Summary:

 Summary
Senate Bill 295 (SB 295) expands gross receipts tax deductions for health care services by removing the sunset date for certain health care-related deductions and creating new deductions for medical equipment, medical supplies, and prescription drugs. The bill also ensures that health care providers receiving Medicaid reimbursements are fully compensated for gross receipts taxes paid on those reimbursements. The bill takes effect on July 1, 2025. 

Legislation Overview:

 Senate Bill 295 (SB 295) amends Section 7-9-93 NMSA 1978, which governs gross receipts tax deductions for health care services provided by licensed practitioners or associations of health care practitioners. The bill removes the sunset date for the existing deduction on copayments and deductibles paid by insured patients, making it a permanent deduction. Additionally, the bill extends gross receipts tax deductions to include receipts from payments made directly by patients to health care practitioners, provided the services are not performed under a managed care or health insurance contract.

The bill also creates new gross receipts tax deductions for medical equipment, supplies, and prescription drugs purchased by health care practitioners and associations of health care practitioners. To qualify, the equipment, supplies, or drugs must be regularly used in the practice of health care professionals.

SB 295 also enacts a new section of the Public Assistance Act, mandating that health care providers who receive Medicaid reimbursements be reimbursed for all applicable gross receipts taxes. This provision ensures that Medicaid-funded services do not create additional tax burdens for providers.

Implications
SB 295 provides significant tax relief for health care providers, reducing the financial burden of gross receipts tax liabilities on patient payments, medical equipment purchases, and Medicaid reimbursements. The removal of the sunset date for copayment and deductible deductions ensures long-term tax relief for patients and providers, while the expansion of deductions to include direct patient payments makes private-pay medical services more affordable.

The deduction for medical equipment, supplies, and drugs reduces operational costs for health care professionals, particularly independent practitioners and small clinics. By compensating Medicaid providers for gross receipts taxes, the bill prevents tax burdens from discouraging provider participation in Medicaid, potentially improving access to care for low-income patients.

However, the cumulative effect of these deductions may reduce gross receipts tax revenue, impacting state and local government budgets. The extent of the revenue loss will depend on the number of claims filed and the total volume of deductible transactions. The bill’s provisions ensure that these deductions are tracked in the state’s tax expenditure budget, improving fiscal oversight and transparency. 

Current Law:

 Under current law, gross receipts tax deductions are available for certain health care services, but the deduction for copayments and deductibles is set to expire in 2028. Additionally, there is no existing deduction for direct patient payments or medical equipment purchases. Medicaid reimbursements are currently subject to gross receipts tax, and providers must absorb the tax burden themselves. SB 295 makes several key deductions permanent, expands tax relief for health care providers, and ensures Medicaid reimbursement fairness.