PREPROPOSAL STATEMENT OF INQUIRY
Subject of Possible Rule Making: WAC 458-20-168 Hospitals, medical care facilities, and adult family homes.
Statutes Authorizing the Agency to Adopt Rules on this Subject: RCW 82.32.300 and 82.01.060(2).
Reasons Why Rules on this Subject may be Needed and What They Might Accomplish: WAC 458-20-168 (Rule 168) provides tax-reporting information to persons operating hospitals, medical care facilities, nursing homes, adult family homes, licensed boarding homes, and similar health-care facilities. Rule 168 needs to be revised to reflect legislative changes.
The department anticipates removing the references to hearing aids and ostomic items from Rule 168. Specific references to these items were removed from the sales and use tax exemptions provided by RCW 82.08.0283 and 82.12.0277 effective July 1, 2004, as a result of legislation to implement provisions of the national streamlined sales and use tax agreement (chapter 168, Laws of 2003). These items, however, will continue to be exempt under the definition of "prosthetic device" in RCW 82.08.0283 and 82.12.0277, which is also effective July 1, 2004. Rule 168 will direct readers to WAC 458-20-18801, which provides information regarding the sales and use tax exemptions provided by RCW 82.08.0283 and 82.12.0277.
Rule 168 currently does not specifically mention licensed boarding homes. We anticipate addressing the taxability of licensed boarding homes in this rule. Recent legislation provides licensed boarding homes with a preferential business and occupation (B&O) tax rate and a B&O tax deduction for amounts received as compensation for providing adult residential care, enhanced adult residential care, or assisted living services under contract with the Department of Social and Health Services. (See chapter 174, Laws of 2004).
Beginning July 1, 2003, RCW 82.71.020 imposes a quality maintenance fee on every nursing home in this state not exempt from the fee under RCW 74.46.091 (see chapter 16, Laws of 2003 1st sp.s.). This rule should be updated to provide information about this quality maintenance fee.
The department also anticipates amending Rule 168 to:
• Provide additional guidance for public and nonprofit hospitals in determining what income is subject to the public and nonprofit hospitals B&O tax classification and what income is subject to the service and other activities B&O tax classification;
• Explain that nursing homes and licensed boarding homes are not entitled to exempt any income from B&O tax as the rental of real estate;
• Explain the tax consequences when a hospital contracts with an independent contractor to provide medical services at the hospital;
• Provide additional information about B&O tax deductions and exemptions available to persons operating medical or other health care facilities; and
• Provide information about the taxability of meals furnished by hospitals, nursing homes, boarding homes, and similar health care facilities.
The result of these changes would be a more comprehensive and up-to-date rule that would be of greater use to taxpayers and agency staff.
Other Federal and State Agencies that Regulate this Subject and the Process Coordinating the Rule with These Agencies: None.
Process for Developing New Rule: Modified negotiated rule making.
Interested parties can participate in the decision to adopt the new rule and formulation of the proposed rule before publication. Written comments may be submitted by mail, fax, or at the public meeting. Oral comments will be accepted at the public meeting. A preliminary draft of the proposed changes is available upon request. Written comments on and/or requests for copies of the rule may be directed to Mark Mullin, Tax Policy Specialist, Legislation and Policy Division, Department of Revenue, P.O. Box 47467, Olympia, WA 98504-7467, phone (360) 570-6112, fax (360) 664-0693, e-mail MarkM@dor.wa.gov.
Location and Date of Public Meeting: The public meeting will take place at 1:30 p.m. on Wednesday, July 28, 2004, Capital Plaza Building, 4th Floor Large Conference Room, 1025 Union Avenue S.E., Olympia, WA.
Assistance for Persons with Disabilities: Contact Sandy Davis no later than ten days before the meeting date at
(360) 725-7499 or at TDD 1-800-451-7985.
June 18, 2004
Alan R. Lynn