Tennessee House Bill HB0385

Tennessee 2025-2026 Regular Session

• Introduced: 1/27/25
• Refer: 2/5/25
• Refer: 3/18/25

Caption

AN ACT to amend Tennessee Code Annotated, Title 67, Chapter 4, relative to tax relief.

Summary

HB0385 creates a new part in Tennessee tax law to allow TennCare to certify certain unreimbursed healthcare costs as charitable contributions made exclusively for public purposes under federal tax law. The bill defines eligible healthcare providers, group practices, TennCare recipients, and “unreimbursed costs” as the gap between 125% of the average federal Medicaid reimbursement rate and the actual TennCare reimbursement rate paid for services to TennCare recipients. Under the bill, a provider may request this certification by paying TennCare a $25 annual fee by January 15, with group practices paying $25 per participating provider. TennCare must then issue a statement by January 31 of the following year showing the total certified charitable contributions for the calendar year. The division is authorized to adopt rules to implement the program, and the act applies to charitable contributions made on or after July 1, 2025.

Impact

The bill would add a new tax-relief mechanism to Title 67, Chapter 4 by creating a state certification process tied to federal charitable contribution deductions under 26 U.S.C. § 170. It would affect TennCare, eligible healthcare providers, and group practices that treat TennCare patients by giving them a potential federal tax benefit for a portion of their uncompensated care, while also imposing a small annual administrative fee and reporting process. The bill does not change TennCare reimbursement rates directly, but it creates a statutory framework for recognizing part of the reimbursement shortfall as a charitable contribution for tax purposes.

Sentiment

The available voting history suggests the bill was received favorably at least in the House TennCare Subcommittee, where it was recommended for passage on a 7-0 vote. No committee transcript is available, but the unanimous vote indicates broad initial support and little visible opposition at that stage. Overall, the bill appears to have been viewed as a targeted tax-relief measure for providers serving TennCare patients.

Contention

The main policy issue is whether it is appropriate for the state to certify unreimbursed TennCare costs as charitable contributions, effectively converting part of a reimbursement gap into a tax benefit. Potential concerns may include the administrative burden on TennCare, the $25-per-provider fee structure for group practices, and whether the definition of “unreimbursed costs” accurately captures the intended relief. Any opposition would likely come from those concerned about tax policy, federal deductibility, or the precedent of treating Medicaid shortfalls as charitable giving, though no explicit opposition is reflected in the provided materials.