Committee approves bed tax repeal, shelves tax rebate proposals

By Barry Massey

SANTA FE — A House committee endorsed a proposal Thursday to repeal a tax on nursing home care, but it shelved Republican-backed measures that would refund to New Mexicans the money paid because of the tax.

The Consumer and Public Affairs Committee gave unanimous approval to a measure that would eliminate the so-called nursing home bed tax starting in July. It’s a proposal that seems headed for enactment this session.
Gov. Bill Richardson is calling for repeal of the tax and the Senate already has passed its own version of the repeal legislation.

In 2004, the state imposed a nearly $9-a-day surcharge on each occupied bed at nursing homes and intermediate care facilities for the mentally retarded. The tax was to help finance Medicaid and is estimated to generate almost $21 million for the state in the next budget year. Supporters say the tax is no longer needed and can be a hardship for some fixed-income residents in long-term care facilities.

Under current law, the tax will be eliminated on June 30, 2007. The bill approved by the committee will speed up the repeal by a year.

The committee — on party-line votes — tabled two measures by Republicans that would repeal the tax and provide for a rebate, including to elderly New Mexicans. One of the measures would have extended the rebate to health care providers or institutions that paid the tax. Republicans favored the rebate measures; Democrats voted to shelve them.

Rep. Dan Foley, R-Roswell, said it’s wrong for state government to keep money it’s collected from the tax.

“Let’s give this money back. It’s their money,” said Foley. “They deserve it.”

Richardson administration officials opposed the proposed tax rebate, saying it could renew a fight with the federal government over Medicaid funding and the state might end up losing more than $30 million in federal matching payments.

When the state enacted the bed tax, it also established an income tax credit to help nursing home patients offset the tax they paid out of pocket because of higher care costs.

However, the federal government objected and contended that the credit effectively meant that only it was paying the bed tax. The government disallowed about $15 million in federal payments to the state. New Mexico is appealing that decision, but the state eliminated the credit last year to help resolve the dispute.

The bulk of nursing home care is covered by Medicaid — jointly financed by the federal and state governments — and Medicare.

An estimated 1,000 people privately pay for nursing home care and the proposed rebate could provide those individuals almost $1.5 million, according to estimates by the Taxation and Revenue Department.

Carolyn Ingram, medical assistance division director in the Human Services Department, said the proposed rebate would be “almost like a double payment” to individuals who received the income tax credit before it was eliminated. In 2004, the state paid about $725,000 in credits to about 500 taxpayers for nursing home payments.

The tax repeal measure goes to the Taxation and Revenue Committee for consideration.

The committee-approved bed tax repealer is HB365. The GOP-backed repeal and rebate measures are HB84 and HB162.