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 -