27 Section 1708-D. Shareholder, owner or member pass-through.
28 (a) Pennsylvania S corporations.--If a Pennsylvania S
29 corporation does not have an eligible tax liability against
30 which the tax credit may be applied, a shareholder of the
20070H1727B2305 - 6 -
1 Pennsylvania S corporation is entitled to a tax credit equal to
2 the tax credit determined for the Pennsylvania S corporation for
3 the taxable year multiplied by the percentage of the
4 Pennsylvania S corporation's distributive income to which the
5 shareholder is entitled.
6 (b) Pass-through entities.--If a pass-through entity other
7 than a Pennsylvania S corporation does not have an eligible tax
8 liability against which the tax credit may be applied, an owner
9 or member of the pass-through entity is entitled to a tax credit
10 equal to the tax credit determined for the pass-through entity
11 for the taxable year multiplied by the percentage of the pass-
12 through entity's distributive income to which the owner or
13 member is entitled.
14 (c) Entitlement.--The credit provided under subsection (a)
15 or (b) is in addition to any tax credit to which a shareholder,
16 owner or member of a pass-through entity is otherwise entitled
17 under this article. However, a pass-through entity and a
18 shareholder, owner or member of a pass-through entity may not
19 claim a credit under this article for the same premium or
20 employee.
21 Section 1709-D. Accountability.
22 (a) Review procedures.--Any taxpayer that receives a tax
23 credit under this article shall be subject to a performance
24 review by the Department of Labor and Industry, in conjunction
25 with the Insurance Department. As appropriate, the performance
26 review shall be based upon information submitted to the
27 department that includes the following:
28 (1) The contractor's or service provider's strategic
29 goals and objectives for disease management programs.
30 (2) The contractor's or service provider's annual
20070H1727B2305 - 7 -
1 performance plan setting forth how these strategic goals and
2 objectives are to be achieved and the specific methodology
3 for evaluating results, along with any proposed methods for
4 improvement.
5 (3) The contractor's or service provider's annual
6 performance report setting forth the specific results in
7 achieving its strategic goals and objectives for disease
8 management, including any changes in the health of
9 participants in the disease management program.
10 (4) The progress made in achieving expected program
11 priorities and goals.
12 (5) Any other information deemed necessary by the
13 department.
14 (b) Penalty.--If a performance review indicates that a
15 primary contractor or a service provider failed to comply with
16 contract requirements or meet performance goals, taxpayers may
17 be subject to a reduction in or ineligibility for future tax
18 credit funding under this article.
19 Section 1710-D. Report to General Assembly.
20 (a) Submission of report.--The secretary shall submit an
21 annual report indicating the effectiveness of the credit
22 provided by this article no later than March 15 following the
23 year in which the credits were approved to the Governor, the
24 chairmen and the minority chairmen of the Public Health and
25 Welfare Committee and the Appropriations Committee of the Senate
26 and the chairmen and minority chairmen of the Health and Human
27 Services Committee and the Appropriations Committee of the House
28 of Representatives.
29 (b) Contents.--The report shall include the names of all
30 taxpayers utilizing the credit as of the date of the report and
20070H1727B2305 - 8 -
1 the amount of credits approved and utilized by each taxpayer.
2 (c) Public information.--Notwithstanding any law providing
3 for the confidentiality of tax records, the information
4 contained in the report shall be public information.
5 (d) Recommendations.--The report may also include any
6 recommendations for changes in the calculation or administration
7 of the credit.
8 Section 1711-D. Termination.
9 The department shall not approve a tax credit under this
10 article for taxable years ending after December 31, 2010.
11 Section 1712-D. Regulations.
12 The secretary shall promulgate regulations necessary for the
13 implementation and administration of this article.
14 Section 2. This act shall take effect in 60 days.
G5L72MSP/20070H1727B2305 - 9 -