Six-Year Extension of Rural Provider Tax Credit Clears Senate Health

The Joint Committee on Tax Credits will debate the scope and the length of the tax break’s extension, which is seen as critical to maintaining providers in rural areas, but criticized for offering an unneeded perk to wealthy physicians in affluent small towns.

The rural medical tax credit bill swiftly passed the Senate Health Committee on a 5-0 vote, setting up a six-year extension of the cherished perk for healthcare professionals who work in rural and exurban communities.

Senate Bill 178 will now appear before the Joint Committee on Tax Credits, chaired by Sen. Mark Hass, D-Beaverton, and Rep. Phil Barnhart, D-Eugene, who will determine whether it can reach the floor of the Senate. In this tight budget year, Barnhart and Hass are looking closely at all tax breaks, but the unanimous support of the policy committee makes it likely to pass.

The extension would move the expiration for the program for new providers from 2018 to 2024, while extending the credit for people already taking it from 2027 to 2033. Backers of the measure want the long extension to avoid another debate in two years. “It does feel like Groundhog’s Day,” said Doug Barber, the lobbyist for the Oregon Rural Health Association, referring to the Bill Murray movie. Legislators previously extended the program in 2013 and extended and altered it in 2015.

The extension of the tax credit would cost the state $1.1 million in the next biennium and $5.2 million in 2019-2021. Physicians, dentists, nurse practitioners, physician assistants, podiatrists, optometrists and nurse anesthetists all qualify for the tax break.

Rural health providers and the Oregon Medical Association have long fought for its continuation, despite complaints that it gives a tax break to highly affluent providers who would practice in eligible communities without it. The credit is available in some wealthy communities such as Ashland and Hood River which have no provider shortage.

"While we were pleased with those changes a while back, we still think the credit has serious flaws and doesn't work," said Chuck Sheketoff, the executive director for the Oregon Center for Public Policy, a liberal-leaning think tank. "We're looking forward to the tax credit committees giving it the scrutiny it deserves. In recent sessions they have cut the sunset date down to two years...they really need to pull the plug."

Former Sen. Chip Shields, D-Portland, also complained that there is no such tax break for providers willing to serve low-income urban communities, where black and Latino populations have been underserved.

But Rep. Nancy Nathanson, D-Eugene, and Sen. Elizabeth Steiner Hayward, D-Beaverton, worked to curtail the program and tailor it toward truly rural areas.

Steiner Hayward told The Lund Report on Tuesday that a study from the Lewin Group was very convincing that the state needed to keep and expand its incentives for rural providers to maintain healthcare access in these areas. She was less certain of whether the revised program would be the right one to extend for a full six years.

The Lewin report found that while the rural provider tax credit had a negligible effect on recruiting primary care physicians, it had a sizeable influence on keeping providers in place.

While providers in Ashland and Hood River still get a tax break, the break has been reduced to $3,000 in towns like Ashland that are between 10 and 20 miles of a city and to $4,000 in towns like Hood River which are within 50 miles from a city, while keeping the tax credit at $5,000 for rural areas such as the South Coast and Eastern Oregon which truly struggle to retain providers.

The new requirements also force all eligible provider types -- not just doctors and physician assistants -- to serve 20 percent of patients on Medicare and 15 percent of those on the Oregon Health Plan.

“We do not yet know the impact of these changes on the program as providers are currently applying for the credit as part of their 2016 taxes,” said Robert Duehmig of the Office of Rural Health. “This program is important in our efforts to recruit and more importantly retain providers in our rural communities.”

Barber said the changes in the program reduced the total possible tax credit by 15 percent, or $2.2 million.

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