2023 Connecticut General Statutes › Title 12 - Taxation › Chapter 211c - Hospitals Tax and Nursing Home and Intermediate Care Facility User Fees › Section 12-263q. - Tax on net revenue from provision of inpatient hospital services and outpatient hospital services.

(a)(1) For each calendar quarter commencing on or after July 1, 2017, each hospital shall pay a tax on the total net revenue received by such hospital for the provision of inpatient hospital services and outpatient hospital services.
(A) On and after July 1, 2017, through June 30, 2026, the rate of tax for the provision of inpatient hospital services shall be six per cent of each hospital's audited net revenue for fiscal year 2016 attributable to inpatient hospital services. Such rate shall apply for fiscal years commencing on or after July 1, 2026, unless modified through any provision of the general statutes.
(B) (i) On and after July 1, 2017, and prior to July 1, 2019, the rate of tax for the provision of outpatient hospital services shall be nine hundred million dollars less the total tax imposed on all hospitals for the provision of inpatient hospital services, which sum shall be divided by the total audited net revenue for fiscal year 2016 attributable to outpatient hospital services, of all hospitals that are required to pay such tax, resulting in an effective rate of twelve and three thousand three hundred twenty-five ten thousandths (12.3325) per cent of each hospital's audited net revenue for fiscal year 2016 attributable to outpatient hospital services.
(ii) On and after July 1, 2019, and prior to July 1, 2020, the rate of tax for the provision of outpatient hospital services shall be eight hundred ninety million dollars less the total tax imposed on all hospitals for the provision of inpatient hospital services, which sum shall be divided by the total audited net revenue for fiscal year 2016 attributable to outpatient hospital services, of all hospitals that are required to pay such tax, resulting in an effective rate of twelve and nine hundred forty-two ten thousandths (12.0942) per cent of each hospital's audited net revenue for fiscal year 2016 attributable to outpatient hospital services, subject to any hospital dissolutions or cessation of operations pursuant to subparagraph (D) of this subdivision or disallowed exemptions pursuant to subsections (b) and (c) of this section.
(iii) On and after July 1, 2020, and prior to July 1, 2021, the rate of tax for the provision of outpatient hospital services shall be eight hundred eighty-two million dollars less the total tax imposed on all hospitals for the provision of inpatient hospital services, which sum shall be divided by the total audited net revenue for fiscal year 2016 attributable to outpatient hospital services, of all hospitals that are required to pay such tax, resulting in an effective rate of eleven and seven thousand five hundred three ten thousandths (11.7503) per cent of each hospital's audited net revenue for fiscal year 2016 attributable to outpatient hospital services, subject to any hospital dissolutions or cessation of operations pursuant to subparagraph (D) of this subdivision or disallowed exemptions pursuant to subsections (b) and (c) of this section.
(iv) On and after July 1, 2021, and prior to July 1, 2025, the rate of tax for the provision of outpatient hospital services shall be eight hundred fifty million dollars less the total tax imposed on all hospitals for the provision of inpatient hospital services, which sum shall be divided by the total audited net revenue for fiscal year 2016 attributable to outpatient hospital services, of all hospitals that are required to pay such tax, resulting in an effective rate of eleven and nine hundred seventy-six ten thousandths (11.0976) per cent of each hospital's audited net revenue for fiscal year 2016 attributable to outpatient hospital services, subject to any hospital dissolutions or cessation of operations pursuant to subparagraph (D) of this subdivision or disallowed exemptions pursuant to subsections (b) and (c) of this section.
(v) On and after July 1, 2025, the rate of tax for the provision of outpatient hospital services shall be eight hundred twenty million dollars less the total tax imposed on all hospitals for the provision of inpatient hospital services, which sum shall be divided by the total audited net revenue for fiscal year 2016 attributable to outpatient hospital services, of all hospitals that are required to pay such tax, resulting in an effective rate of ten and four thousand eight hundred fifty-eight ten thousandths (10.4858) per cent of each hospital's audited net revenue for fiscal year 2016 attributable to outpatient hospital services, subject to any hospital dissolutions or cessation of operations pursuant to subparagraph (D) of this subdivision or disallowed exemptions pursuant to subsections (b) and (c) of this section. The rate set forth in this clause shall apply for fiscal years commencing on or after July 1, 2026, unless modified through any provision of the general statutes.
(C) (i) For each state fiscal year commencing on or after July 1, 2019, the total audited net revenue for fiscal year 2016 attributable to inpatient hospital services, of all hospitals that are required to pay the tax under this section shall be five billion ninety-seven million eight hundred twenty thousand one hundred ninety-seven dollars, subject to any hospital dissolutions or cessation of operations pursuant to subparagraph (D) of this subdivision or disallowed exemptions pursuant to subsections (b) and (c) of this section.
(ii) (I) For the state fiscal year commencing on or after July 1, 2019, and prior to July 1, 2020, the total audited net revenue for fiscal year 2016 attributable to outpatient hospital services, of all hospitals that are required to pay the tax under this section shall be four billion eight hundred twenty-nine million eight hundred fifty-nine thousand three hundred ninety-nine dollars, subject to any hospital dissolutions or cessation of operations pursuant to subparagraph (D) of this subdivision or disallowed exemptions pursuant to subsections (b) and (c) of this section.
(II) For each state fiscal year commencing on or after July 1, 2020, the total audited net revenue for fiscal year 2016 attributable to outpatient hospital services, of all hospitals that are required to pay the tax under this section shall be four billion nine hundred three million one hundred twenty-seven thousand one hundred thirty-three dollars, subject to any hospital dissolutions or cessation of operations pursuant to subparagraph (D) of this subdivision or disallowed exemptions pursuant to subsections (b) and (c) of this section.
(D) (i) If a hospital or hospitals subject to the tax imposed under this subdivision merge, consolidate, are acquired or otherwise reorganize, the surviving hospital shall assume and be liable for the total tax imposed under this subdivision on the merged, consolidated, acquired or reorganized hospitals, including any outstanding liabilities from periods prior to such merger, consolidation, acquisition or reorganization.
(ii) If a hospital ceases to operate as a hospital for any reason other than a merger, consolidation, acquisition or reorganization, or ceases for any reason to be subject to the tax imposed under this subdivision, the amount of tax due from each taxpayer under this subdivision shall not be recalculated to take into account such occurrence for the state fiscal year in which the hospital dissolves or ceases to operate. The amount of tax that would be due from the dissolved hospital after its dissolution or cessation of operations shall not be collected by the commissioner for the state fiscal year in which such hospital dissolves or ceases to operate. In the next succeeding state fiscal year after the hospital dissolves or ceases to operate and in each subsequent state fiscal year, the total audited net revenue for fiscal year 2016 shall be reduced by such hospital's audited net revenue for fiscal year 2016 and the effective rate of the tax due under this section shall be adjusted to ensure that the total amount of such tax to be collected under subparagraphs (A) and (B) of this subdivision is redistributed among the surviving hospitals in proportion to the reduced total audited net revenue for fiscal year 2016 attributable to inpatient hospital services and outpatient hospital services, of all hospitals.
(E) (i) For each state fiscal year commencing on or after July 1, 2026, if the Commissioner of Social Services determines for any fiscal year that the effective rate of tax for the tax imposed on net revenue for the provision of inpatient hospital services exceeds the rate permitted under the provisions of 42 CFR 433.68(f), as amended from time to time, the amount of tax collected that exceeds the permissible amount shall be refunded to hospitals, in proportion to the amount of net revenue for the provision of inpatient hospital services upon which the hospitals were taxed. The effective rate of tax shall be calculated by comparing the amount of tax paid by hospitals on net revenue for the provision of inpatient hospital services in a state fiscal year with the amount of net revenue received by hospitals subject to the tax for the provision of inpatient hospital services for the equivalent fiscal year.
(ii) On or before July 1, 2026, and annually thereafter, each hospital subject to the tax imposed under this subdivision shall report to the Commissioner of Social Services, in the manner prescribed by and on forms provided by said commissioner, the amount of tax paid pursuant to this subsection by such hospital and the amount of net revenue received by such hospital for the provision of inpatient hospital services, in the state fiscal year commencing two years prior to each such reporting date. Not later than ninety days after said commissioner receives completed reports from all hospitals required to submit such reports, said commissioner shall notify the Commissioner of Revenue Services of the amount of any refund due each hospital to be in compliance with 42 CFR 433.68(f), as amended from time to time. Not later than thirty days after receiving such notice, the Commissioner of Revenue Services shall notify the Comptroller of the amount of each such refund and the Comptroller shall draw an order on the Treasurer for payment of each such refund. No interest shall be added to any refund issued pursuant to this subparagraph.
(2) Except as provided in subdivision (3) of this subsection, each hospital subject to the tax imposed under subdivision (1) of this subsection shall be required to pay the total amount due in four quarterly payments consistent with section 12-263s, with the first quarter commencing with the first day of each state fiscal year and the last quarter ending on the last day of each state fiscal year. Hospitals shall make all payments required under this subsection in accordance with procedures established by and on forms provided by the commissioner.
(3) (A) For the state fiscal year commencing July 1, 2017, each hospital required to pay tax on inpatient hospital services or outpatient hospital services shall make an estimated tax payment on December 15, 2017, which estimated payment shall be equal to one hundred thirty-three per cent of the tax due under chapter 211a for the period ending June 30, 2017. If a hospital was not required to pay tax under chapter 211a on either inpatient hospital services or outpatient hospital services, such hospital shall make its estimated payment based on its unaudited net patient revenue.
(B) Each hospital required to pay tax pursuant to this subdivision on inpatient hospital services or outpatient hospital services shall pay the remaining balance determined to be due in two equal payments, which shall be due on April 30, 2018, and July 31, 2018, respectively.
(C) (i) For each state fiscal year commencing on or after July 1, 2017, each hospital required to pay tax on inpatient hospital services or outpatient hospital services shall calculate the amount of tax due on forms prescribed by the commissioner by multiplying the applicable rate set forth in subdivision (1) of this subsection by its audited net revenue for fiscal year 2016.
(ii) For the state fiscal year commencing July 1, 2019, the payment made for the period ending September 30, 2019, by each hospital required to pay tax on inpatient hospital services or outpatient hospital services shall be considered an estimated payment for purposes of the tax due for said state fiscal year. Each hospital required to pay the tax under this section on inpatient hospital services or outpatient hospital services shall pay the remaining balance due in three equal payments, which shall be due on January 31, 2020, April 30, 2020, and July 31, 2020, respectively.
(D) The commissioner shall apply any payment made by a hospital in connection with the tax under chapter 211a for the period ending September 30, 2017, as a partial payment of such hospital's estimated tax payment due on December 15, 2017, under subparagraph (A) of this subdivision. The commissioner shall return to a hospital any credit claimed by such hospital in connection with the tax imposed under chapter 211a for the period ending September 30, 2017, for assignment as provided under section 12-263s.
(4) (A) Each hospital required to pay tax on inpatient hospital services or outpatient hospital services shall submit to the commissioner such information as the commissioner requires in order to calculate the audited net inpatient revenue for fiscal year 2016, the audited net outpatient revenue for fiscal year 2016 and the audited net revenue for fiscal year 2016 of all such health care providers. Such information shall be provided to the commissioner not later than January 1, 2018. The commissioner shall make additional requests for information as necessary to fully audit each hospital's net revenue. Upon completion of the commissioner's examination, the commissioner shall notify, prior to February 28, 2018, each hospital of its audited net inpatient revenue for fiscal year 2016, audited net outpatient revenue for fiscal year 2016 and audited net revenue for fiscal year 2016.
(B) Any hospital that fails to provide the requested information by the dates specified in subparagraph (A) of this subdivision or fails to comply with a request for additional information made under this subdivision shall be subject to a penalty of one thousand dollars per day for each day the hospital fails to provide the requested information or additional information.
(C) The commissioner may engage an independent auditor to assist in the performance of the commissioner's duties and responsibilities under this subdivision.
(5) Net revenue derived from providing a health care item or service to a patient shall be taxed only one time under this section.
(6) (A) For purposes of this section:
(i) “Audited net inpatient revenue for fiscal year 2016” means the amount of revenue that the commissioner determines, in accordance with federal law, that a hospital received for the provision of inpatient hospital services during the 2016 federal fiscal year;
(ii) “Audited net outpatient revenue for fiscal year 2016” means the amount of revenue that the commissioner determines, in accordance with federal law, that a hospital received for the provision of outpatient hospital services during the 2016 federal fiscal year; and
(iii) “Audited net revenue for fiscal year 2016” means net revenue, as reported in each hospital's audited financial statements, less the amount of revenue that the commissioner determines, in accordance with federal law, that a hospital received from other than the provision of inpatient hospital services and outpatient hospital services. The total audited net revenue for fiscal year 2016 shall be the sum of all audited net revenue for the 2016 fiscal year for all hospitals required to pay tax on inpatient hospital services and outpatient hospital services.
(B) For purposes of this section, if a hospital's audited financial statements for fiscal year 2016 does not report revenue for the entire fiscal year, such hospital's audited net revenue for fiscal year 2016 shall be calculated by projecting the amount of revenue such hospital would have received for the entire fiscal year based proportionally on the audited net revenue reported on its audited financial statements.
(C) Audited net inpatient revenue and audited net outpatient revenue shall be based on information provided by each hospital required to pay tax on inpatient hospital services or outpatient hospital services.
(b) (1) The Commissioner of Social Services shall seek approval from the Centers for Medicare and Medicaid Services to exempt from the net revenue tax imposed under subsection (a) of this section the following: (A) Specialty hospitals; (B) children's general hospitals; and (C) hospitals operated exclusively by the state other than a short-term general hospital operated by the state as a receiver pursuant to chapter 920. Any hospital for which the Centers for Medicare and Medicaid Services grants an exemption shall be exempt from the net revenue tax imposed under subsection (a) of this section. Any hospital for which the Centers for Medicare and Medicaid Services denies an exemption shall be deemed to be a hospital for purposes of this section and shall be required to pay the net revenue tax imposed under subsection (a) of this section on inpatient hospital services and outpatient hospital services at the same effective rates set forth in subsection (a) of this section.
(2) Each hospital shall provide to the Commissioner of Social Services, upon request, such information as said commissioner may require to make any computations necessary to seek approval for exemption under this subsection.
(3) As used in this subsection, (A) “specialty hospital” means a health care facility, as defined in section 19a-630, other than a facility licensed by the Department of Public Health as a short-term general hospital or a short-term children's hospital. “Specialty hospital” includes, but is not limited to, a psychiatric hospital or a chronic disease hospital, and (B) “children's general hospital” means a health care facility, as defined in section 19a-630, that is licensed by the Department of Public Health as a short-term children's hospital. “Children's general hospital” does not include a specialty hospital.
(c) (1) (A) For each state fiscal year commencing on or after July 1, 2017, and prior to July 1, 2020, the Commissioner of Social Services shall seek approval from the Centers for Medicare and Medicaid Services to exempt financially distressed hospitals from the net revenue tax imposed on outpatient hospital services. Any such hospital for which the Centers for Medicare and Medicaid Services grants an exemption shall be exempt from the net revenue tax imposed on outpatient hospital services under subsection (a) of this section. Any hospital for which the Centers for Medicare and Medicaid Services denies an exemption shall be required to pay the net revenue tax imposed on outpatient hospital services under subsection (a) of this section.
(B) For purposes of this subdivision, “financially distressed hospital” means a hospital that has experienced over the five-year period from October 1, 2011, through September 30, 2016, an average net loss of more than five per cent of aggregate revenue. A hospital has an average net loss of more than five per cent of aggregate revenue if such a loss is reflected in the applicable years of financial reporting that have been made available by the Health Systems Planning Unit of the Office of Health Strategy for such hospital in accordance with section 19a-670. Upon said commissioner's receipt of a determination by the Centers for Medicare and Medicaid Services that a hospital is not exempt, the total audited net revenue from the provision of outpatient hospital services for fiscal year 2016 shall be increased by such hospital's audited net revenue from the provision of outpatient hospital services for fiscal year 2016 and the effective rate of the tax due under this section shall be adjusted to ensure that the total amount of such tax to be collected under subsection (a) of this section is redistributed, commencing with the calendar quarter next succeeding the date of the determination by the Centers for Medicare and Medicaid Services.
(2) (A) For each state fiscal year commencing on or after July 1, 2020, the Commissioner of Social Services shall seek approval from the Centers for Medicare and Medicaid Services to exempt sole community hospitals from the net revenue tax imposed on outpatient hospital services. Any such hospital for which the Centers for Medicare and Medicaid Services grants an exemption shall be exempt from the net revenue tax imposed on outpatient hospital services under subsection (a) of this section. Any hospital for which the Centers for Medicare and Medicaid Services denies an exemption shall be required to pay the net revenue tax imposed on outpatient hospital services under subsection (a) of this section.
(B) For purposes of this subdivision, “sole community hospital” means a hospital that is classified by the Centers for Medicare and Medicaid Services for purposes of Medicare as a sole community hospital under 42 CFR 412.92. Upon said commissioner's receipt of a determination by the Centers for Medicare and Medicaid Services that a hospital is not exempt, the total audited net revenue from the provision of outpatient hospital services for fiscal year 2016 shall be increased by such hospital's audited net revenue from the provision of outpatient hospital services for fiscal year 2016 and the effective rate of the tax due under this section shall be adjusted to ensure that the total amount of such tax to be collected under subsection (a) of this section is redistributed, commencing with the calendar quarter next succeeding the date of the determination by the Centers for Medicare and Medicaid Services.
(3) Upon receipt of a determination by the Centers for Medicare and Medicaid Services under this subsection that a hospital is not exempt, said commissioner shall notify all hospitals subject to the tax under this section of such determination, the corresponding increase to the total audited net revenue for fiscal year 2016 and the change in any effective rate of the tax to be collected under subsection (a) of this section through the state fiscal year 2026. Such notice shall be provided prior to the end of the calendar quarter next succeeding the date of the determination by the Centers for Medicare and Medicaid Services. If a state fiscal year has commenced when such determination is made, the adjusted audited net revenue for fiscal year 2016 and the change in any effective rate of the tax to be collected under subsection (a) of this section shall be prorated to take into account the amount of the tax already paid during the applicable state fiscal year.
(d) The commissioner shall issue guidance regarding the administration of the tax on inpatient hospital services and outpatient hospital services. Such guidance shall be issued upon completion of a study of the applicable federal law governing the administration of tax on inpatient hospital services and outpatient hospital services. The commissioner shall conduct such study in collaboration with the Commissioner of Social Services, the Secretary of the Office of Policy and Management, the Connecticut Hospital Association and the hospitals subject to the tax imposed on inpatient hospital services and outpatient hospital services.
(e) (1) The commissioner shall determine, in consultation with the Commissioner of Social Services, the Secretary of the Office of Policy and Management, the Connecticut Hospital Association and the hospitals subject to the tax imposed on inpatient hospital services and outpatient hospital services, if there is any underreporting of revenue on hospitals' audited financial statements. Such consultation shall only be as authorized under section 12-15. The commissioner shall issue guidance, if necessary, to address any such underreporting.
(2) If the commissioner determines, in accordance with this subsection, that a hospital underreported net revenue on its audited financial statements, the amount of underreported net revenue shall be added to the amount of net revenue reported on such hospital's audited financial statements so as to comply with federal law and the revised net revenue amount shall be used for purposes of calculating the amount of tax owed by such hospital under this section. For purposes of this subsection, “underreported net revenue” means any revenue of a hospital subject to the tax imposed under this section that is required to be included in net revenue from the provision of inpatient hospital services and net revenue from the provision of outpatient hospital services to comply with 42 CFR 433.56, as amended from time to time, 42 CFR 433.68, as amended from time to time, and Section 1903(w) of the Social Security Act, as amended from time to time, but that was not reported on such hospital's audited financial statements. Underreported net revenue shall only include revenue of the hospital subject to such tax.
(f) Nothing in this section shall affect the commissioner's obligations under section 12-15 regarding disclosure and inspection of returns and return information.
(g) The provisions of section 17b-8 shall not apply to any exemption or exemptions sought by the Commissioner of Social Services from the Centers for Medicare and Medicaid Services under this section.
(June Sp. Sess. P.A. 17-4, S. 2; P.A. 18-91, S. 76; P.A. 19-117, S. 356; Dec. Sp. Sess. P.A. 19-1, S. 1.)
History: June Sp. Sess. P.A. 17-4 effective November 21, 2017; P.A. 18-91 amended Subsec. (c) by replacing “Office of Health Care Access” with “Health Systems Planning Unit of the Office of Health Strategy”, effective May 14, 2018; P.A. 19-117 substantially amended Subsec. (a) including by deleting references to July 1, 2019, adding references to Subpara. (C), replacing provision re rate of tax with provisions re fiscal year upon which tax is to be imposed in Subdiv. (1)(C), adding Subpara. (D) re tax liability after merger, consolidation or other reorganization in Subdiv. (1), adding Subpara. (E) re determination of effective rate of tax and refund in Subdiv. (1), adding clause (ii) re calculation of amount of tax for each state fiscal year commencing on or after July 1, 2019 in Subdiv. (3)(C), adding “(i) For each state fiscal year commencing on or after July 1, 2017, and prior to July 1, 2019,” and adding clause (ii) re biennial submission of information to commissioner in Subdiv. (4)(A), amended Subsec. (c) by replacing “January 1, 2018” with “July 1, 2019” re seeking approval from Centers for Medicare and Medicaid Services, amended Subsec. (g) by replacing “Department” with “Commissioner”, and made technical and conforming changes, effective June 26, 2019; Dec. Sp. Sess. P.A. 19-1 substantially revised Subsec. (a) re imposition of tax in Subdivs. (1)(A) to (6), amended Subsec. (b)(1) by changing “acute hospital” to “general hospital” and adding reference to effective rates in Subsec. (a) of section, substantially revised Subsec. (c) re exemptions from tax and Commissioner of Social Services' duties to seek such exemptions, and made technical changes in Subsec. (e)(2), effective December 19, 2019.