(a) A managed care organization provider tax shall be imposed on each health plan. The tax shall be imposed for the following tax periods:

(1) April 1, 2023, through December 31, 2023.

(2) 2024 calendar year.

(3) 2025 calendar year.

(4) 2026 calendar year.

(b) (1) The department shall compute the annual tax for each health plan subject to the tax during each applicable calendar year pursuant to Section 14199.85.

(2) The computed tax for the tax period of April 1, 2023, through December 31, 2023, shall be equal to three-fourths of the amount that would otherwise be computed for a 12-month period, as determined by the department.

(c) The department shall collect the tax for each health plan in quarterly installments and shall determine the amount due for each installment in the applicable tax period by dividing the total tax for a tax period by the number of calendar quarters in the respective tax period.

(d) The department shall not collect the tax imposed pursuant to this article until the department receives approval from the federal Centers for Medicare and Medicaid Services that this tax is a permissible health care-related tax in accordance with Section 433.68 of Title 42 of the Code of Federal Regulations and is eligible for federal financial participation.

(1) Within 10 business days following the date the department receives all necessary federal approvals for the tax pursuant to this article, the director shall certify in writing that federal approval has been received, and the department shall post the certification on its internet website and send a copy of the certification to the Secretary of State, the Secretary of the Senate, the Chief Clerk of the Assembly, and the Legislative Counsel.

(2) Within 30 business days following the date the department receives all necessary federal approvals for the tax pursuant to this article, the department shall send a notice to each health plan subject to the tax that shall contain the following information:

(A) The tax due for each tax period.

(B) The dates on which the installment tax payments are due for each tax period.

(3) A health plan shall pay the tax for each tax period in installments as calculated pursuant to Section 14199.85, based on a schedule developed by the department. The department shall establish the date that each tax payment is due, provided that the first tax payment shall be due no earlier than 20 calendar days following the date the department sends the notice pursuant to paragraph (2), and the tax payments shall be paid at least one month apart, but no more than one quarter apart.

(4) A health plan shall pay the taxes that are due, if any, in the amounts and at the times set forth in the notice unless superseded by a subsequent notice issued by the department.

(e) The tax assessed pursuant to this article shall be paid by each health plan subject to the tax to the department for deposit in the Managed Care Enrollment Fund created pursuant to Section 14199.82.

(f) (1) Interest shall be assessed on an applicable health plan for any amount of the managed care organization provider taxes that are not paid on the date due at a rate of 10 percent per annum. Interest shall begin to accrue the day after the date the tax payment was due and shall be deposited in the Managed Care Enrollment Fund created pursuant to Section 14199.82.

(2) If a tax payment is more than 60 days overdue, a penalty equal to the total accrued interest charge described in paragraph (1) shall also be assessed on the applicable health plan and due for each month for which the tax payment is not received after 60 days.

(g) (1) Subject to paragraph (2), the director may waive a portion or all of either the interest or penalties, or both, assessed under this article if the director determines, in their sole discretion, that the health plan has demonstrated that imposition of the full amount of the tax pursuant to the timelines applicable under this article has a high likelihood of creating an undue financial hardship for the health plan or creates a significant financial difficulty in providing needed services to Medi-Cal beneficiaries.

(2) Waiver of some or all of the interest or penalties pursuant to this subdivision shall be conditioned on the health plan’s agreement to make tax payments on an alternative schedule developed by the department that takes into account the financial situation of the health plan and the potential impact on the delivery of services to Medi-Cal beneficiaries.

(h) In the event of a merger, acquisition, establishment, or any other similar transaction that results in the transfer of health plan responsibility for all countable enrollees under this article from a health plan to another health plan or similar entity, and that occurs at any time during which this article is operative, the resultant health plan or similar entity shall be responsible for paying the full tax amount as provided in this article that would have been the responsibility of the health plan to which that full tax amount was assessed upon the effective date of any such transaction. If a merger, acquisition, establishment, or any other similar transaction results in the transfer of health plan responsibility for only some of a health plan’s countable enrollees under this article but not all countable enrollees, the full tax amount as provided in this article shall remain the responsibility of that health plan to which that full tax amount was assessed.

(Added by Stats. 2023, Ch. 13, Sec. 2. (AB 119) Effective June 29, 2023. Conditionally operative as prescribed by Section 14199.87. Conditionally inoperative on or before January 1, 2027, as prescribed by Section 14199.87. Repealed as of January 1, 2028, pursuant to Section 14199.87.)