A Nebraskan’s View

Common Sense Tax Relief Helps Bring Health Professionals to Rural Communities

By Senator Ben Nelson

The days of country doctors making house calls in our rural communities, and riding by horseback out to our farms and ranches, is part of the heritage that makes us proud to be Nebraskans. That tradition is one reason I fought for tax relief in the health reform law that comes into play with this week’s tax filing deadline.

In the spring of 2009, I introduced a bill to help bring health professionals to rural Nebraska and fifteen other states. It provides them with needed tax relief tied to financial help they’ve been getting to repay their student loans. Last fall, I asked Senate leaders to consider adding my bill to the health reform package, and was pleased when they did and now it is in law.

State and local people helping rural health professionals
Here’s how I got involved. For years, state and local communities have teamed up to offer award money to doctors, nurses and other health professionals who made a commitment to work in rural communities. The money goes to help them pay off their student loans for their medical education.

That’s good for rural communities and good for health professionals who may not necessarily want to work in big cities but are often drawn there to earn enough to pay off education loans.

2004 law had added a new tax
Then, in 2004, a federal law passed that excluded such loan repayment help from being treated as taxable income for health professionals participating in a National Health Service Corps program, or state programs operating under federal rules. That was good for many. But it didn’t affect state-funded loan repayment programs in states that had set up their own programs, like Nebraska.

So, Washington stepped in and began treating this state and local award money as taxable income. The IRS began taxing it, even though Nebraska medical officials and some health professionals told me it was at cross purposes with Nebraskans’ efforts to reduce the shortage of health professionals in rural areas.

These tax penalties didn’t happen only in Nebraska. They happened in other states including those nearby such as Missouri, New Mexico, Utah, Wyoming, Minnesota and Texas.

Health professionals forced to take out loans to pay off other loans
It was a situation where many of these health professionals were probably already living on less income—because they like living in rural places or raising their family there—than their city counterparts. Then, those rural health professionals had an added tax burden their city counterparts did not. In some cases they have had to take out an additional loan to pay their new income tax charges. That just makes no sense at all.

In Nebraska, I’d heard more than 100 health professionals were practicing under a three-year commitment to work in our rural areas and that more than 700,000 Nebraskans were receiving access to health professionals as a result of the rural incentive program.

Tax relief is one reason Tax Day isn’t all bad
The health reform bill has my language that gives the same tax exemption used for the National Health Service Corps participants as those in state-funded programs that haven’t been eligible for the tax break. Nebraska health professionals in our program will see tax refunds if they’ve filed their taxes already, or will pay less this year if they haven’t yet filed.

This common sense tax relief for those who take care of rural Nebraskans is one reason to look favorably on Tax Day. Goodness knows we welcome that opportunity.

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