HB2519 SD2 PROPOSED

Part I

SECTION 1. The legislature finds that many Hawaii residents are increasingly unable to obtain timely and appropriate health care because of physician and dentist shortages, which primarily affect the rural areas of the State. Shortages in the areas of family practice, obstetrics, gynecology, and orthopedics are especially acute.

Because of the need to repay student loans to fund a physician's increasingly high cost of professional education, physicians are discouraged from working in shortage areas, which generally provide lower incomes.

The legislature finds that the establishment of various programs such as student loan repayment and state-funded physician and dentist stipend programs may be used to encourage and enable physicians and dentists to provide care in shortage areas.

The purpose of this part is to direct the legislative reference bureau to research the actions, programs, or approaches of other jurisdictions to address physician and dentist shortages including student loan repayment and stipend programs.

SECTION 2. (a) The legislative reference bureau shall research the actions, programs, or approaches of other jurisdictions to address physician and dentist shortages including student loan repayment and stipend programs.

(b) The legislative reference bureau shall include in its research of student loan repayment and stipend programs in other jurisdictions:

(1) General regulations regarding application procedures, policies, and contracts;

(2) Regulations regarding procedures and penalties for student loan repayment and stipend repayment defaults;

(3) An estimate of the minimum level of initial and on-going funding needed to establish student loan repayment and stipend programs; and

(4) An estimate of the number of participating physicians and dentists in such programs and an estimate of student loan repayment and stipend payment amounts.

(1) University of Hawaii John A. Burns School of Medicine; and

(2) Hawaii State Center for Nursing.

(d) The legislative reference bureau shall submit a report of its findings, recommendations, and any proposed legislation to the legislature not later than twenty days prior to the convening of the regular session of 2009. Any contract issued pursuant to this part shall be exempt from chapter 103D, Hawaii Revised Statutes.

SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2008-2009 for the legislative reference bureau to conduct the research set out in section 2.

The sum appropriated shall be expended by the legislative reference bureau for the purposes of this part.

Part II

SECTION 4. Purpose. The purpose of this part is to increase access to physician and dental services for residents of the State who live in federally designated "medically underserved areas" or "health professional shortage areas" by granting certain benefits to physicians and dentists who provide services in those areas.

SECTION 5. Definitions. As used in this part, unless the context clearly requires otherwise:

"Department" means the department of health.

"Director" means the director of health.

"Health professional shortage area" generally means a geographic area within the State that is served by an inadequate supply of physicians or dentists and that has the meaning as defined by the Health Resources and Services Administration of the United States Department of Health and Human Services.

"Medical or dental establishment" means a single physical location where a medical practice is conducted by a physician or dentist providing professional services.

"Medical practice" may include one or more medical or dental establishments, any number of which may be located within a medical practice shortage zone.

"Medical practice shortage zone" means either a health professional shortage area or a medically underserved area, or both, that is:

(1) Within the jurisdiction of a county government; and

(2) Eligible for the benefits under this part.

"Medically underserved area" generally means a geographic location within the State that has insufficient health resources in terms of physician or dental personnel or facilities, or both, to meet the medical or dental needs of the resident population and that has the meaning as defined by the Health Resources and Services Administration of the United States Department of Health and Human Services.

"Qualified medical practice" means any corporation, partnership, or sole proprietorship that is authorized to do business in the State and whose practitioner is licensed under chapter 448, 453, or 460, Hawaii Revised Statutes, that is qualified under section 9 and subject to the state corporate or individual income tax under chapter 235, Hawaii Revised Statutes.

"Taxes due the State" means income taxes due under chapter 235, Hawaii Revised Statutes.

SECTION 6. Medical practice shortage zone designation. The director of health shall designate areas within the State as medical practice shortage zones for a period of seven years. The director shall publish, update, and make available a list of medical practice shortage zones each year.

SECTION 7. Government assistance; prohibition. There shall be no duplication of existing state tax incentives to qualified medical practices that locate in a medical practice shortage zone.

SECTION 8. Rules; generally. The department shall adopt rules in accordance with chapter 91, Hawaii Revised Statutes, to implement this part, including rules relating to health, safety, building, planning, zoning, and land use, which shall supersede all other inconsistent ordinances and rules relating to the use, zoning, planning, and development of land and construction in a medical practice shortage zone. Rules adopted under this section shall follow existing law, rules, and ordinances as closely as is consistent with standards meeting minimum requirements of energy efficiency, health, and safety.

SECTION 9. Qualified medical practice; designation. (a) A medical practice may obtain designation as a qualified medical practice for purposes of this part if the medical practice registers with the department and certifies that the medical practice either:

(1) Will begin the conduct of a medical practice within a medical practice shortage zone within one year of the date of registration; or

(2) Is already actively engaged in the conduct of a medical practice in an area immediately prior to the area's being designated a medical practice shortage zone; and

enters into an agreement with the department, within six months of the date of registration, to actively conduct the medical practice within the medical practice shortage zone for no less than seven consecutive years from the date of the agreement.

(b) After designation of a medical practice shortage zone, each qualified medical practice within a zone shall submit annually to the department an approved form supplied by the department that provides the certification and information necessary for the department to determine if the medical practice qualifies as a qualified medical practice. The approved form shall be submitted by each medical practice to the governing body of the county in which the medical practice shortage zone is located and then forwarded to the department by the governing body of the county.

(c) The form referred to in subsection (b) shall be prima facie evidence of the qualification of a medical practice for the purposes of this section.

SECTION 10. State business tax credit. (a) The director shall certify annually to the department of taxation the applicability of the tax credit provided in this part for a qualified medical practice against any taxes due the State. Except for the general excise tax, the credit shall be:

(1) Eighty per cent of the tax due for the first tax year;

(2) Seventy per cent of the tax due for the second tax year;

(3) Sixty per cent of the tax due for the third year;

(4) Fifty per cent of the tax due the fourth year;

(5) Forty per cent of the tax due the fifth year;

(6) Thirty per cent of the tax due the sixth year; and

(7) Twenty per cent of the tax due the seventh year.

Any tax credit not usable shall not be applied to future tax years.

(b) When a partnership is eligible for a tax credit under this section, each partner shall be eligible for the tax credit provided for in this section on the partner's income tax return in proportion to the amount of income received by the partner from the partnership. Any qualified medical practice having taxable income from the active conduct of a medical or dental establishment, both within and outside a medical practice shortage zone, shall allocate and apportion its taxable income attributable to that production. Tax credits provided for in this section shall only apply to taxable income of a qualified medical practice attributable to the active conduct of a medical or dental establishment within a medical practice shortage zone.

(c) In addition to any tax credit authorized under this section, any qualified medical practice shall be entitled to a tax credit against any taxes due the State in an amount equal to a percentage of unemployment taxes paid. The amount of the credit shall be equal to:

(1) Eighty per cent of the unemployment taxes paid during the first year;

(2) Seventy per cent of the taxes paid during the second year;

(3) Sixty per cent of the taxes paid during the third year;

(4) Fifty per cent of the taxes paid during the fourth year;

(5) Forty per cent of the taxes paid during the fifth year;

(6) Thirty per cent of the taxes paid during the sixth year; and

(7) Twenty per cent of the taxes paid during the seventh year.

(d) Tax credits provided for in subsection (c) shall only apply to the unemployment tax paid on employees employed at the medical establishment or establishments located within the medical practice shortage zone. Any tax credit not usable shall not be applied to future tax years.

SECTION 11. State general excise and use tax exemptions. The director shall certify annually to the department of taxation that any qualified medical practice is exempt from the payment of general excise taxes on the gross proceeds from the conduct of a medical practice within a medical practice shortage zone. The director shall also certify annually to the department of taxation that any qualified medical practice is exempt from the use tax for purchases by the qualified medical practice. The gross proceeds received by a contractor licensed under chapter 444, Hawaii Revised Statutes, shall be exempt from the general excise tax for construction within a medical practice shortage zone that is performed for a qualified medical practice within a medical practice shortage zone. The exemption shall extend for a period not to exceed seven years.

SECTION 12. County incentives. A county may propose county incentives to be made available in a medical practice shortage zone, including:

(1) Reduction of permit fees;

(2) Reduction of user fees;

(3) Reduction of real property taxes; and

(4) Regulatory flexibility, including, but not limited to:

(A) Special zoning districts;

(B) Permit process reform;

(D) Other public incentives,

which shall be binding upon the locality upon designation of the medical practice shortage zone.

SECTION 13. Termination of medical practice shortage zone. Upon designation of an area as a medical practice shortage zone, the proposals for regulatory flexibility, tax incentives, and other public incentives specified in this part shall be binding upon the county governing body to the extent and for the period of time specified by the director pursuant to section 9. If the county governing body is unable or unwilling to provide any of the incentives set forth in section 11 or other incentives acceptable to the director, and the director has not adopted rules that supersede inconsistent ordinances and rules relating to medical practice shortage zones, then the medical practice shortage zone shall terminate. Qualified medical practices located within a medical practice shortage zone shall be eligible to receive the state tax incentives provided by this part even though the zone designation has terminated. No medical practice may become a qualified medical practice after the date of zone termination.

SECTION 14. This part does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.

Part III

SECTION 15. If any provision of this Act, or the application thereof to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the Act, which can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 16. This Act shall take effect upon its approval, except that section 3 shall take effect on July 1, 2008, and part II of this Act shall be repealed on June 30, 2016.

HOUSE OF REPRESENTATIVES	H.B. NO.	2519
TWENTY-FOURTH LEGISLATURE, 2008		H.D. 2
STATE OF HAWAII		S.D. 2
		PROPOSED