Limited State Tax Credit for EHR Due January 31

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1 Limited State Tax Credit for EHR Due January 31 The State of Wisconsin has an Electronic Medical Records Credit is available to individuals and entities for taxable years that begin on or after Jan. 1, 2012, for the amounts paid for information technology hardware and software used to maintain medical records in electronic format. Unfortunately, the tax credit was initially available to doctors and hospitals that purchased their EHR technology before Jan. 1, However, because of state budget concerns, the state changed the availability date to Jan. 1, An individual doctor or LLC are among those entities that may claim the credit. To qualify for the Electronic Medical Records Credit, a claimant must purchase information technology hardware and software that is certified by the federal government and used to maintain medical records in electronic format. The Wisconsin Department of Revenue (DOR) will then certify applicants as eligible to claim the credit. For a listing of the federal certified software, visit The Office of the National Coordinator for Health Information Technology website: Applicants for the credit will need to be certified by the DOR prior to claiming the credit. The applicant will complete Schedule EM-C by January 31 of the year following the calendar year in which qualified information technology expenses are paid. This schedule will be available on the department's web site by Dec. 1, The department will inform the applicant of the amount of credit they are certified for by the end of February. A schedule to be used for claiming the credit will be available on the department's website by Dec. 1, The maximum credit that may be claimed by all claimants in a taxable year is,000. If the total amount of hardware and software expenses paid in the calendar year by all claimants does not exceed $20,000,000, the credit will be equal to 50 percent of the amount the applicant paid during the calendar year in which the certified information technology hardware and software was purchased. If the total amount of hardware and software expenses paid in the calendar year by all claimants exceeds $20,000,000, the total available credits of,000 will be allocated to each certified applicant in proportion to the amount paid during the calendar year. The amount of credit that is claimed is income and must be reported as income on the claimant's Wisconsin income tax return in the year in which the credit is computed. The amount of credit not entirely offset against Wisconsin income taxes may be carried forward and credited against Wisconsin income taxes due for up to fifteen years. Electronic Medical Records Credit Q & A 1. What is the electronic medical records credit? The electronic medical records credit is available to Wisconsin licensed health care providers who purchase information technology hardware and software and use it to maintain medical records in electronic format. 2. Who is eligible to claim the credit? An individual, estate, trust, C-corporation, or LLC disregarded as a separate entity may claim the credit. 3. Who is not eligible to claim the credit? Partnerships, LLCs treated as partnerships, and tax-option (S) corporations cannot claim the credit. However, the eligibility for claiming the credit and the computation of the credit is based on the amount the entity pays for information technology hardware and software. The credit computed by those entities can pass through to the partners, members, and shareholders.

2 4. What is an electronic medical record? An electronic medical record is a record of health-related information that includes patient demographic and clinical health information that has the capacity to provide clinical decision support, to support physician order entry, to capture and query information relevant to health care quality, and to exchange and integrate electronic health information with and from other sources. 5. What is a health care provider? A health care provider is any of the following that are licensed under the Wisconsin statutes: nurse, chiropractor, dentist, physician, physician assistant, perfusionist, respiratory care practitioner, physical therapist, podiatrist, dietitian, athletic trainer, occupational therapist, occupational therapy assistant, optometrist, pharmacist, acupuncturist, psychologist, social worker, marriage and family therapist, professional counselor, speech-language pathologist, audiologist, massage therapist, bodywork therapist, a partnership of any providers listed above, a corporation or limited liability company of any providers listed above, a cooperative health care association that directly provides services through salaried employees in its own facility, a hospice, an inpatient health care facility, a community-based residential facility, or a rural medical center. 6. How do I know if my software qualifies? The software must comply with the federal health information technology standards under title 45, Code of Federal Regulations (CFR), Part 170. The Office of the National Coordinator for Health Information Technology will issue a federal certification number to software that meets the qualifications of title 45 CFR 170. To verify that the software you purchased or will purchase is certified, the following website provides a searchable listing of all the software that has been certified: 7. How do I become certified? Applicants will have from Jan. 1, 2013, through Jan. 31, 2013, to file Schedule EM-C, Electronic Medical Records Credit Certification, with the Department of Revenue. The certification schedule will require the applicant to provide the following information: type of health care license or certification held, the license or certification number, the information technology hardware and software purchased, the amount paid, a description of the hardware and software purchased, the federal certification number, and a description of how the hardware and software is used to maintain electronic medical records. The department will notify applicants of the amount of credit they are certified for by the end of February What is the amount of credit? The credit is equal to 50 percent of the amount paid during the year by a health care provider for information technology hardware and software that is used to maintain medical records in electronic format. However, this amount may be limited if the total amount of credits claimed exceeds the maximum amount. 9. Is there a maximum dollar amount for the credit? The maximum amount of credits that may be claimed by all applicants in the taxable year is, What if the total expenses claimed by all applicants exceed the maximum credit amount? If the total amount of hardware and software expenses paid in the calendar year by all claimants exceeds $20,000,000, the total available credits of,000 will be allocated to each certified applicant in proportion to the amount paid during the calendar year. Example: Health Care Providers A, B, and C are certified to claim the electronic medical records credit for the following amounts paid in 2012 for certified hardware and software:

3 A B C Total $ 8,000,000 $12,000,000 $ 4,000,000 $24,000,000 The,000 of available credits are allocated to A, B, and C based on their proportionate share of the total amount of $24,00,000 paid. Health Care Provider A is allocated a credit of $3,333,333 computed as follows: ($8,000,000 $24,000,000) x,000. Health Care Provider B is allocated a credit of $5,000,000 computed as follows: ($12,000,000 $24,000,000) x,000. Health Care Provider C is allocated a credit of $1,666,667 computed as follows: ($4,000,000 $24,000,000) x, When does the information technology hardware and software have to be purchased? Because the allocation of the credits occurs on a calendar year basis, the hardware and software certified for the 2012 taxable year must be purchased between Jan. 1, 2012, and Dec. 31, This will be true regardless if the company is filing on a fiscal year or calendar year basis. 12. What if I am a fiscal year filer? A fiscal year filer will include the amounts paid for information technology hardware and software purchases for the time period of Jan. 1, 2012, through Dec. 31, 2012, on the 2012 Schedule EM-C (Electronic Medical Records Credit Certification). The fiscal year filer will allocate the credit awarded for the calendar year to its respective fiscal taxable years. Example: An applicant has a fiscal year beginning Oct. 1, 2012, and ending on Sept. 30, The applicant will file a certification request on a 2012 Schedule EM-C for the period of Oct. 1, 2012, through Dec. 31, 2012, by Jan. 31, By Jan. 31, 2014, the applicant will file a 2013 Schedule EM-C for the amounts paid for information technology hardware and software from Jan. 1, 2013, through Dec. 31, The applicant is awarded electronic medical record credits of and $20,000 for the calendar years 2012 and 2013 respectively. The applicant paid the following amounts for certified information technology software and hardware: Date 11/02/12 02/04/13 08/01/13 09/27/13 10/22/13 12/16/13 Amount $ 8,000 $ 5,000 $ 4,000 $ 3,000

4 The department will notify the applicant by the end of February 2013 of the credit that may be claimed based on the expenses paid in the 2012 calendar year. In this example the applicant may claim an electronic medical records credit of. For expenses paid in the 2013 calendar year, the department will notify the applicant of the allowable credit by February In this example, the total credit awarded to the applicant for the 2013 calendar year is $20,000. Because the applicant has a fiscal taxable year that begins and ends in 2013, an allocation is required in order to determine the amount of credit that may be claimed in the 2012 and 2013 taxable years. The credit for 2013 will be allocated to the applicants fiscal year based on a ratio consisting of the amounts paid during the calendar year that fall within the dates of the taxpayers fiscal year divided by the total amounts paid in the 2013 calendar year, with the result multiplied by the applicant's credit awarded for the 2013 calendar year Calendar Year X = 2013 Calendar Year Computation for 2012 fiscal year: $17,000 1 $30,000 2 X $20,000 = $11,333 Enter this amount on line 1 of the 2012 Schedule EM. 1 $8,000+$5,000+$4,000 2 $8,000+$5,000+$4,000+$3,000+ Computation for 2013 fiscal year: $13,000 3 $30,000 4 X $20,000 = $8,667 Enter this amount on line 1 of the 2013 Schedule EM. 3 $3, $8,000+$5,000+$4,000+$3, What form is used to claim the credit? Wisconsin Schedule EM, Electronic Medical Records Credit, will be used by applicants to claim the credit. The schedule will be posted to the department's website by Dec. 1, Am I required to submit any documentation with my tax return? The only documentation you are required to submit with your tax return is Wisconsin Schedule EM Electronic Medical Records Credit. 15. Is the credit refundable or nonrefundable? The credit is nonrefundable so any amount not used to offset the current Wisconsin income or franchise tax liability may be carried forward for 15 years. 16. Does the credit have to be included in income?

5 The credit is income and must be reported as income on the claimant's Wisconsin franchise or income tax return in the year in which the credit is computed.

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