In July 2012, the U.S. Government Accountability Office published a Report entitled "Providers in Three States with Unpaid Federal Taxes Received over $6 Billion in Medicaid Reimbursements" (the "Report"). Available at http://gao.gov/assets/600/593095.pdf (last accessed April 15, 2015). According to that Report, about 7,000 Medicaid providers in Florida, New York, and Texas collectively owed hundreds of millions in federal taxes, and yet received reimbursement payments from Medicaid totaling more than six billion dollars. The Report looks at potential opportunities for those unpaid federal taxes to be recaptured through offset against future Medicaid reimbursements, as well as other alternative methods for recovery of delinquent taxes.

Since that Report was issued, we have seen the Texas Department of Aging and Disability Services ("TDADS") use their licensing authority and the Texas Administrative Code as one method to push back against Home and Community Support Service Agencies ("HCSSAs") with certain outstanding tax liens.

Pursuant to 40 Texas Administrative Code Section 97.11(h)(2)(A), TDADS has a discretionary ability to deny an application for an initial HCSSA license or for a renewal of a HCSSA license if the applicant or certain people related to the applicant have an unresolved federal or state tax lien in the two years prior to the application. The pertinent people for this rule include, among others, any controlling person of the applicant, any person with a disclosable interest, the administrator of the applicant, or the chief financial officer of the applicant.

Pursuant to that rule, TDADS has begun researching license applicants to find tax liens assessed against licensees or the pertinent individuals related to the licensee. Based upon that research, we have seen several instances of an otherwise qualified licensee having their application for renewal denied.

If you receive such a denial based upon an unpaid tax lien, you have only ten calendar days to request an opportunity to show compliance with TDADS rules. Therefore, time is of the essence if you receive a license renewal denial. Of note, the tax liens at issue under the Code are those that are “unresolved,” and therefore an applicant will generally have an opportunity to resolve the tax liens at issue and move forward with their application.

If you or your company receives a denial of your HCSSA license renewal based on unresolved tax liens, you should act quickly to retain that valuable license and protect your ability to provide licensed services.