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Oregon Lawmakers Consider Extending Tax Credits For Rural Providers

Rural providers receive $3,000 to $5,000 in income tax credits annually through the incentive program which is due to sunset in 2022.
March 22, 2021

A tax credit for rural health care providers will sunset in 2022 unless lawmakers extend it this session. 

It can provide up to $5,000 in credit for health care providers who earn up to $300,000. But some providers say lawmakers need to eliminate the income cap to recruit physicians to rural Oregon.

Senate Bill 143 would extend the sunset to 2028. Health care providers say the tax credit is a valuable tool to recruit doctors and specialists to rural Oregon, which struggles to attract talented physicians more than urban cores of the state. The Senate Health Care Committee heard the bill on Monday, but did not vote on it.

Along the way, lawmakers also heard another message: Providers want to see the $300,000 cap on income lifted so physicians who make more can get the tax break -- and receive an incentive to work in rural Oregon.

The bill is popular among providers in rural parts of Oregon like Douglas County. The credit is in effect a cash donation to providers. 

“Our local physicians have found this an extremely valuable tool in bringing doctors to our county and keeping them here,” said Dr. Bart Bruns, a Roseburg physician and chief executive officer of the Douglas County Independent Practice Association, in submitted testimony. The group has more than 100 physicians who are shareholders. “We have multiple physicians here who can attest to how this has worked to influence their decision to practice in Douglas County. At the very least, I hope you will consider extending this program for rural Oregon.”

The bill gives providers a credit against their income taxes that ranges from $3,000 to $5,000, depending on how far they live from a city of 40,000 people or more.  The credit is $3,000 if they work 10 to 20 miles from a larger community; $4,000 if they practice 20 to 50 miles from a larger community; and $5,000 if they practice more than 50 miles from a larger city. 

The credit is open to a variety of providers, including physicians, dentists, podiatrists, optometrists, physician assistants, nurse practitioners and nurse anesthetists. The program has existed since 1989 and, like other tax credit programs, sunsets every six years. To qualify, a provider must earn less than $300,000 annually, with exceptions for obstetricians and general surgeons. Providers also need to work at least 20 hours a week in the qualifying rural region and serve patients on Medicare or Medicaid.

In recent years, the tax credit has changed. Lawmakers changed it to a tiered credit system in 2016, ending a flat $5,000 credit for all. In 2018, lawmakers put on the $300,000 income limit.

In submitted testimony, Bruns urged lawmakers to consider House Bill 2473, which removes the $300,000 income cap. In a letter to lawmakers, Bruns said the cap “dramatically limits the effectiveness of the program.”

“While this is a very substantial income, the market in medicine will simply not allow us to bring many doctors to our area if they earn less,” he wrote. 

Katy King, government relations director for the Oregon chapter of the American College of Emergency Physicians, asked lawmakers to consider making emergency physicians exempt from the $300,000 income limit. In testimony, King said emergency physicians may exceed the income cap because they work long shifts to keep hospital emergency rooms in remote areas open.

“The average medical school debt now is over $225,000, which severely limits the ability of young physicians to start families and buy homes, while taking a pay cut to work in rural areas,” King said.

Without legislative action, the tax credit will end in 2022 for new providers entering rural Oregon. Providers who received the credit in 2021 would be grandfathered in and eligible to continue to receive it through 2031. The Legislature last extended the credit in 2015.

Legislative analysts project that if lawmakers extend the tax credit again, it would cost the state $4.4 million in the 2023-2025 biennium. Those numbers are estimates because providers can claim the credit only for up to 10 years, and new providers would enter the system and others would retire or leave the state.

No one testified against the bill.

You can reach Ben Botkin at [email protected] or via Twitter @BenBotkin1.