Bill Text: CA SB1071 | 2009-2010 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Personal income tax: credit: prescription drugs:

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2010-06-16 - From committee with author's amendments. Read second time. Amended. Re-referred to Com. on HEALTH. Set, second hearing. Hearing canceled at the request of author. [SB1071 Detail]

Download: California-2009-SB1071-Amended.html

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BILL NUMBER: SB 1071	AMENDED
	BILL TEXT

	AMENDED IN SENATE  APRIL 27, 2010
	AMENDED IN SENATE  MARCH 24, 2010

INTRODUCED BY   Senator DeSaulnier

                        FEBRUARY 17, 2010

   An act to amend Section 11165 of, and  add Section
11165.05 to,   to add and repeal Section 11165.05 of,
 the Health and Safety Code,  and to add and repeal Section
17054.8 of, and to add and repeal Part 33 (commencing with Section
70001) of Division 2 of, the Revenue and Taxation Code, 
relating to  controlled substances  
prescription drugs  .



	LEGISLATIVE COUNSEL'S DIGEST


   SB 1071, as amended, DeSaulnier.  Controlled Substance
Utilization Review and Evaluation System.   Personal
income tax: credit: prescription drugs: controlled substances tax:
CURES.  
   The Personal Income Tax Law authorizes various credits against the
tax imposed by that law.  
   This bill would, on and after January 1, 2011, and before January
1, 2016, authorize a credit against that tax for a person who is 55
years of age or older in an amount equal to the amount paid or
incurred for that taxpayer's own medicines or drugs, as described,
that is not reimbursable or payable by public or private health
insurance plans or by any 3rd party.  
   Existing law imposes various taxes, including taxes on the
privilege of engaging in certain activities. The Fee Collection
Procedures Law, the violation of which is a crime, provides
procedures for the collection of certain fees and surcharges.
Existing law also requires the Department of Justice to maintain the
Controlled Substance Utilization Review and Evaluation System (CURES)
for the electronic monitoring of the prescribing and dispensing of
Schedule II, Schedule III, and Schedule IV controlled substances by
all practitioners authorized to prescribe or dispense these
controlled substances.  
   This bill would, on and after January 1, 2011, and before January
1, 2016, impose a tax at the rate of $0.0025 per pill included in
Schedule II, III, or IV upon every manufacturer and importer of
controlled substances classified as Schedule II, III, or IV, or other
person that makes the first sale in this state of a Schedule II,
III, or IV controlled substance. The tax would be administered by the
State Board of Equalization and would be collected pursuant to the
procedures set forth in the Fee Collection Procedures Law.  

   The bill would require the board to deposit all taxes, penalties,
and interest collected, less refunds and administrative costs, in the
CURES Fund, which this bill would create. This bill would require
moneys in the fund, upon appropriation by the Legislature, to be
allocated to the Department of Justice for the cost of administration
of the CURES program, as specified.  
   This bill would also require a person that manufactures controlled
substances classified in Schedule II, III, or IV in this state, or
that imports controlled substances classified in Schedule II, III, or
IV into this state, to register with the Department of Justice to
enable the department to report specified information to the board
for purposes of collecting a tax on those persons. Those provisions
would remain in effect until January 1, 2016.  
   Because this bill would expand the application of the Fee
Collection Procedures Law, the violation of which is a crime, it
would impose a state-mandated local program.  
   The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.  
   This bill would provide that no reimbursement is required by this
act for a specified reason.  
   Existing law provides for the electronic monitoring and reporting
of the prescribing and dispensing of Schedule II, Schedule III, and
Schedule IV controlled substances pursuant to the Controlled
Substance Utilization Review and Evaluation System (CURES) program.
 
   This bill would require the Department of Justice, beginning
January 1, 2011, and annually thereafter, to determine and impose a
fee on manufacturers and importers of controlled substances
classified in Schedules II, III, and IV, as specified. The bill would
require the State Board of Equalization to administer and collect
the fee, as specified, and to deposit the fee in the CURES Fund
established by the bill. The moneys in the CURES Fund would be
available for expenditure, upon appropriation by the Legislature,
only for reimbursement of the department for specified costs related
to the CURES program. The bill would require that the fee imposed
shall be consistent with all applicable legal requirements for
imposing fees, as specified. The bill would make technical,
nonsubstantive changes to specified provisions relating to the CURES
program. 
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program:  no   yes  .


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  The Legislatures finds and declares all of the
following:
   (a) The CURES program is a valuable investigative, preventive, and
educational tool for law enforcement, regulatory boards, educational
researchers, and the health care community.
   (b) Each year the CURES program responds to more than 60,000
requests from practitioners and pharmacists to (1) help identify and
deter drug abuse and diversion through accurate and rapid tracking of
Schedule II, III, and IV controlled substances, (2) help
practitioners make better prescribing decisions, and (3) cut down on
the misuse, abuse, and trafficking of prescription drugs in
California.
   (c) The manufacture and importation of Schedules II, III, and IV
controlled substances have had deleterious effects on private and
public interests, including the misuse, abuse, and trafficking in
dangerous prescription medications resulting in injury and death. The
 fee   tax  that is imposed by this bill
on manufacturers and importers of Schedules II, III, and IV
controlled substances  is to be limited in amount and
 seeks to mitigate these effects of the drugs by supporting
the operation of the CURES program, which has proved a cost-effective
tool to help to reduce the misuse, abuse, and trafficking of those
drugs.  There is a sufficient nexus between the fee this bill
imposes on manufacturers and importers of Schedule II, III, and IV
controlled substances and the deleterious effects the bill would
ameliorate through its funding of the CURES program. 
   (d) It is the nature of these Schedule II, III, and IV controlled
substances that their addictive qualities and the ever present market
for their misuse and abuse pose inherent risks to public health that
must be systematically addressed, as by the CURES program. Once
these products are present in California, ad hoc enforcement of
conditions on distribution and criminal and civil sanctions on
downstream actors in the distribution system  is an 
 are  extraordinarily costly, ineffective, and inefficient
means to attempt to control the misuse, abuse, and trafficking of
these substances. It is therefore appropriate for manufacturers and
importers, which benefit from the commercial markets for these
inherently dangerous products with knowledge of their potential for
misuse and abuse absent systematic tracking and monitoring, to pay
for the cost-effective CURES program. 
   (e) The Legislature declares that the imposition of a fee upon the
manufacturers and importers of Schedule II, III and IV controlled
substances by this act would not result in the imposition of a tax
within the meaning of Article XIII of the California Constitution,
because the amount and nature of the fee has a fair and reasonable
relationship to the adverse impact and burden imposed by the
manufacture and importation of Schedule II, III, and IV controlled
substances. 
  SEC. 2.  Section 11165 of the Health and Safety Code is amended to
read:
   11165.  (a) To assist law enforcement and regulatory agencies in
their efforts to control the diversion and resultant abuse of
Schedule II, Schedule III, and Schedule IV controlled substances, and
for statistical analysis, education, and research, the Department of
Justice shall, contingent upon the availability of adequate funds
from the CURES Fund and from the Contingent Fund of the Medical Board
of California, the Pharmacy Board Contingent Fund, the State
Dentistry Fund, the Board of Registered Nursing Fund, and the
Osteopathic Medical Board of California Contingent Fund, maintain the
Controlled Substance Utilization Review and Evaluation System
(CURES) for the electronic monitoring of the prescribing and
dispensing of Schedule II, Schedule III, and Schedule IV controlled
substances by all practitioners authorized to prescribe or dispense
these controlled substances.
   (b) The reporting of Schedule III and Schedule IV controlled
substance prescriptions to CURES shall be contingent upon the
availability of adequate funds from the Department of Justice. The
Department of Justice may seek and use grant funds to pay the costs
incurred from the reporting of controlled substance prescriptions to
CURES. Funds shall not be appropriated from the Contingent Fund of
the Medical Board of California, the Pharmacy Board Contingent Fund,
the State Dentistry Fund, the Board of Registered Nursing Fund, the
Naturopathic Doctor's Fund, or the Osteopathic Medical Board of
California Contingent Fund to pay the costs of reporting Schedule III
and Schedule IV controlled substance prescriptions to CURES.
   (c) CURES shall operate under existing provisions of law to
safeguard the privacy and confidentiality of patients. Data obtained
from CURES shall only be provided to appropriate state, local, and
federal persons or public agencies for disciplinary, civil, or
criminal purposes and to other agencies or entities, as determined by
the Department of Justice, for the purpose of educating
practitioners and others in lieu of disciplinary, civil, or criminal
actions. Data may be provided to public or private entities, as
approved by the Department of Justice, for educational, peer review,
statistical, or research purposes, provided that patient information,
including any information that may identify the patient, is not
compromised. Further, data disclosed to any individual or agency as
described in this subdivision shall not be disclosed, sold, or
transferred to any third party.
   (d) For each prescription for a Schedule II, Schedule III, or
Schedule IV controlled substance, the dispensing pharmacy or clinic
shall provide the following information to the Department of Justice
on a weekly basis and in a format specified by the Department of
Justice:
   (1) The full name, address, and telephone number of the ultimate
user or research subject, or contact information as determined by the
Secretary of the United States Department of Health and Human
Services, and the gender and date of birth of the ultimate user.
   (2) The prescriber's category of licensure and license number;
federal controlled substance registration number; and the state
medical license number of any prescriber using the federal controlled
substance registration number of a government-exempt facility.
   (3) Pharmacy prescription number, license number, and federal
controlled substance registration number.
   (4) NDC (National Drug Code) number of the controlled substance
dispensed.
   (5) Quantity of the controlled substance dispensed.
   (6) ICD-9 (diagnosis code), if available.
   (7) Number of refills ordered.
   (8) Whether the drug was dispensed as a refill of a prescription
or as a first-time request.
   (9) Date of origin of the prescription.
   (10) Date of dispensing of the prescription.
  SEC. 3.  Section 11165.05 is added to the Health and Safety Code,
to read: 
   11165.05.  (a) The Department of Justice shall, beginning January
1, 2011, and annually thereafter, impose a fee on manufacturers and
importers of controlled substances classified in Schedule II, III, or
IV in order to reimburse the department for costs related to the
CURES program which provides for the electronic monitoring of the
prescribing and dispensing of controlled substances classified in
Schedule II, III, or IV.
   (b) The department shall impose a fee on manufacturers and
importers of controlled substances classified in Schedule II, III, or
IV that the department determines to be sufficient for, and limited
to, reimbursement of the department for the following expenses:
   (1) The cost of the administration of the CURES program as
required by this section and Sections 11165 and 11165.1.
   (2) The cost of the maintenance of, and any improvements to, the
CURES program.
   (3) The cost of education and outreach relating to the CURES
program.
   (4) The cost of the investigation of abuses of the CURES program.
   (c) The State Board of Equalization shall administer and collect
the fee imposed by the department in compliance with the following:
   (1) The board may prescribe, adopt, and enforce regulations
relating to the administration and enforcement of this section,
including, but not limited to, regulations governing collections,
reports, refunds, and appeals relating to the fee imposed by this
section.
   (2) The board may prescribe, adopt, and enforce emergency
regulations as necessary to implement the fee imposed by this
section.
   (3) The imposed fee shall be due and payable from the manufacturer
or importer to the board on a quarterly basis, on or before the last
day of the second month following each calendar quarter.
   (4) Each manufacturer or importer of controlled substances
classified in Schedule II, III, or IV shall, on or before the last
day of the second month following each calendar quarter, pay the
imposed fee and file a return for the preceding quarterly period with
the board using electronic media, as prescribed by the board.
Returns shall be authenticated in a form or pursuant to methods as
may be prescribed by the board.
   (5) The board may, to facilitate administration of the fee,
require that the payment of the fee and filing of the returns be made
for periods other than quarterly periods.
   (d) The CURES Fund is hereby established in the State Treasury.
All fees imposed under this section, and any interest or penalties
imposed by the department or board with respect to those fees, shall
be paid to the board in the form of remittances payable to the board.
The board shall transmit any payment to the Treasurer for deposit in
the CURES Fund.
   (e) Except for payments required to reimburse the board for its
administrative costs in collecting the fee imposed by this section,
all moneys deposited in the CURES Fund shall, upon appropriation by
the Legislature, be expended only for the purposes specified in
subdivision (b).
   (f) Any fee imposed pursuant to this section shall be consistent
with all applicable legal requirements for imposing fees, including
the requirements set forth in Sinclair Paint Co. v. State Bd. of
Equalization (1997) 15 Cal.4th 866.  
   11165.05.  (a) A person that manufactures controlled substances
classified in Schedule II, III, or IV in this state, or that imports
controlled substances classified in Schedule II, III, or IV into this
state, shall register with the Department of Justice to enable the
department to report to the State Board of Equalization the persons
subject to this section and to the tax imposed pursuant to Part 33
(commencing with Section 70001) of Division 2 of the Revenue and
Taxation Code.
   (b) A person shall not sell or distribute any controlled substance
classified in Schedule II, III, or IV in the state if the product is
received or purchased from a manufacturer or importer that is not
registered in accordance with the requirements of this section.
   (c) A person required to register with the department shall file
an annual report with the department. The annual report shall be due
on or before January 1, 2011, and on or before January 1 each year
thereafter, and shall provide the name, address, and telephone number
of the person required to register.
   (d) A person required to register with the department shall also
file a quarterly report with the department. The quarterly report
shall be due on the last day of the month following each quarterly
period and shall provide all of the following information:
   (1) The number of Schedule II, III, or IV pills the registrant has
sold in this state during that quarterly reporting period.
   (2) The number of Schedule II, III, or IV pills the registrant has
imported into this state during that quarterly reporting period.
   (3) The number of Schedule II, III, or IV pills the registrant has
sold, transferred, or otherwise furnished to other persons in this
state during that quarterly reporting period.
   (4) Any other information the department deems necessary for the
purpose of administering this section.
   (e) Each registrant that is required to provide the information
required by this section may be subject to audit by the department.
   (f) On the last day of each month following the due date for
filing a quarterly report pursuant to subdivision (d), the department
shall send to the State Board of Equalization a report containing
all of the following information:
   (1) The name, address, and telephone number of each person
required to register with the department pursuant to this section,
and the necessary information regarding who owes the tax imposed
pursuant to Part 33 (commencing with Section 70001) of Division 2 of
the Revenue and Taxation Code on each Schedule II, III, or IV pill
sold in this state in the amount of $0.0025 per pill for the previous
quarterly period.
   (2) The number of Schedule II, III, or IV pills each registrant
manufactured in this state or imported into this state.
   (g) This section shall remain in effect until January 1, 2016, and
as of that date is repealed. 
   SEC. 4.    Section 17054.8 is added to the  
Revenue and Taxation Code   , to read:  
   17054.8.  (a) For each taxable year beginning on or after January
1, 2011, and before January 1, 2016, there shall be allowed to a
taxpayer who is 55 years of age or older as a credit against the "net
tax," as defined in Section 17039, an amount equal to that amount
paid or incurred by the taxpayer during the taxable year for that
taxpayer's own medicine or drugs, as described in Section 213(b) of
the Internal Revenue Code, that was not reimbursable or payable by
public or private health insurance plans or by any third party.
   (b) The taxpayer shall claim the credit on a timely filed original
return.
   (c) The Franchise Tax Board may prescribe rules, guidelines, or
procedures necessary or appropriate to carry out the purposes of this
section. Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code shall not apply to any
rule, guideline, or procedure prescribed by the Franchise Tax Board
pursuant to this section.
   (d) In the case where the credit allowed by this section exceeds
the "net tax," the excess may be carried over to reduce the "net tax"
for the following year, and the succeeding seven years, until the
credit is exhausted.
   (e) (1) The total amount of credits that may be allowed pursuant
to this section shall not exceed the total amount of taxes collected
pursuant to Part 33 (commencing with Section 70001) of Division 2 for
any taxable year.
   (2) The intent of paragraph (1) is to ensure that the act adding
this section does not produce a net revenue gain in state taxes, and
the board and the Franchise Tax Board shall cooperate in exchanging
information for this purpose.
   (f) This section shall remain in effect only until December 1,
2016, and as of that date is repealed. 
   SEC. 5.    Part 33 (commencing with Section 70001) is
added to Division 2 of the   Revenue and Taxation Code
  , to read:  

      PART 33.  Controlled Substances Tax Law


   70001.  This part shall be known and may be cited as the
Controlled Substances Tax Law.
   70002.  For purposes of this part:
   (a) "CURES program" means the Controlled Substance Utilization
Review and Evaluation System program described in Section 11165 of
the Health and Safety Code.
   (b) "Importer" means a person that imports controlled substances
classified in Schedule II, III, or IV into this state, for sale or
distribution in this state.
   (c) "Manufacturer" means a person that manufactures controlled
substances classified in Schedule II, III, or IV sold in this state,
either directly or indirectly.
   (d) "Quarterly report" means the report that a registrant is
required to file with the Department of Justice pursuant to Section
11165.05 of the Health and Safety Code.
   (e) "Registrant" means a manufacturer or importer of controlled
substances classified in Schedule II, III, or IV that is required to
annually register and report certain information to the Department of
Justice pursuant to Section 11165.05 of the Health and Safety Code.
   70003.  On and after January 1, 2011, a tax is hereby imposed at
the rate of $0.0025 per pill included in Schedule II, III, or IV upon
every manufacturer and importer of controlled substances classified
as Schedule II, III, or IV, or other person that makes the first sale
in this state of a Schedule II, III, or IV controlled substance. The
tax imposed by this part is for the purpose of reimbursing the
Department of Justice for the cost of administering the CURES
program, which provides for the electronic monitoring of the
prescribing and dispensing of controlled substances classified in
Schedule II, III, or IV.
   70004.  The board shall administer and collect the tax imposed by
this part pursuant to the Fee Collection Procedures Law (Part 30
(commencing with Section 55001)). For purposes of this part, the
references in the Fee Collection Procedures Law to "fee" shall
include the tax imposed by this part and references to "feepayer"
shall include a person required to pay the tax imposed by this part.
   70005.  Each person required to pay the tax shall prepare and file
with the board a return in the form prescribed by the board
containing information as the board deems necessary or appropriate
for the proper administration of this part. The return shall be filed
on or before the last day of the calendar month following the
calendar quarter to which it relates, together with a remittance
payable to the board for the amount of tax due for that period.
   70006.  The board may prescribe those forms and reporting
requirements as are necessary to implement the tax, including, but
not limited to, information regarding the total amount of tax due.
   70007.  (a) (1) The CURES Fund is hereby created in the State
Treasury. The CURES Fund shall consist of all taxes, interest,
penalties, and other amounts collected pursuant to this part, less
refunds and reimbursement to the board for expenses incurred in the
administration and collection of the tax.
   (2) Money in the CURES Fund shall, upon appropriation by the
Legislature, be used to reimburse the Franchise Tax Board for
administrative costs related to Section 17054.8.
   (b) All moneys in the CURES Fund less refunds and reimbursement
pursuant to subdivision (a), shall, upon appropriation by the
Legislature, be allocated to the Department of Justice for the
following:
   (1) The cost of the administration of the CURES program as
required by this section and Section 11165.05 of the Health and
Safety Code.
   (2) The cost of the maintenance of, and any improvements to, the
CURES program.
   (3) The cost of education and outreach relating to the CURES
program.
   (4) The cost of the investigation of abuses of the CURES program.
   70008.  This part shall remain in effect only until January 1,
2016, and as of that date is repealed. 
   SEC. 6.    No reimbursement is required by this act
pursuant to Section 6 of Article XIII B of the California
Constitution because the only costs that may be incurred by a local
agency or school district will be incurred because this act creates a
new crime or infraction, eliminates a crime or infraction, or
changes the penalty for a crime or infraction, within the meaning of
Section 17556 of the Government Code, or changes the definition of a
crime within the meaning of Section 6 of Article XIII B of the
California Constitution.