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Law360 (April 22, 2020, 4:56 PM EDT) -- Minnesota would temporarily suspend the state's health care provider tax and offer a credit against the tax for expenses related to treating and researching COVID-19, under state Senate bills recently introduced in response to the pandemic.
S.B. 4474, which was introduced April 16 by Sen. Carla Nelson, R-Rochester, would suspend the state's health care provider tax from May 1, 2020, to June 30, 2021. The tax rate is 1.8% on amounts health care providers receive for providing services to Minnesota patients.
S.B. 4473, which Nelson also introduced April 16, would provide a credit against the provider tax for health care providers' qualifying expenses relating to COVID-19. Qualifying expenses would include purchases of protective equipment and certain medical equipment; research costs related to testing for and treating COVID-19; and expenses related to isolation and quarantining of staff. The expenses would have to be incurred in the period of state emergency, starting from Democratic Gov. Tim Walz's declaration on March 13 to the expiration of any executive orders related to COVID-19.
Nelson told Law360 that while she does not support the provider tax in general, S.B. 4474 was narrowly crafted for the COVID-19 pandemic. She said that because of Walz's executive order in March ordering health care providers to postpone elective surgery, many health care providers have experienced revenue losses.
"Fifty percent, 60%, 70% of their income is in those procedures or surgeries that are no longer being able to be provided," Nelson told Law360. "There's no revenue coming in, and we should not be taxing what little revenue is left with the provider tax at this time."
The credit proposed under S.B. 4473 would be available to providers paying the provider tax that for the period of the state emergency have not applied for or received other state or federal funds for responding to the pandemic.
The health care provider tax was originally scheduled to sunset in 2019. Walz eliminated the sunset in the budget he signed in 2019 as a way to fund the state's Health Care Access Fund, although the budget provisions also brought the tax rate down from 2% to the current 1.8% rate.
Both bills are now in the Senate Taxes Committee.
Nelson represents Olmsted County, where the Mayo Clinic is located.
Walz's office did not respond to requests for comment.
--Editing by Robert Rudinger.
For a reprint of this article, please contact reprints@law360.com.
