State News : Texas

On December 1, 2022, Commissioner Jeff Nelson released DWC’s biennial report to the 88th legislature providing an update on the Texas workers’ compensation system including legislative recommendations.

The Commissioner’s first recommendation is in response to the Comptroller of Public Accounts’ October 20, 2022 Private Letter Ruling stating that designated doctor examinations performed pursuant to Labor Code §408.0041 are considered “insurance services” and are subject to Texas sales and use tax. DWC already struggles with a dearth of qualified designated doctors and the Commissioner recognizes that other specialty examinations performed within the workers’ compensation system may also be considered taxable insurance services. For such reason and in an effort to attract and retain more doctors, the Commissioner recommends amendment of the Tax Code §151.0039(b) to exempt from sales and use tax any medical examination or service performed to determine the appropriate level of benefits under the Workers’ Compensation Act. 

In his second recommendation, the Commissioner seeks amendment of Labor Code Chapter 410 to add a limited public information exception for working papers and electronic communications for DWC administrative law judges and Appeals Panel judges. The Commissioner indicates that such an amendment will empower DWC ALJ’s and Appeals Panel judges to remain impartial fact finders and afford them the same protections as ALJs at the State Office of Administrative Hearings (SOAH). 

The Commissioner’s recommendation makes a good argument, however, the Division is very different from SOAH. SOAH ALJs are in an agency completely separate from the agencies whose proceedings come before them. The Division, on the other hand, acts as the executive, legislative and judicial functionary in all things related to workers’ compensation. There is no separation of power. This potentially opens the door to inside influences such as direction from agency personnel in different sections of the Division which could very well influence an ALJ’s duty as a fact finder to render a decision based solely on the law and the evidence admitted. 

Finally, the Commissioner noted an emerging issue concerning shortfalls in the maintenance tax generated under Labor Code §403.002 which funds DWC and the Office of Injured Employee Counsel (OIEC). Specifically, tax collections are not adequate to match the amount appropriated by the legislature to fund operations of DWC and OIEC resulting in a $9.4 million shortfall in fiscal year 2023. 

The Commissioner indicates TDI has tools to accommodate this shortfall in the near term, however, the current 2% statutory cap on the maintenance tax is unlikely to generate sufficient revenues in the future.  

Copyright 2023, Stone Loughlin & Swanson, LLP