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HMO Use Tax in Michigan - Registration, Payments, and Discounts

Get information about the HMO Use Tax in Michigan, including registration process, electronic funds transfer, payment due dates, accelerated payments, and discounts for early payments.

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HMO Use Tax in Michigan - Registration, Payments, and Discounts

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  1. HMO Use Tax Michigan Department of Treasury August 2014

  2. Topics • HMO Overview • Registration • Electronic Funds Transfer (EFT) Process • Payments • Accelerated Payments • Discount • Annual Return • Contact Information

  3. HMO Overview • On June 11, 2014, Governor Snyder signed legislation (P.A. 161 of 2014) reinstating the 6% Use Tax on medical services provided by Medicaid Health Maintenance Organizations (HMOs) and Prepaid Inpatient Health Plans (PIHPs). Although not signed into law until June, the legislation is retroactive to April, 2014. • The tax was resurrected to help fix the revenue shortfall created when the Health Insurance Claims Assessment (HICA) fell short of projected revenue collections.

  4. HMO Overview (cont.) • HMO is a 6% tax on the use or consumption of “medical services”. It is not a tax on overall revenue or income. • “Medical Services” is defined to mean only those medical services provided to Medicaid beneficiaries. • All medical services provided to Medicaid beneficiaries beginning April 1, 2014 are subject to the tax.

  5. Registration • Complete form 518, Registration for Michigan Taxes, and fax it to the Miscellaneous Taxes and Fees unit. (517) 636- 4593 • Write HMO Use Tax at the top of the form. • Please do NOT submit form 518 to the fax number on the form. Sending the completed 518 to the Registration Unit could result in the erroneous Registration of other Taxes. • Any update to account number, address or contact information after the initial Registration should be provided in writing to the Misc. Taxes and Fees Unit.

  6. Electronic Funds Transfer (EFT) • Payments are required to be submitted by the Electronic Funds Transfer (EFT) Credit method. • EFT Credit • Payer contacts its financial institution to initiate a transaction to transfer funds to the State’s account for the amount due. • EFT Credit Instructions (Form 5174) have been mailed to each of the businesses that were identified as being subject to HMO Use Tax. • Additional copies of the Credit Instructions (Form 5174) will be available on the website or by contacting the Misc. Taxes and Fees Unit.

  7. EFT Credit (cont.) • Final steps you must complete: • Send a $0.01 test transmission to Treasury prior to the first payment. • Call Treasury (Misc. Taxes and Fees Unit) to verify the test transmission was received properly. • Contact your financial institution to find out what their requirements are for initiating a timely EFT Credit transaction. • NOTE: Generally, the Credit transmission will have to be initiated at least 24 hours prior to the due date to be received timely. • Provide the EFT Credit Instructions to your Financial Institution for proper payment formatting. • NOTE: If payments are not properly formatted, it could result in a misapplied payment. • EFT Debit is not an available payment option for HMO Use Tax.

  8. Payments • Due Dates: • April, May and June 2014 payments are now due on or before September 20th. (The timely payment discount is only available for payments for these periods that were made by July 20, 2014) • July payment due on or before August 20, 2014. • August payment due on or before September 20, 2014. • September payment due on or before October 20, 2014. • October payment due on or before November 20, 2014. • November payment due on or before December 20, 2014. • December payment due on or before January 20, 2015.

  9. Accelerated Payments • Taxpayers that had an HMO tax liability in the preceding year of $720,000.00 or more shall be required to remit to the Department (Treasury) by Electronic Funds Transfer (EFT) Credit on an accelerated basis beginning in 2015. Accounts are reviewed annually based on the preceding calendar year. No accelerated filing is required in 2014 because there was no one year history to base the accelerated status on. • Accelerated payments: • Accelerated payment requirements will be reviewed and determined starting in 2015. • Review will likely take place in Spring of 2015 after the first annual reconciliation return has been processed. • You will be notified in writing of any changes to your filing status. Specifically, if we require payments on an accelerated schedule, Treasury will notify your organization in writing.

  10. Discount • Discount available for early and timely payments of Use Tax. • Discounts apply to 2/3 of the 6% (4% of the tax). • For monthly filers: • If monthly filers pay by the 12th of the following month, they are entitled to a discount of ¾ (0.0075) of 1% up to $20,000.00. (EARLY) • If monthly filers pay by the 20th of the following month, they are entitled to a discount of ½ (0.0050) of 1% up to $15,000.00. (TIMELY)

  11. Discount (cont.) Discount Calculation Chart: Paying by the 12thPaying by the 20th (Maximum Discount: (Maximum Discount: $20,000) (Maximum Discount: $15,000) Amount you are paying early ________ Amount you are paying timely ___________ x 0.6667 x 0.6667 Early discount rate ________ Timely discount rate ___________ x 0.0075 x 0.005 Discount amount ________ Discount Amount ___________

  12. Discount (cont.) • Example of Early Payment Discount Calculation (Paying by the 12th ): • Payment due of $250,000.00 • Multiply $250,000.00 by 2/3 = $166,675.00 (payment amount that discount can be taken on). • Multiply $166,675.00 by .0075 = $1,250.06 (discount amount) • Total payment – discount amount ($250,000.00 - $1250.06 = $248,749.94) Total payment to send to Treasury = $248,749.94 • Example of Timely Payment Discount Calculation (Paying by the 20th): • Payment due of $250,000.00 • Multiply $250,000.00 by 2/3 = $166,675.00 (payment amount that discount can be taken on). • Multiply $166,675.00 by .0050 = $833.38 (discount amount) • Total payment – discount amount ($250,000.00 - $833.38 = $249,166.62) Total payment to send to Treasury = $249,166.62

  13. Annual Return • Annual reconciliation return due February 28 for the previous calendar year. • First annual return will be due February 28, 2015 (for calendar year 2014). • A specific return is being created for HMO Use Tax payers. • The form has not been finalized yet. Will be available later in this year. • Check the website for updates. www.michigan.gov/businesstaxes

  14. Contact Information • Account Related Inquiries including payment and return questions. • Michigan Department of Treasury Miscellaneous Taxes and Fees Unit PO Box 30781 Lansing, MI 48909-8281 Phone: 517-636-0515 Fax: 517-636-4593 Email: Treas_MiscTaxesFees@michigan.gov

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