Arizona ~ Miscellaneous Tax: Imposition of Hospital Assessment Constitutional

The Arizona Court of Appeals held that the hospital assessment imposed pursuant to H.B. 2010, enacted in the 2013 legislative session, was not in violation of the Arizona Constitution because it was only an assessment and not a new tax that required a super-majority vote under Article 9, Section 22. Pursuant to H.B. 2010, the director of the Arizona Health Care Cost Containment System (AHCCCS), which provides health insurance benefits to eligible low-income individuals, was authorized to create assessments to be paid by Arizona hospitals in order to expand the program’s coverage through joint funding from the federal and state governments. The petitioners against H.B. 2010 argued that the assessment was a tax because it (1) was imposed by the state legislature through statute, (2) was imposed upon a broad class of hospitals, and (3) was expended for general public purposes, not for the regulation or benefit of the assessed parties. Although the legislature had authorized the assessment through statute, the AHCCCS was the imposing entity because only its director had the statutory authority and discretion to “establish, administer and collect” the assessment. In addition, even though the purpose of H.B. 2010 was to provide healthcare to more of Arizona’s indigent population, the assessment was meant to be used for the benefit of hospitals to provide health care for eligible persons. Consequently, the assessment did not constitute a tax that was expended for a general public purpose because the assessment allowed for hospitals to receive additional funding for uncompensated care. The petitioners’ argument that the assessment required a super-majority vote pursuant to the Constitution was meritless because the assessment fit within the specific exception under Section 22(C)(2), which required that the assessment must be authorized by statute, must not be prescribed by formula, amount, or limit, and must be set by a state officer or agency. Contrary to the petitioners’ arguments, the federal approval and the federal medical assistance requirements did not place a formula or limit on the assessment under the exception.

Biggs v. Betlach, Court of Appeals of Arizona, Division One, No. 1 CA-CV 15-0743, March 16, 2017, ¶401-364

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