CR_12-012 Hearing to consider permanent rules creating section Tax 2.985, relating to the electronic medical records credit.

Tax 11.92 (1) (e) Every person shall keep a record of the purchase price of property, items, and goods on which the person is subject to county , and stadium , and regional transit authority use or excise tax in each enacting county , or stadium district or transit authority's district's jurisdiction.

SECTION 69. Tax 11.95(1)(a) is amended to read:

Tax 11.95 (1) (a) Effective for Wisconsin sales and use tax returns filed for periods ending on or after January 1, 1997, for timely reporting state, county , and stadium , and transit authority sales or use tax collected on their retail sales, retailers may deduct 0.5% of the sales and use tax payable on retail sales, except as provided in pars. (am), (b), and (c).

SECTION 70. Tax 11.96 (title) and (1) are amended to read:

Tax 11.96 (title) Delivery of ordinance or resolution; county, stadium, transit authority, and premier resort area tax.

(1) This section clarifies requirements for the timely delivery of county , and stadium , and transit authority sales and use tax and premier resort area tax ordinances or resolutions to the secretary of revenue.

SECTION 71. Tax 11.96 (2) (g) and (h) are repealed

SECTION 72. Tax 11.96 (3) (intro.) and (Note) are amended to read:

Tax 11.96 (3) (intro.) An ordinance or resolution referred to in s. 77.70 , 77.9941 (1) or (3) , 229.68 (15) , or 229.824 (15) , or 66.1039 (4) (s), Stats., is timely delivered to the secretary of revenue if, by the prescribed number of days before the effective date, any of the following occur:

(Note) Section Tax 11.96 interprets ss. 66.1039 (4) (s), 77.70, 77.705, 77.706, 77.707, 77.708, 77.9941 (1) and (3), 229.68 (15), and 229.824 (15), Stats.

SECTION 73. Tax 11.97 (8) is repealed and recreated to read:

Tax 11.97 (8) County and special district taxes. Retailers that are registered or required to be registered to collect and remit Wisconsin state sales or use taxes are also required to collect, report, and remit the applicable county and stadium district sales or use taxes, regardless of whether the retailer is engaged in business in the county or special district, as provided in s. 77.73 (3) , Stats.

ADMINISTRATIVE RULES FISCAL ESTIMATE AND ECONOMIC IMPACT ANALYSIS
Type of Estimate and Analysis
X Original Updated Corrected
Administrative Rule Chapter, Title and Number
Chapters Tax 1 and 11 – General administration and sales and use tax
Subject
Sales tax law changes made by 2011 Wisconsin Act 32 and other legislation
Fund Sources Affected			Chapter 20 , Stats. Appropriations Affected
GPR FED PRO PRS SEG SEG-S
Fiscal Effect of Implementing the Rule
X No Fiscal Effect Indeterminate	Increase Existing Revenues Decrease Existing Revenues		Increase Costs Could Absorb Within Agency's Budget Decrease Costs
The Rule Will Impact the Following (Check All That Apply)
State's Economy Local Government Units		Specific Businesses/Sectors Public Utility Rate Payers
Would Implementation and Compliance Costs Be Greater Than $20 million? Yes X No
Policy Problem Addressed by the Rule
The rule does not create or revise policy, other than to reflect statutory changes.
Summary of Rule's Economic and Fiscal Impact on Specific Businesses, Business Sectors, Public Utility Rate Payers, Local Governmental Units and the State's Economy as a Whole (Include Implementation and Compliance Costs Expected to be Incurred)
As indicated in the attached fiscal estimate, the fiscal effect of the proposed rule changes was reflected under general fund condition statements subsequent to 2011 Wisconsin Act 32. The rule itself does not create any further economic or fiscal impact or implementation and compliance costs beyond the statutes it interprets. No comments concerning the economic effect of the rule were submitted in response to the department's solicitation.
Benefits of Implementing the Rule and Alternative(s) to Implementing the Rule
Clarifications and guidance provided by administrative rules may lower the compliance costs for businesses, local governmental units, and individuals. If the rule is not implemented, Chapters Tax 1 and 11 will be incomplete in that they will not reflect current law.
Long Range Implications of Implementing the Rule
No long-range implications are anticipated.
Compare With Approaches Being Used by Federal Government
N/A
Compare With Approaches Being Used by Neighboring States (Illinois, Iowa, Michigan and Minnesota )
N/A

Assumptions used in arriving at fiscal estimate

The proposed rule updates Chapter TAX 11 of the Administrative Code, pertaining to the sales and use tax, to reflect certain sales tax changes contained in 2011 Wisconsin Act 32 , the 2011-13 Budget Bill. The proposed rule also amends chapter Tax 1, pertaining to tax administration.

The proposed rule modifies the administrative code to reflect law changes, improve clarity, and add examples to illustrate the tax treatment of certain items.

The proposed rule includes:

  • Changes under 2011 Wisconsin Act 32 , including:

○   A sales and use tax exemption for modular and manufactured homes used in real property construction activities outside Wisconsin.

○   A sales and use tax exemption for vegetable oil or animal fat converted to motor vehicle fuel that is exempt from motor vehicle fuel tax.

○   The repeal of regional transit authorities.

○   Change in the tax treatment of items provided free of charge by a retailer.

  • Repeal of the Wisconsin Quality Home Care Authority under 2011 Wisconsin Act 10 .

  • Updates and clarifications to reflect amendments to the Streamlined Sales and Use Tax Agreement.

  • Clarification and examples relating to exempt occasional sales.

  • Changes to reflect the federal preemption on the taxation of air commerce.

  • Clarification that if electronic fund transfers payments are due on a day when the Federal Reserve Bank is closed, the payment due date is revised to be the next day the Federal Reserve Bank is open.

The fiscal effect of the exemptions created under 2011 Wisconsin Act 32 has already been reflected under general fund condition statements subsequent to 2011 Wisconsin Act 32 . Since the fiscal impact of the statutory changes has already been reflected, the proposed rule has no fiscal effect.

Notice of Hearing

Revenue

CR 12-012

NOTICE IS HEREBY GIVEN that, pursuant to sections 73.15 (3) and 227.11 (2) (a) , Stats., the Department of Revenue will hold a public hearing to consider permanent rules creating section Tax 2.985 , relating to the electronic medical records credit.

Hearing Information

The hearing will be held:

Date:   Monday, February 27, 2012

Time:   12:30 P.M.

Location:   State Revenue Building
  Events Room
  2135 Rimrock Road
  Madison, WI 53713

Handicap access is available at the hearing location.

Appearances at the Hearing and Submittal of Written Comments

Interested persons are invited to appear at the hearing and may make an oral presentation. It is requested that written comments reflecting the oral presentation be given to the department at the hearing. Written comments may also be submitted to the contact person listed below no later than February 27, 2012 , and will be given the same consideration as testimony presented at the hearing.

Dale Kleven

Department of Revenue

Mail Stop 6-40

2135 Rimrock Road

P.O. Box 8933

Madison, WI 53708-8933

Telephone: [phone]

E-mail: [e-mail]

Analysis Prepared by the Department of Revenue

Statutes interpreted

Sections 71.07 (5i) , 71.28 (5i) , 71.47 (5i) , and 73.15 (1) and (2) , Stats.

Statutory authority

Sections 73.15 (3) and 227.11 (2) (a) , Stats.

Explanation of agency authority

The department is authorized by s. 73.15 (3) , Stats., to promulgate rules to comply with the provisions under ss. 73.15 (1) and (2) , Stats., which provide:

73.15 (1) The department of revenue shall implement a program to certify health care providers as eligible for the electronic medical records credit under ss. 71.07 (5i) , 71.28 (5i) , and 71.47 (5i) .

(2) If the department of revenue certifies a health care provider under sub. (1), the department shall determine the amount of credits to allocate to the health care provider. The total amount of electronic medical records credits allocated to health care providers in any calendar year may not exceed $10,000,000.

(3) The department of revenue shall promulgate rules to administer this section.

The department is further authorized by s. 227.11 (2) (a) , Stats., to promulgate rules interpreting the provisions of any statute enforced or administered by the agency if the agency believes it necessary to effectuate the purpose of the statutes enforced or administered by the agency. Section 227.11 (2) (a) , Stats., provides:

227.11 (2) Rule-making authority is expressly conferred as follows:

(a) Each agency may promulgate rules interpreting the provisions of any statute enforced or administered by the agency, if the agency considers it necessary to effectuate the purpose of the statute, but a rule is not valid if the rule exceeds the bounds of correct interpretation. All of the following apply to the promulgation of a rule interpreting the provisions of a statute enforced or administered by an agency:

1. A statutory or nonstatutory provision containing a statement or declaration of legislative intent, purpose, findings, or policy does not confer rule-making authority on the agency or augment the agency's rule-making authority beyond the rule-making authority that is explicitly conferred on the agency by the legislature.

2. A statutory provision describing the agency's general powers or duties does not confer rule-making authority on the agency or augment the agency's rule-making authority beyond the rule-making authority that is explicitly conferred on the agency by the legislature.

3. A statutory provision containing a specific standard, requirement, or threshold does not confer on the agency the authority to promulgate, enforce, or administer a rule that contains a standard, requirement, or threshold that is more restrictive than the standard, requirement, or threshold contained in the statutory provision.

Related statute or rule

There are no other applicable statutes or rules.

Plain language analysis

This proposed rule establishes procedures for:

•   certifying health care providers as eligible for the electronic medical records tax credit under ss. 71.07 (5i) , 71.28 (5i) and 71.47 (5i) , Stats.;

•   filing a claim for the electronic medical records tax credit under ss. 71.07 (5i) , 71.28 (5i) and 71.47 (5i) , Stats., including the method of application and information required; and

•   allocating the electronic medical records tax credit to certified health care providers.

Summary of, and comparison with, existing or proposed federal regulation

The federal Office of the National Coordinator (ONC) for Health IT promulgated 45 CFR 170 relating to health information technology (HIT) standards, implementation specifications, and certification criteria and certification programs for HIT. These rules, in addition to the rules for meaningful use of certified electronic health records (EHR) technology under 42 CFR 495 , are being used by the Centers for Medicare and Medicaid (CMS) to administer an electronic health record incentive payment program. CMS will require health care providers participating in Medicare to adopt and use certified EHR technology or face penalties beginning in 2016.

Comparison with rules in adjacent states

The department is not aware of a similar rule in an adjacent state.

Summary of factual data and analytical methodologies

The department has created this proposed rule order to comply with the statutory requirement to administer the implementation of the electronic medical records credit. No other data was used in the preparation of this proposed rule order or this analysis.

Analysis and supporting documents used to determine effect on small business

As explained above, this proposed rule is created to administer Wisconsin's income and franchise tax laws. As the rule itself does not impose any significant financial or other compliance burden, the department has determined that it does not have a significant effect on small business.

Anticipated costs incurred by private sector

This proposed rule does not have a significant fiscal effect on the private sector.

Effect on Small Business

This proposed rule does not have a significant effect on small business.

Initial Regulatory Flexibility Analysis

This proposed rule order does not have a significant economic impact on a substantial number of small businesses.

Agency Contact Person

Please contact Dale Kleven at [phone] or [e-mail] , if you have any questions regarding this proposed rule.

Text of Rule

SECTION 1. Tax 2.985 is created to read:

Tax 2.985 Electronic medical records credit. (1) Purpose and scope . The purpose and scope of this section is to establish procedures for all of the following:

(a) Certifying health care providers as eligible for the electronic medical records credit under ss. 71.07 (5i) , 71.28 (5i) , and 71.47 (5i) , Stats.

(b) Filing an application for the electronic medical records credit under ss. 71.07 (5i) , 71.28 (5i) , and 71.47 (5i) , Stats., including the method of application and information required.

(c) Allocating the electronic medical records tax credit to health care providers certified under this section.

(2) Definitions . In this section:

(a) "Claimant" has the meaning given in ss. 71.07 (5i) (a) , 71.28 (5i) (a) , and 71.47 (5i) (a) , Stats.

(b) "Electronic medical record" means an electronic record of health-related information that includes patient demographic and clinical health information and has the capacity to provide clinical decision support; to support physician order entry; to capture and query information relevant to health care quality; and to exchange and integrate electronic health information with and from other sources.

(c) "Health care provider" has the meaning given in s. 146.81 (1) (a) to (p) , Stats.

(d) "Taxable year" has the meaning given in ss. 71.01 (12) , 71.22 (10) , and 71.42 (5) , Stats.

(3) Applying for certification and allocation . (a) The department shall provide an official form to apply for certification and allocation of the electronic medical records credit under ss. 71.07 (5i) , 71.28 (5i) , and 71.47 (5i) , Stats. The form shall require an applicant to provide the following information:

1. The type of health care provider license or certification held and the license or certification number.

2. The amount paid in the taxable year for information technology hardware and software used to maintain electronic medical records.

3. A description of the information technology hardware and software, including the federal certification number issued pursuant to 45 CFR 170 .

4. An explanation of how the information technology hardware and software is used to maintain electronic medical records.

5. Any other information, as determined by the department, necessary to certify a health care provider or allocate the credit under sub. (4).

(b) Each application shall be completed and submitted to the department, no sooner than upon completion of the calendar year in which the amount under par. (a) 2. was paid, and no later than January 31 of the subsequent calendar year.

Note: An application for the electronic medical records credit may be filed beginning January 1, 2013. The application form will be available on the department's web site at www.revenue.wi.gov by December 2012.

(4) Certification of applicants and allocation of credits . (a) Based on the information provided in sub. (3) (a) 1. to 5., the department shall certify health care providers as eligible for the electronic medical records credit under s. 71.07 (5i) , 71.28 (5i) , or 71.47 (5i) , Stats.

(b) In conjunction with issuing a certification for an applicant, the department shall determine the amount of credit that the applicant may claim or distribute to its partners, members, or shareholders as follows:

1. If 50 percent of the total of the amounts under sub. (3) (a) 2. for all certified applicants does not exceed the $10,000,000 maximum total established in s. 73.15 (2) , Stats., for allocations in each calendar year, the credit shall be equal to 50 percent of the amount the applicant paid during the calendar year for health information technology software certified pursuant to 45 CFR 170 and hardware used to run and access certified software.

2. If 50 percent of the total of the amounts under sub. (3) (a) 2. for all certified applicants exceeds the $10,000,000 maximum total established in s. 73.15 (2) , Stats., for allocations in each calendar year, the $10,000,000 of credits shall be allocated to each certified applicant in proportion to the amount paid during the calendar year for health information technology software certified pursuant to 45 CFR 170 and hardware used to run and access certified software.

Example: Health Care Providers A, B, and C are certified to claim the electronic medical records credit for the following amounts paid in 2012 for certified software and related hardware:

A   $8,000,000

B   $12,000,000

C   $4,000,000

The $10,000,000 of credits available for 2012 are allocated to A, B, and C, based on their proportionate share of the $24,000,000. A is allocated a credit of $3,333,333 (= [8,000,000 ÷ 24,000,000] x $10,000,000), B is allocated a credit of $5,000,000 (= [12,000,000 ÷ 24,000,000] x $10,000,000), and C is allocated a credit of $1,666,667 (= [4,000,000 ÷ 24,000,000] x $10,000,000).

(c) Following completion of the certifications and allocations under pars. (a) and (b), the department shall notify each applicant of the outcome of their application, including the amount of credit allocated to the applicant.

ADMINISTRATIVE RULES FISCAL ESTIMATE AND ECONOMIC IMPACT ANALYSIS
Type of Estimate and Analysis
X Original Updated Corrected
Administrative Rule Chapter, Title and Number
Section Tax 2.985 - Electronic medical records credit
Subject
Electronic medical records credit under ss. 71.07(5i), 71.28(5i), and 71.47(5i), Stats.
Fund Sources Affected			Chapter 20 , Stats. Appropriations Affected
GPR FED PRO PRS SEG SEG-S
Fiscal Effect of Implementing the Rule
X No Fiscal Effect Indeterminate	Increase Existing Revenues Decrease Existing Revenues		Increase Costs Could Absorb Within Agency's Budget Decrease Costs
The Rule Will Impact the Following (Check All That Apply)
State's Economy Local Government Units		Specific Businesses/Sectors Public Utility Rate Payers
Would Implementation and Compliance Costs Be Greater Than $20 million? Yes X No
Policy Problem Addressed by the Rule
The rule does not create or revise policy, other than to reflect a statutory change.
Summary of Rule's Economic and Fiscal Impact on Specific Businesses, Business Sectors, Public Utility Rate Payers, Local Governmental Units and the State's Economy as a Whole (Include Implementation and Compliance Costs Expected to be Incurred)
The rule does not create any further impact or implementation and compliance costs beyond the statutes it interprets, except that, by providing clarifications and examples, may reduce the costs that businesses and individuals would otherwise incur to comply with the statutes. No comments concerning the economic effect of the rule were submitted in response to the department's solicitation.
Benefits of Implementing the Rule and Alternative(s) to Implementing the Rule
Clarifications and guidance provided by administrative rules may lower the compliance costs for businesses, local governmental units, and individuals. If the rule is not implemented, Chapter Tax 2 will be incomplete in that it will not reflect current law.
Long Range Implications of Implementing the Rule
No long-range implications are anticipated.
Compare With Approaches Being Used by Federal Government
N/A
Compare With Approaches Being Used by Neighboring States (Illinois, Iowa, Michigan and Minnesota )
N/A

Assumptions used in arriving at fiscal estimate

The proposed rule order implements the electronic medical records credit under ss. 71.07 (5i) . 71.28 (5i), 71.47 (5i), and 73.15 (1) and (2), Wis. Stats., as created in 2007 Act 20 and amended in 2011 Act 32 .

Any fiscal effect resulting from the credit was included in previously issued fiscal estimates for 2007 Act 20 and 2011 Act 32 . The proposed rule merely implements the credit, and as such the rule itself has no fiscal effect.

Notice of Hearing

Revenue

CR 12-013

NOTICE IS HEREBY GIVEN that, pursuant to sections 125.03 (1) and 125.28 (5) (e) , Stats., the Department of Revenue will hold a public hearing to consider emergency and proposed permanent rules revising section Tax 7.23 , relating to the activities of brewers, bottlers, out-of-state shippers, and wholesalers.

Hearing Information

The hearing will be held:

Date:   Monday, February 27, 2012

Time:   2:00 P.M.

Location:   State Revenue Building
  Events Room
  2135 Rimrock Road
  Madison, WI 53713

Handicap access is available at the hearing location.

Appearances at the Hearing and Submittal of Written Comments

Interested persons are invited to appear at the hearing and may make an oral presentation. It is requested that written comments reflecting the oral presentation be given to the department at the hearing. Written comments may also be submitted to the contact person listed below no later than February 27, 2012 , and will be given the same consideration as testimony presented at the hearing.

Dale Kleven

Department of Revenue

Mail Stop 6-40

2135 Rimrock Road

P.O. Box 8933

Madison, WI 53708-8933

Telephone: [phone]

E-mail: [e-mail]

Analysis Prepared by the Department of Revenue

Statutes interpreted

Sections 125.02 (2) , 125.28 (5) (e) , and 139.01 (2) , Stats.

Statutory authority

Sections 125.03 (1) and 125.28 (5) (e) , Stats.

Explanation of agency authority

Section 125.03 (1) , Stats., provides "[t]he department, in furtherance of effective control, may promulgate rules consistent with this chapter and Ch. 139 ."

Section 125.28 (5) (e) , Stats., as created by 2011 Wisconsin Act 32 , provides "[t]he department shall promulgate rules to administer and enforce the requirements under this subsection. The rules shall ensure coordination between the department's issuance and renewal of permits under this section and its enforcement of the requirements of this subsection, and shall require that all applications for issuance or renewal of permits under this section be processed by department personnel generally familiar with activities of fermented malt beverages wholesalers. The department shall establish by rule minimum requirements for warehouse facilities on premises described in permits issued under this section and for periodic site inspections by the department of such warehouse facilities."

Related statute or rule

Section 125.54 , Stats., authorizes the department of Revenue to issue wholesalers' permits for the sale of intoxicating liquor to retailers, wholesalers and manufacturers, Chapters Tax 8.61 and 8.63, Wis. Adm. Code, provide the requirements for processing intoxicating liquor wholesalers' permits by the department and the minimum requirements for intoxicating liquor warehouse facilities.

Plain language analysis

This proposed rule does the following:

•   Establishes the requirements for issuance and renewal of fermented malt beverage wholesalers' permits

•   Describes the minimum requirements for fermented malt beverage wholesaler warehouse facilities.

•   Details the process for applying for wholesalers' permits.

•   Provides guidance regarding eligibility for out-of-state shippers' permits.

•   Details the requirements for obtaining a brewer's permit and clarifies the permits required in contract brewing arrangements.

Summary of, and comparison with, existing or proposed federal regulation

Federal law, 27 U.S.C. Chapter 8 , the Federal Alcohol Administration Act (FAAA) provides for the regulation of persons engaged in the alcohol beverage industry, and for the protection of consumers. The FAAA includes provisions to require a permit for those who engage in the business as a producer, importer, or wholesaler of alcohol beverages, and to ensure that labeling and advertising of alcohol beverages provides adequate information to consumers. Sections 7805 and 5051 of the Internal Revenue Code of 1986 authorize the Secretary of the Treasury to administer requirements for qualifying a brewery, operating a brewery, and for paying tax and labeling beer removed from a brewery. These duties are the responsibility of the Alcohol and Tobacco Tax and Trade Bureau of the U.S. Department of the Treasury (TTB). Regulations in 27 CFR part 25 implement the IRC beer provisions and include requirements on brewers that cover the production, removal, and tax payment of beer. TTB has issued Industry Circular Number 2005-2 providing guidance to brewers who wish to obtain TTB approval of a contract brewing arrangement. According to the Industry Circular, "a `contract brewing arrangement' is a business relationship in which one person, such as a wholesale or retail dealer or a brewer, pays a brewing company, the `contract brewer' to produce beer for him or her. The contract brewer is entirely responsible for producing the beer, keeping appropriate brewery records, labeling the beer with its name and address, obtaining necessary certificates of label approval (COLAs), and paying tax at the appropriate rate upon removal of the beer from the brewery. TTB considers contract brewing arrangements to be ordinary commercial arrangements." In a contract brewing arrangement, only one person, the contract brewer, must qualify as a brewer under 27 CFR part 25 . The beer may be sold back to the person on whose behalf the beer was produced under contract, or to wholesalers, retailers, or to the ultimate consumer. If the person on whose behalf the beer is produced under contract resells the beer to a dealer, that person must hold a federal basic permit from TTB as a wholesaler under the FAAA.

Comparison with rules in adjacent states

The Iowa Alcoholic Beverages Division of the Iowa Department of Commerce issues permits for the manufacture and sale of alcoholic beverages, including fermented malt beverages, as authorized by the Iowa Administrative Code Chapter 185 .

The Illinois Liquor Control Commission issues brewer's licenses to any person who is engaged in the manufacture of beer, as authorized by Illinois Compiled Statutes (235ILCS5/) the Illinois Liquor Control Act and rules in Illinois Administrative Code, Title 11, Subtitle A, Part 100.

The Michigan Liquor Control Commission issues beer manufacturer licenses to: brewers authorizing the licensee to manufacture and sell the beer they brew. (Michigan Complied Laws Sections 436.1105 through 436.1113 , 436.1201 , and 436.1203 , and administrative code sections 436.1601 through 436.1659.)

The Minnesota Department of Public Safety Alcohol and Gambling Enforcement Division issues manufacturer's licenses to brewers, who may also be issued a wholesaler's license to sell the brewer's product at wholesale provided the brewer was selling their own products at wholesale in Minnesota on January 1, 1991. A licensed brewer may sell the brewer's products at wholesale only if the brewer has been issued a wholesaler's license. (2011 Minnesota statutes 340A.301, and Minnesota Administrative Rule Chapter 7515).

Summary of factual data and analytical methodologies

2011 Wisconsin Act 32 amended numerous sections in Chapter 125 Subchapter II affecting the three-tier system regulating the production, distribution and sale of fermented malt beverages (beer) in Wisconsin. The amendments converted the municipal beer wholesaler's license from a license issued by a local municipality to a statewide permit issued by the Department of Revenue. Act 32 also changed the requirements for obtaining a beer wholesaler's permit and for obtaining an out-of-state shipper's permit, and restructured the brewer's permit.

In consultation with manufacturers, wholesalers and retailers of fermented malt beverages, the department has created this proposed rule order to satisfy the above requirements. No other data was used in the preparation of this proposed rule order or this analysis.

Analysis and supporting documents used to determine effect on small business

This proposed rule is created in accordance with 2011 Wisconsin Act 32 to administer and enforce statutory requirements relating to the production, distribution and sale of fermented malt beverages, consistent with the legislature's support for the three-tier system and with the Federal Alcohol Administration Act as implemented by the Alcohol and Tobacco Tax and Trade Bureau (TTB). As explained above, the proposed rule is created to reflect changes to Wisconsin law regulating fermented malt beverages. As the rule itself does not impose any significant financial or other compliance burden, the department has determined that it does not have a significant effect on small business.

Anticipated costs incurred by private sector

This proposed rule does not have a significant fiscal effect on the private sector.

Effect on Small Business

This proposed rule does not have a significant effect on small business.

Initial Regulatory Flexibility Analysis

This proposed rule order does not have a significant economic impact on a substantial number of small businesses.

Agency Contact Person

Please contact Dale Kleven at [phone] or [e-mail] , if you have any questions regarding this proposed rule.

Text of Rule

SECTION 1. Tax 7.23 (title) and (1) are amended to read:

Tax 7.23 (title) Activities of brewers, bottlers , out-of-state shippers, and wholesalers.

(1) In this rule section and in ss. 125.02 , 125.04 , 125.06 , 125.07 , 125.09 , 125.26 , 125.28 , 125.29 , 125.295 , 125.30 , 125.33 , 125.34 , and 139.01 , Stats. :

SECTION 2. Tax 7.23 (1) (a) to (d) are renumbered 7.23 (1) (b) and (g) to (i)

SECTION 3. Tax 7.23 (1) (a), (c), (d), (e), and (f) and (2) (title) are created to read:

Tax 7.23 (1) (a) "Brewer" as defined in ss. 125.92 (2) and 139.01 (2) , Stats., includes any person who manufactures fermented malt beverages for sale or transportation using an agent to directly manufacture fermented malt beverages.

( c) "Out-of-state shipper" means the holder of an out-of-state shipper's permit issued under s. 125.30 , Stats., and includes holders of a Federal Basic Importer's Permit.

(d) "Ownership interest" is a level of ownership in a sole proprietorship, partnership, tax option corporation, limited liability company, corporation, estate, or trust as an individual, partner, shareholder, member, or beneficiary.

(e) "Production brewer" means a brewer who directly manufactures fermented malt beverages for another brewer.

(f) "Recipe-brewer" means a person who contracts with an agent to directly manufacture fermented malt beverages for sale or transportation by that person.

(2) (title) Brewers permit restriction and exceptions.

SECTION 4. Tax 7.23 (3) (intro.) is amended to read:

Tax 7.23 (3) (intro.) Subject to the limitations in sub. (2) (a) and (b), examples of conduct prohibited by s. 125.33 (1) , Stats., and this section include , but are not limited to :

SECTION 5. Tax 7.23 (4) and (5) are created to read:

Tax 7.23 (4) Brewer's permit requirements. (a) A brewer producing or selling fermented malt beverages in this state shall file an application for a brewer's permit with the department in the manner prescribed by the department.

(b) A production brewer is required to obtain federal label approval and a federal brewer's notice from the Alcohol and Tobacco Tax and Trade Bureau.

(c) 1. An application filed under par. (a) shall include a certification by the recipe-brewer as to both of the following:

a. The recipe-brewer is contracting with a production brewer to produce fermented malt beverages.

b. The contract between the recipe-brewer and production brewer specifically provides the production brewer is an agent of the recipe-brewer and the recipe-brewer has retained the right to control the work contracted for.

2. Upon request of the department, a recipe-brewer shall provide the contract under subd. 1. a. and b. for the department's inspection.

3. A contract under subd. 1. a. and b. may be contingent upon the recipe-brewer receiving a permit under s. 125.29 , Stats.

(d) An application filed under par. (a) shall designate the premises where the fermented malt beverages will be manufactured as the exclusive permitted brewery premises and provide the permit number of the production brewer.

(e) 1. All applications for issuance or renewal of permits under s. 125.29 , Stats., shall be processed by department personnel generally familiar with activities of fermented malt beverage brewers. The issuance and renewal of permits shall be done in coordination with the enforcement of the requirements of s. 125.29 (1) and (2) , Stats.

2. A permit issued or renewed under this paragraph is specific to the premises of the production brewer. If the recipe-brewer seeks to have fermented malt beverages manufactured at multiple locations, it must submit brewer's permit applications for each new premise.

(f) For purposes of s. 139.05 (2) , Stats., the recipe-brewer is the brewer whom must file tax returns.

(g) A recipe-brewer shall include fermented malt beverages manufactured in a contract brewing arrangement in the report required under s. 139.11 (2) , Stats. A production brewer shall exclude fermented malt beverages manufactured in a contract brewing arrangement from the report required under s. 139.11 (2) , Stats.

(h) For purposes of the eligible producers tax credit under s. 139.02 , Stats., the recipe-brewer is the producer.

(5) Fermented malt beverage wholesaler warehouse facilities. (a) Minimum requirements for warehouse facilities. The premises described in a permit issued under s. 125.28 , Stats., shall be a minimum of 1,000 square feet of floor space and shall be located in a free-standing building that is not part of or connected to a premises covered by a retail license or permit issued under s. 125.25 , 125.26 , or 125.27 , Stats.

(b) Exception to minimum requirements. The secretary of revenue may waive the requirement that a premises described in a permit issued under s. 125.28 , Stats., be a minimum of 1,000 square feet of floor space when the secretary determines the waiver fair and equitable, if the applicant or permittee does both of the following:

1. Submits a written request for a waiver along with the application for issuance or renewal of a permit.

2. Clearly indicates how the requirements described in par. (a) and s. 125.28 (5) (a) , Stats., other than the requirement that the premises described in the permit be a minimum of 1,000 square feet of floor space, will be or have been met.

(c) Purchases by a wholesaler. Every permittee under s. 125.28 , Stats., shall retain invoices covering all purchases of fermented malt beverages stored at the premises described in the permit for 4 years from the date of the invoice. The invoices shall be retained on the premises described in the permit for 2 years from the date of the invoice, and shall be open to inspection at all reasonable times by any representative of the department.

(d) Inventory records. Every permittee under s. 125.28 , Stats., shall complete a written inventory listing the entire stock of fermented malt beverages stored at the premises described in the permit as of the close of business on the last day of every month. A copy of the inventory listing shall be retained by the permittee for 4 years from the date the inventory is completed. The inventory listing shall be retained on the premises described in the permit for 2 years from the date the inventory is completed, and shall be open to inspection at all reasonable times by any representative of the department.

(e) Inspections of warehouse facilities. Before issuing a permit under s. 125.28 , Stats., the department shall conduct a site inspection of the premises described in the permit application to determine if such premises meets the minimum requirements described in sub. (a). The department shall also conduct periodic site inspections of premises described in permits issued under s. 125.28 , Stats. Site inspections shall be conducted by department personnel generally familiar with activities of fermented malt beverage wholesalers.

(f) Background investigations of applicants. Before issuing a permit under s. 125.28 , Stats., the department shall conduct a background investigation to determine that the applicant is qualified to hold the permit. The background investigation shall be limited to obtaining information that is necessary to enable the department to verify that the applicant meets the eligibility requirements described in s. 125.28 (1) (a) and (2) (b) , Stats.

(g) Processing of permits by the department. All applications for issuance or renewal of permits under s. 125.28 , Stats., shall be processed by department personnel generally familiar with activities of fermented malt beverage wholesalers. The issuance and renewal of permits shall be done in coordination with the enforcement of the requirements of s. 125.28 (5) (e) , Stats.

ADMINISTRATIVE RULES FISCAL ESTIMATE AND ECONOMIC IMPACT ANALYSIS
Type of Estimate and Analysis
X Original Updated Corrected
Administrative Rule Chapter, Title and Number
Section Tax 7.23 – Activities of brewers, bottlers, out-of-state shippers, and wholesalers
Subject
The production, distribution, and sale of fermented malt beverages
Fund Sources Affected			Chapter 20 , Stats. Appropriations Affected
GPR FED PRO PRS SEG SEG-S
Fiscal Effect of Implementing the Rule
X No Fiscal Effect Indeterminate	Increase Existing Revenues Decrease Existing Revenues		Increase Costs Could Absorb Within Agency's Budget Decrease Costs
The Rule Will Impact the Following (Check All That Apply)
State's Economy Local Government Units		Specific Businesses/Sectors Public Utility Rate Payers
Would Implementation and Compliance Costs Be Greater Than $20 million? Yes X No
Policy Problem Addressed by the Rule
The rule does not create or revise policy, other than to reflect a statutory change.
Summary of Rule's Economic and Fiscal Impact on Specific Businesses, Business Sectors, Public Utility Rate Payers, Local Governmental Units and the State's Economy as a Whole (Include Implementation and Compliance Costs Expected to be Incurred)
As indicated in the attached fiscal estimate, the fiscal effect of modifying the regulation of fermented malt beverages was included in the fiscal effect of 2011 Wisconsin Act 32. The rule itself does not create any further economic or fiscal impact or implementation and compliance costs beyond the statutes it interprets. No comments concerning the economic effect of the rule were submitted in response to the department's solicitation.
Benefits of Implementing the Rule and Alternative(s) to Implementing the Rule
Clarifications and guidance provided by administrative rules may lower the compliance costs for businesses, local governmental units, and individuals. If the rule is not implemented, section Tax 7.23 will be incomplete in that it will not reflect current law.
Long Range Implications of Implementing the Rule
No long-range implications are anticipated.
Compare With Approaches Being Used by Federal Government
N/A
Compare With Approaches Being Used by Neighboring States (Illinois, Iowa, Michigan and Minnesota )
Illinois, Iowa, Michigan, and Minnesota have their own unique provisions concerning the regulation of fermented malt beverages, which differ from Wisconsin's provisions substantively enough to prohibit consideration of these approaches.

Assumptions used in arriving at fiscal estimate

2011 Wisconsin Act 32 made several modifications to Wisconsin's three-tier system for the regulation of fermented malt beverages. The act converted the municipal beer wholesaler's license to a statewide permit issued by the Department of Revenue (DOR). It also modified the requirements for obtaining a beer wholesalers permit and restructured the brewers permit. Act 32 further required DOR to promulgate rules to administer and enforce the new wholesaler provisions, including minimum requirements for and periodic inspections of warehouse facilities. The specific directive included in Act 32 to promulgate rules supplemented DOR's existing rule-making authority pertaining to alcohol regulation under s. 125.03 (1) .

The proposed rule enacts certain administrative provisions consistent with and required by the Act 32 changes. The proposed rule establishes the requirements for issuance and renewal of fermented malt beverage wholesalers' permits, describes the minimum requirements for fermented malt beverage wholesaler warehouse facilities, and explains the process for applying for wholesalers' permits. The minimum square feet of floor space for a fermented malt beverage wholesaler warehouse facility is set at 1,000 square feet (but a waiver may be granted provided certain statutory requirements are met).

Since the proposed rule merely implements certain provisions and requirements of 2011 Wisconsin Act 32 , the proposed rule itself has no fiscal effect.

Notice of Hearing

Revenue

CR 12-015

NOTICE IS HEREBY GIVEN that, pursuant to sections 77.54 (57) (a) 1m. and 227.11 (2) (a) , Stats., the Department of Revenue will hold a public hearing to consider permanent rules creating section Tax 11.07 , relating to sales and use tax exemptions for biotechnology.

Hearing Information

The hearing will be held:

Date:   Monday, February 27, 2012

Time:   11:00 A.M.

Location:   State Revenue Building
  Events Room
  2135 Rimrock Road
  Madison, WI 53713

Handicap access is available at the hearing location.

Appearances at the Hearing and Submittal of Written Comments

Interested persons are invited to appear at the hearing and may make an oral presentation. It is requested that written comments reflecting the oral presentation be given to the department at the hearing. Written comments may also be submitted to the contact person listed below no later than February 27, 2012 , and will be given the same consideration as testimony presented at the hearing.

Dale Kleven

Department of Revenue

Mail Stop 6-40

2135 Rimrock Road

P.O. Box 8933

Madison, WI 53708-8933

Telephone: [phone]

E-mail: [e-mail]

Analysis Prepared by the Department of Revenue

Statutes interpreted

Section 77.54 (57) , Stats.

Statutory authority

Sections 77.54 (57) (a) 1m. and 227.11 (2) (a) , Stats.

Explanation of agency authority

Section 77.54 (57) (a) 1m. , Stats., provides: "`Biotechnology business' means a business, as certified by the department in the manner prescribed by the department, that is primarily engaged in the application of biotechnologies that use a living organism or parts of an organism to produce or modify products to improve plants or animals, develop microorganisms for specific uses, identify targets for small molecule pharmaceutical development, or transform biological systems into useful processes and products."

Section 227.11 (2) (a) , Stats., provides "[e]ach agency may promulgate rules interpreting the provisions of any statute enforced or administered by the agency, if the agency considers it necessary to effectuate the purpose of the statute..."

Related statute or rule

There are no other applicable statutes or rules.

Plain language analysis

The proposed rule prescribes the manner in which a biotechnology business will be certified. It also prescribes the manner of determining the percent needed to establish if the definition of "primarily," which is defined as "more than 50%" under s. 77.54 (57) (a) 4. , Stats., is met.

Summary of, and comparison with, existing or proposed federal regulation

There is no existing or proposed federal regulation that is intended to address the activities to be regulated by the rule.

Comparison with rules in adjacent states

The department is not aware of a similar rule in an adjacent state.

Summary of factual data and analytical methodologies

The department has created this proposed rule order to comply with the statutory requirement to prescribe the manner in which a business will be certified for the sales and use tax exemptions for biotechnology under s. 77.54 (57) , Stats. No other data was used in the preparation of this proposed rule order or this analysis.

Analysis and supporting documents used to determine effect on small business

As explained above, this rule is created to administer Wisconsin's sales and use tax laws. As the rule itself does not impose any significant financial or other compliance burden, the department has determined that it does not have a significant effect on small business.

Anticipated costs incurred by private sector

This rule does not have a significant fiscal effect on the private sector.

Effect on Small Business

This rule does not have a significant effect on small business.

Initial Regulatory Flexibility Analysis

This proposed rule order does not have a significant economic impact on a substantial number of small businesses.

Agency Contact Person

Please contact Dale Kleven at [phone] or [e-mail] , if you have any questions regarding this rule.

SECTION 1. Tax 11.07 is created to read:

Tax 11.07 Property used in qualified research and property used to raise research animals. (1) General. Section 77.54 (57) (b) , Stats., provides exemptions for the following:

(a) Machinery and equipment, including attachments, parts, and accessories, that are sold to persons who are engaged primarily in manufacturing or biotechnology in this state and are used exclusively and directly in qualified research.

(b) Tangible personal property or an item or property under s. 77.52 (1) (b) or (c) , Stats., that is sold to persons who are engaged primarily in manufacturing or biotechnology in this state, if the tangible personal property or item or property under s. 77.52 (1) (b) or (c) , Stats., is consumed or destroyed or loses its identity while being used exclusively and directly in qualified research.

(c) Machines and specific processing equipment, including accessories, attachments, and parts for the machines or equipment, that are used exclusively and directly in raising animals that are sold primarily to a biotechnology business, a public or private institution of higher education, or a governmental unit for exclusive and direct use by any such entity in qualified research or manufacturing.

(d) The items listed in s. 77.54 (3m) (a) to (m) , Stats., medicines, semen for artificial insemination, fuel, and electricity that are used exclusively and directly in raising animals that are sold primarily to a biotechnology business, a public or private institution of higher education, or a governmental unit for exclusive and direct use by any such entity in qualified research or manufacturing.

(2) Definitions. For purposes of the exemptions in s. 77.54 (57) (b) , Stats., and sub. (1), the following definitions apply:

(a) "Animals" has the meaning given in s. 77.54 (57) (a) 1d. , Stats.

(b) "Biotechnology" has the meaning given in s. 77.54 (57) (a) 1f. , Stats.

(c) "Biotechnology business" has the meaning given in s. 77.54 (57) (a) 1m. , Stats.

(d) "In this state" has the meaning given in s. 77.51 (6) , Stats.

(e) "Institution of higher education" means an accredited educational organization providing education after completion of high school, including undergraduate, graduate, and professional education.

(f) "Machinery" has the meaning given in s. 70.11 (27) (a) 2. , Stats.

(g) "Primarily" has the meaning given in s. 77.54 (57) (a) 4. , Stats.

(h) "Qualified research" has the meaning given in s. 77.54 (57) (a) 5. , Stats.

(i) "Used exclusively" has the meaning given in s. 77.54 (3) (b) 3. , Stats.

(3) Exemptions for property used in qualified research. (a) In order for a person to claim the exemption described in sub. (1) (a) or (b), that person must be engaged primarily in manufacturing or biotechnology in this state. In addition, the exemption in sub. (1) (a) requires that the property be used exclusively and directly in qualified research and the exemption in sub. (1) (b) requires that the property or item is consumed, destroyed, or loses its identity while being used exclusively and directly in qualified research.

(b) The exemption in sub. (1) (b) includes fuel and electricity that is consumed, destroyed, or loses its identity while being used exclusively and directly in qualified research.

(c) For purposes of determining whether an activity is qualified research, the regulations under Treas. Reg. section 1.41-4 apply.

(d) The same activity may be biotechnology and manufacturing for purposes of determining whether the person is engaged primarily in manufacturing or biotechnology in this state. When a person's activities in this state include one or more activities in addition to manufacturing or biotechnology, the question of which activity, if any, is the primary activity is answered by a consistent application of a reasonable measure of activity.

Examples 1) Company A performs research and product development services at locations in Wisconsin for its customers. This is Company A's sole activity in Wisconsin. Company A, using the sales price of its services as the measure of activity, determines that more than 50% of the total sales price it receives for performing all research and product development services in Wisconsin is derived from biotechnology.

2) Company B performs research and product development services at locations outside of Wisconsin. Company B manufactures tangible personal property at a location in Wisconsin. This is Company B's sole activity in Wisconsin. The products manufactured in Wisconsin are used by Company B in performing its research and product development activities. For purposes of the exemptions in sub. (1) (a) and (b), Company B is engaged primarily in manufacturing in Wisconsin, as manufacturing is its only activity in Wisconsin.

(e) When property or an item purchased exempt under sub. (1) (a) or (b) is used more than 5% of its total use for purposes other than exclusive and direct use in qualified research, the purchaser becomes subject to Wisconsin use tax on the purchase price of the property or item, unless another exemption applies.

Examples 1) Company A is engaged primarily in manufacturing in Wisconsin. Company A purchases a machine that it will use directly in conducting qualified research at its manufacturing plant in Wisconsin, and purchases it exempt from Wisconsin sales tax claiming the exemption in sub. (1) (a). After completing the qualified research and having made no use of the machine other than direct use in qualified research, Company A begins using the machine exclusively and directly in its manufacturing operation, which is an exempt use under s. 77.54 (6) (a) , Stats. Company A does not owe Wisconsin use tax on its purchase of the machine.

2) Company B is engaged primarily in manufacturing in Wisconsin. Company B purchases a machine that it will use exclusively and directly at its manufacturing plant in conducting qualified research as well as using the machine for more than 5% of its total use in conducting research and development projects that do not meet the definition of qualified research. Company B's purchase of the machine is taxable.

3) Company C is engaged primarily in manufacturing in Wisconsin. Company C develops a new product in an activity that is qualified research. During the qualified research, Company C purchased a variety of raw materials that were used exclusively and directly and destroyed in qualified research in determining what raw materials were needed to produce the new product. Once the qualified research is concluded, Company C consumes some of the raw materials in further research and development of the new product that is not qualified research. Company C's purchases of the raw materials used exclusively and directly and destroyed in qualified research are exempt under sub. (1) (b). Company C's purchases of raw materials it uses in further research and development of the new product that is not qualified research are taxable. Research and development are not manufacturing and the raw materials used in further research and development of the new product that is not qualified research do not qualify for exemption under s. 77.54 (2) or (6) (a) , Stats.

(4) Exemptions for raising animals used in qualified research or manufacturing. ( a) This subsection explains how a person qualifies for the exemptions under sub. (1) (c) and (d), the information certain purchasers of the animals are required to furnish to a seller of such animals, and the documentation to be kept by the seller to verify the seller qualifies for the exemptions.

(b) T he exemptions in sub. (1) (c) and (d) apply to property purchased and used exclusively and directly in raising animals only when more than 50% of all the animals raised by the seller of the animals are sold to one of the following organizations for exclusive and direct use by such organization in qualified research or manufacturing:

1. A biotechnology business certified by the department as described in sub. (5).

2. A public or private institution of higher education as defined in sub. (2) (e).

3. A government agency.

(c) The person claiming an exemption under sub. (1) (c) or (d), shall obtain and retain information furnished to it by the organizations described in par. (b), attesting to the number of animals purchased and the number of animals used by the organization exclusively and directly in qualified research or manufacturing. Purchaser's Statement to Seller for Animals used in Qualified Research or Manufacturing, Form S-209, may be used by the purchaser for this purpose.

Note: Form S-209 is available on the department's web site at www.revenue.wi.gov .

Examples: 1) Company A raises various animals for sale for use in research. Company A sells more than 50% of its animals to biotechnology businesses for exclusive and direct use in qualified research. 100% of the feed Company A purchases for exclusive and direct use in raising its animals is exempt.

2) Company T raises various animals for sale for use in research. Company A uses cages to raise some of these animals. The cages have a life expectancy of 5 years. Company T's purchases of cages are exempt only if more than 50% of all the animals raised by Company T are sold to organizations described in par. (a) for exclusive and direct use by such an organization in qualified research or manufacturing.

3) Company K raises various animals for sale for use in research. Company K does not sell more than 50% of its animals to organizations described in par. (a) for exclusive and direct use by such an organization in qualified research or manufacturing. Company K does not qualify for the exemptions in sub. (1) (c) and (d).

(5) Certification of biotechnology business by the department. ( a) For purposes of the exemptions in sub. (1) (c) and (d), the department is required to certify a business as a biotechnology business. This subsection outlines the rules and procedures for a person to be certified as a biotechnology business by the department.

(b) A business is a biotechnology business when all of the following conditions are satisfied:

1. The business is engaged primarily in biotechnology. A business is engaged primarily in biotechnology for the period described in par. (c) when more than 50% of the business' activities during that period are devoted to the application of biotechnologies.

2. The business has received notice from the department that the business has been certified, with respect to a prescribed period determined under par. (c), that the business is a biotechnology business.

(c) The certification period under par. (b) 2. shall correspond to the business' tax year as determined for federal income tax purposes, including short years, subject to the following conditions:

1. If a business is certified by the department with respect to a previous tax year, the certification is valid for the previous tax year.

2. If a business is certified for a current tax year, the certification is valid until the expected end of the tax year unless, during such tax year the business' tax year terminates earlier than expected. When a tax year terminates earlier than expected, the certification is valid until the actual end of the tax year as determined for federal income tax purposes.

(d) A business may apply for certification with a form and in the manner prescribed by the department.

(e) Notwithstanding any other provision in this subsection, the department may:

1. Revoke any certification granted with respect to a period under par. (c) (1) or (2), but only upon information that either the business' application for certification contained a misstatement as to the business' gross income or expenses and deductions or the business no longer qualifies as a biotechnology business.

2. Require any business seeking certification as a biotechnology business to submit additional information, as determined by the department, prior to the department granting or denying the applicant's request for certification.

3. Require any business seeking certification to be certified only with respect to its previous tax years, until the department determines otherwise.

ADMINISTRATIVE RULES FISCAL ESTIMATE AND ECONOMIC IMPACT ANALYSIS
Type of Estimate and Analysis
X Original Updated Corrected
Administrative Rule Chapter, Title and Number
Section Tax 11.07 – Property used in qualified research and property used to raise research animals
Subject
Sales and use tax exemptions for biotechnology
Fund Sources Affected			Chapter 20 , Stats. Appropriations Affected
GPR FED PRO PRS SEG SEG-S
Fiscal Effect of Implementing the Rule
X No Fiscal Effect Indeterminate	Increase Existing Revenues Decrease Existing Revenues		Increase Costs Could Absorb Within Agency's Budget Decrease Costs
The Rule Will Impact the Following (Check All That Apply)
State's Economy Local Government Units		Specific Businesses/Sectors Public Utility Rate Payers
Would Implementation and Compliance Costs Be Greater Than $20 million? Yes X No
Policy Problem Addressed by the Rule
The rule does not create or revise policy, other than to reflect a statutory change.
Summary of Rule's Economic and Fiscal Impact on Specific Businesses, Business Sectors, Public Utility Rate Payers, Local Governmental Units and the State's Economy as a Whole (Include Implementation and Compliance Costs Expected to be Incurred)
As indicated in the attached fiscal estimate, the fiscal effect of creating sales and use tax exemptions for biotechnology was reflected under general fund condition statements subsequent to 2009 Wisconsin Act 28. The rule itself does not create any further economic or fiscal impact or implementation and compliance costs beyond the statutes it interprets. No comments concerning the economic effect of the rule were submitted in response to the department's solicitation.
Benefits of Implementing the Rule and Alternative(s) to Implementing the Rule
Clarifications and guidance provided by administrative rules may lower the compliance costs for businesses, local governmental units, and individuals. If the rule is not implemented, Chapter Tax 11 will be incomplete in that it will not reflect current law.
Long Range Implications of Implementing the Rule
No long-range implications are anticipated.
Compare With Approaches Being Used by Federal Government
N/A
Compare With Approaches Being Used by Neighboring States (Illinois, Iowa, Michigan and Minnesota )
N/A

Assumptions used in arriving at fiscal estimate

2009 Wisconsin Act 28 , the 2009-11 biennial budget bill, created an exemption (under s.77.54 (57)) for: certain tangible personal property sold to persons who are engaged primarily in manufacturing or biotechnology in this state and are used exclusively and directly in qualified research; and certain tangible personal property used exclusively and directly in raising animals that are sold primarily to a biotechnology business, a public or private institution of higher education, or a governmental unit for exclusive and direct use by any such entity in qualified research or manufacturing.

The effective date of the exemption is January 1, 2012.

The proposed rule modifies TAX 11 to reflect the law changes, establish certification criteria for biotechnology businesses, improve clarity, and add examples to illustrate the tax treatment of certain items under the exemptions under s.77.54 (57).

The proposed rule includes:

•   Criteria used by the department to certify a business as a "biotechnology business".

•   Definitions for "biotechnology products" and "biotechnology services".

•   Clarification that "engaged primarily in manufacturing or biotechnology in this state" means more than 50% of a person's activity in Wisconsin is manufacturing or biotechnology.

•   Examples to clarify the tax treatment of certain items under the exemption.

The fiscal effect of the exemptions under s.77.54 (57) has already been reflected under general fund condition statements subsequent to 2009 Act 28 (where the annual sales tax loss of the exemptions was estimated at $10 million annually). Since the fiscal impact of the statutory change has already been reflected, the proposed rule has no fiscal effect.

Notice of Hearing

Safety and Professional Services

Safety, Buildings, and Environment, Part II
Chs. SPS 326-360

CR 12-008

NOTICE IS HEREBY GIVEN that pursuant to sections 101.02 (1) and 101.17 , Stats., the Department of Safety and Professional Services will hold a public hearing on proposed rules under Chapter SPS 333 , relating to Passenger Ropeways.

Hearing Information

The public hearing will be held as follows:

Date:   Tuesday, February 28, 2012

Time:   10:00 A.M.

Location:   1400 East Washington Avenue
  Room 121C
  Madison, WI 53703

This hearing is held in an accessible facility. If you have special needs or circumstances that may make communication or accessibility difficult at the hearing, please call [phone] or [phone] (TTY) at least 10 days before the hearing date. Accommodations such as interpreters, English translators, or materials in audio tape format will, to the fullest extent possible, be made available upon a request from a person with a disability.

Appearances at the Hearing and Submittal of Written Comments

Interested persons are invited to appear at the hearing and present comments on the proposed rules. Persons making oral presentations are requested to submit their comments in writing. Persons submitting comments will not receive individual responses. The hearing record on this proposed rulemaking will remain open until March 2, 2012 to permit submittal of written comments from persons who are unable to attend the hearing or who wish to supplement testimony offered at the hearing. Written comments should be submitted to James Quast, at the Department of Safety and Professional Services, P.O. Box 2689, Madison, WI 53701-2689, or Email at [e-mail] .

The small business regulatory coordinator for the Department of Safety and Professional Services is Greg Gasper, who may be contacted at telephone [phone], or Email at [e-mail] .

Copies of Proposed Rule

The proposed rules and an analysis of the proposed rules are available on the Internet at the Safety and Buildings Division Web site at: http://dsps.wi.gov/sb/SB-HomePage
.html . Paper copies may be obtained without cost from Shancethea Leatherwood, at the Department of Safety and Professional Services, Board Services Division, P.O. Box 8935, Madison, WI 53708, or Email [e-mail] , or at telephone [phone] or TDD Relay dial 711 in Wisconsin or [phone]. Copies will also be available at the public hearing.

Analysis Prepared by the Department of Safety and Professional Services

Statutes interpreted

Section 101.17 , Stats.

Statutory authority

Sections 101.02 (1) and 101.17 , Stats.

Related statute or rule

None.

Explanation of agency authority

Under the authority of s. 101.17 , Stats., the Department of Safety and Professional Services has oversight of various mechanical devices and equipment, which includes ski lifts and tows, in order to protect public safety. The department fulfills this responsibility by promulgating the Passenger Ropeways Code, under Chapter SPS 333 .

Summary of proposed rules

The current rules of Chapter SPS 333 require passenger ropeways to be designed, constructed, installed, maintained and operated in accordance with the 1999 edition of ANSI B77.1 standard Passenger Ropeways – Aerial Tramways, Aerial Lifts, Surface Lifts, Tows and Conveyors – Safety Requirements. The proposed rules will reference and adopt the 2011 edition of the ANSI B77.1 standard.

Summary of, and comparison with, existing or proposed federal regulations

There are no existing or proposed federal regulations that address the specific issues of this rule.

Comparison with rules in adjacent states

An Internet search of the ski lift regulations for the states of Illinois, Iowa, Michigan and Minnesota indicated the following:

•   Illinois adopts and references the 2006 edition of the ANSI 77.1 standard.

•   Iowa does not have any specific state standards for the design, construction, installation, maintenance or operation for passenger ropeways.

•   Michigan adopts and references the 2006 edition of the ANSI 77.1 standard.

•   Minnesota does not have any specific state standards for the design, construction, installation, maintenance or operation for passenger ropeways.

Summary of factual data and analytical methodologies

The department reviewed and compared provisions of the currently adopted 1999 edition ANSI B77.1 standard to the 2006 and 2011 editions. The latest editions of the ANSI standard make a few specific design provisions retroactive for existing ropeway systems. Most of the retroactive design requirements were established under the 2006 edition of the ANSI standard and addressed communications, evacuation power, rollback devices, cable catchers, and deropement switches. The 2011 ANSI edition retroactively requires bullwheel brakes for existing fixed grip aerial lift systems. Operation and maintenance provisions relating to signage are required to be more pictorial in nature with the 2006 ANSI edition compared to the 1999 edition.

Effect on small business including an analysis and supporting documents used to determine the effect or in preparation of economic impact report

The rules were developed with input from an advisory council that includes representatives of ski hill owners and operators. There are 50 existing ski/tubing facilities in the state operating approximately 200 passenger ropeway systems.

Two-thirds of the ski hill operations, involving about 130 passenger ropeway systems, are insured and inspected annually by third-party inspectors either employed or contracted by national insurance companies covering ski hill operations. It is the understanding of the department that the insurance company inspections are based upon the latest edition of the ANSI B77.1 standard.

The advisory council and the department believe that most of the existing passenger ropeway systems in the state currently comply with the retroactive design provisions of the latest ANSI B77.1 standards. If an existing passenger ropeway system would need to comply with the various retroactive requirements, the cost would depend upon the retroactive provisions involved and other variables including the type of passenger ropeway system, system manufacturer, the length of the system and the capacity of the system. Estimates, as provided by advisory council members, associated with the components of the various retroactive provisions are:

•   communications, battery backup phone systems - $200.

•   rollback devices and bullwheel brakes:

○   rollback detection device - $2,800.

○   automatic emergency hydraulic release system - $1,500.

○   electronics - $1,000.

Some ski areas may need to replace signage to conform to the latest ANSI standard requirements. The typical cost of a sign is about $40. Signs are subject to weathering and most ski areas account for replacement in their operating budgets.

The department does not believe that the proposed rules will affect a significant number of existing ski hill operations.

Members of the advisory council are:

•   Jim Engel, WI Ski Industries Association (WSIA)

•   Sam Geise, Insurance Industry

•   Hans Hauschild, WSIA

•   Jim Hubing, National Ski Patrol System

•   Don McKay, WSIA

•   Gren Rudd, Ski Industry At Large

•   Rick Schmitz, WSIA

•   Dennis Schulz, Ski Industry At Large

•   Chris Stoddard, Ski Industry At Large

•   Rob Walz, WSIA

Initial Regulatory Flexibility Analysis

1.   Types of small businesses that will be affected by the rules.

  Businesses affected by the rules include those operations offering downhill skiing, snow boarding and/or tubing where access to the slopes and hills is provided by mechanical means, such as chair lift, surface lifts, rope tows or conveyor systems.

2.   Reporting, bookkeeping and other procedures required for compliance with the rules.

  No new or addition bookkeeping or other administrative procedures are required for compliance.

3.   Types of professional skills necessary for compliance with the rules.

  No new or addition professional skills are required for compliance.

The small business regulatory coordinator for the Department of Safety and Professional Services is Greg Gasper, who may be contacted at telephone [phone], or Email at [e-mail] .

Environmental Analysis

Notice is hereby given that the department has considered the environmental impact of the proposed rules. In accordance with Chapter SPS 301 , the proposed rules are a Type III action. A Type III action normally does not have the potential to cause significant environmental effects and normally does not involve unresolved conflicts in the use of available resources. The department has reviewed these rules and finds no reason to believe that any unusual conditions exist.

Agency Contact

James Quast, Program Manager,
[e-mail] , [phone]

STATE OF WISCONSIN DEPARTMENT OF ADMINISTRATION DOA 2049 (R 07/2011) ADMINISTRATIVE RULES FISCAL ESTIMATE AND ECONOMIC IMPACT ANALYSIS
Type of Estimate and Analysis
X Original Updated Corrected
Administrative Rule Chapter, Title and Number
Chapter SPS 333 .
Subject
Passenger Ropeways
Fund Sources Affected			Chapter 20 , Stats. Appropriations Affected
GPR FED X PRO PRS SEG SEG-S
Fiscal Effect of Implementing the Rule
X No Fiscal Effect Indeterminate	Increase Existing Revenues Decrease Existing Revenues		Increase Costs Could Absorb Within Agency's Budget Decrease Costs
The Rule Will Impact the Following (Check All That Apply)
State's Economy Local Government Units		Specific Businesses/Sectors Public Utility Rate Payers
Would Implementation and Compliance Costs Be Greater Than $20 million? Yes X No
Policy Problem Addressed by the Rule
Under the authority of s. 101.17, Stats., the Department of Safety and Professional Services has oversight of various mechanical devices and equipment, which includes ski lifts and tows, in order to protect public safety. The current rules of Chapter SPS 333 require passenger ropeways to be designed, constructed, installed, maintained and operated in accordance with the 1999 edition of ANSI B77.1 standard Passenger Ropeways – Aerial Tramways, Aerial Lifts, Surface Lifts, Tows and Conveyors – Safety Requirements. The code was last updated in 2001. Since that time the ANSI standard has been revised twice, the 2011 being the current edition. The technical provisions of Chapter SPS 333 are out of date and no longer reflect current national standards.

Notice of Hearing

Safety and Professional Services

Controlled Substances Board

CR 12-010

NOTICE IS HEREBY GIVEN that pursuant to authority vested in the Controlled Substances Board in sections 227.11 (2) and 961.335 (8), Wis. Stats., and interpreting section 961.335, Wis. Stats., the Controlled Substances Board will hold a public hearing at the time and place indicated below to consider an order to promulgate Chapter CSB 3 , Wis. Admin. Code. The proposed rules relate to the requirements and procedures for granting special use authorizations.

Hearing Information

Date:   Monday, February 27, 2012

Time:   1:00 P.M.

Location:   1400 East Washington Avenue
  Room 121
  Madison, WI 53703

Appearances at the Hearing and Submittal of Written Comments

Interested persons are invited to present information at the hearing. Persons appearing may make an oral presentation but are urged to submit facts, opinions, and argument in writing as well. Facts, opinions, and argument may also be submitted in writing without a personal appearance by mail addressed to the Department of Safety and Professional Services, Division of Board Services, P.O. Box 8935, Madison, Wisconsin 53708 or by email at [e-mail] .. Written comments must be received at or before the public hearing to be included in the record of rule-making proceedings.

Copies of Rule

Copies of this proposed rule are available upon request to Kris Anderson, Paralegal, Department of Regulation and Licensing, Division of Board Services, 1400 East Washington Avenue, P.O. Box 8935, Madison, Wisconsin 53708, or by email at [e-mail] .

Analysis Prepared by the Department of Safety and Professional Services

Statutes interpreted

Section 961.335 , Stats.

Statutory authority

Sections 227.11 (2) , 961.335 (8) , Stats.

Explanation of agency authority

Section 227.11 (2) , Stats., permits an agency to promulgate rules interpreting the provisions of any statute enforced or administered by the agency if the agency deems such rules necessary to effectuate the purposes of the statute. Section 961.335 (8) , Stats., expressly authorizes the Wisconsin controlled substances board to promulgate rules relating to the board's issuance of special use authorization permits (SUA's), including rules regarding the criteria and procedures for obtaining SUA's, records retention and disclosure requirements for permit holders, submissions of protocols, and suspension or revocation of SUA's.

Related statute or rule

Sections 961.41 , 961.42 , and 941.43 , Stats., establish Wisconsin's proscriptions against the unlawful manufacture, distribution, dispensing, delivery, or possession of any controlled substance. Section 961.335 , Stats., provides for certain exceptions to those proscriptions. A search of Wisconsin's statutes and administrative code revealed only one reference to s. 961.335 , the SUA statute, in s. 961.54 (3) , Stats. Such reference is not related to the issuance of SUA's.

Plain language analysis

The proposed administrative code chapter will set forth rules for the issuance of SUA's by the controlled substances board. These rules will include definitions of terms used in the chapter; general requirements for SUA's; procedures and criteria for obtaining an initial permit and an amendment to an initial permit; limitations on drugs and drug quantities for use in training narcotics dogs; requirements for recordkeeping, records retention, and disclosure of records related to SUA's; and acts constituting violations of an SUA permit.

Summary of, and comparison with, existing or proposed federal regulation

The federal laws describing the requirements for manufacturers, distributors, and dispensers of controlled substances, Schedules I-V, are found at 21 U.S.C. ss. 821-830. All persons manufacturing, distributing, dispensing, or possessing for any purpose other than prescribed medical treatment, must obtain federal registration to do so. Id. The application requirements and procedures are set forth in the Code of the Federal Register at 21 C.F.R., Part 1301 . There are 10 different categories of business activities, each of which requires separate registration: manufacturing; distributing; reverse distributing; dispensing or instructing; research – Sched. I; research – Sched.'s II-V; narcotic treatment program; importing; exporting; and chemical analysis. 21 C.F.R. s. 1301 (13). Those regulations comprise the federal equivalent of the "special use authorizations" referred to in the new administrative rules proposed herein.

Comparison with rules in adjacent states

Illinois:

Statutes: Under the Illinois Controlled Substances Act, all persons who manufacture, distribute, or dispense any controlled substance, or engage in chemical analysis or instructional activities using controlled substances, or who purchases, stores, or administers euthanasia drugs must obtain a registration issued by the Illinois Department of Financial and Professional Regulation. The Act requires the department to promulgate rules administering the registration function. Section 720 ILCS 570/301. Registered persons may possess, manufacture, distribute, or dispense controlled substances, or administer euthanasia drugs to the extent authorized by their registration and in conformity with the other provisions of the Act. Registration is site-specific, so persons operating at more than one site must have separate registration for each. Sections 720 ILCS 570/302 (a), (b), and (d). The department may deny, refuse to renew, suspend, or revoke a registration upon finding that the applicant or registrant has provided false information on an application, had his or her federal controlled substances registration suspended or revoked, been convicted of certain crimes, failed to take effective preventative measures against diversion, or violated any provision of the Illinois Controlled Substances Act or the Methamphetamine Precursor Control Act, or any of the rules promulgated under those Acts. Sections 720 ILCS 570/304 (a) and (b).
http://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=072005700HArt%2E+III&ActID=1941&ChapterID=53&SeqStart=2600000&SeqEnd=5000000 .

Administrative rules: The Illinois Administrative Code sets forth rules promulgated by the Department of Financial and Professional Regulation for implementing the provisions of the Controlled Substances Act. Title 77, ch. XV, pt. 3100, Ill. Admin. Code. Among other things, these rules require separate registrations for any of six different types of controlled substances activities deemed independent of each other. The independent-activities rule also describes several exceptions thereto. For instance, the first two of the different types of activities are 1) manufacturing controlled substances, and 2) distributing controlled substances. However, persons registered to manufacture a basic class of controlled substances, or one substance in particular, may distribute the same without a separate distribution registration. Sections 3100.50 a), b), Title 77, Ill. Admin. Code. Other rules provide instructions for registration applicants, and authorize the department to deny, limit, suspend, or revoke any registration upon finding the registrant in violation of any of the statutes or rules regarding controlled substances. Sections 3100.100, .160, Title 77, Ill. Admin. Code.
http://www.ilga.gov/commission/jcar/admincode/077/07703100sections.html .

Comparison of approaches: The Illinois laws regarding registration for use of controlled substances do not address "special uses" in a separate, or stand-alone, section as Wisconsin law does. Similar to Wisconsin though, the Illinois Controlled Substances Act includes a registration requirement, and charges a state agency with the administration of that requirement. The Illinois statutes and rules also contain provisions for certain non-medicinal-related uses that are substantially similar to the provisions of Wisconsin's special use authorization law, s. 961.335 , Stats. One exception to the similarity is that, unlike the proposed Wisconsin rules, Illinois law does not specifically reference narcotic dog trainers in either its Controlled Substances Act or administrative code.

While Illinois's approach to controlled substances user registration differs in part from the approach taken by the Wisconsin controlled substances board's proposed rules, the fundamental policy of regulating uses of controlled substances not related to medical treatment is the same. Unlike Wisconsin's controlled substances law, the Illinois law is silent regarding the use of controlled substances for training narcotic dogs. That silence may cause confusion for persons using controlled substances for that purpose. Wisconsin's special use authorization statute provides for uses not specified in the statute by permitting the controlled substances board to approve "other special uses, without restriction because of enumeration." s. 961.335 (1) , Stats. Accordingly, in addition to the special uses the Wisconsin statute does specify, the board's proposed rules address other "special," but well-known purposes, such as euthanasia at humane shelters or under municipal animal control laws, and the training of narcotic dogs. The board believes increased clarity will result in less confusion for both permit applicants and administrators.

Iowa:

Statutes: The Iowa statutes require that all persons who manufacture, distribute, or dispense any controlled substance, or who propose to engage in the manufacture, distribution, or dispensing of any controlled substance, obtain and maintain a biennial registration from the Iowa Board of Pharmacy. Registration applies to one site only, so persons operating at more than one site must have separate registrations for each. Registered persons may possess, manufacture, distribute, dispense, or conduct research using controlled substances to the extent authorized by their registration only and in conformity with the other provisions of Iowa's controlled substances registration law. Sections 124.302 , 1., 2., 4., Iowa Code. The pharmacy board may suspend, revoke, or restrict a registration to manufacture, distribute, or dispense a controlled substance upon certain findings, including that the registrant has committed such acts as would render the registrant's registration inconsistent with the public interest as determined under s. 124.304 1.d., Iowa Code.
http://www.state.ia.us/ibpe/pdf/IC124.pdf

Administrative rules: Iowa's administrative code contains rules implementing the statutes regarding the use of controlled substances. The rules establish further specifications of who or what entities must register, and seven different types of activities, each of which requires separate registration. In addition, the rules include application instructions and procedures; specific requirements for the approved uses of controlled substances; descriptions of, and requirements for separate registrations of separate sites; requirements and procedures for modifying or terminating a current registration based on several different types of changes; and registration enforcement provisions. Beyond requiring "[m]anufacturers, distributors, reverse distributors, importers and exporters," of controlled substances to register, the list of persons and entities that must register includes all individual medical practitioners, pharmacies, hospitals, animal shelters, care facilities, researchers, dog trainers, analytical laboratories, and teaching institutions. Rules 657—10.1-.12, IAC.
http://www.legis.state.ia.us/aspx/ACODocs/ruleList.aspx?agency=657&chapter=10

Comparison of approaches: Like Illinois, and unlike Wisconsin, Iowa takes an approach to registration for controlled substances use that does not treat non-medicinal-related uses separately. Nevertheless, Iowa's controlled substances laws do require registration of persons using controlled substances for non-medicinal-related purposes, and charges a state agency with administering that requirement. Iowa sets forth comprehensive registration provisions in its administrative rules that are substantially similar to Wisconsin's special use authorization statute. In addition, the scope of Iowa's rules is more consistent with the Wisconsin board's proposed rules than not. Thus, Iowa's approach to administering its "special use" laws is essentially the same as the approach the Wisconsin controlled substances board contemplates in the instant rule-making proposal.

Michigan:

Statutes: Michigan's controlled substances law is set forth in that state's public health code, Act 368 of 1979, Art. 7. The statutes require any person who manufactures, distributes, prescribes, or dispenses a controlled substance in Michigan to obtain a license for such purposes issued by the Michigan Board of Pharmacy or its Administrator. Sections 333.7303 , Art. 7, Michigan Compiled Laws (MCL). The administrator is authorized to promulgate rules for controlled substances licensure and the enforcement thereof. Section 333.7301 , MCL. License holders may possess, manufacture, distribute, prescribe, dispense, or conduct research with the specified controlled substances to the extent authorized only, and as is consistent with all other provisions of Article 7. Licenses apply to specific sites, so persons operating at more than one site must have separate registrations for each. Persons licensed as pharmacists must also obtain a separate controlled substances license. Sections 333.7303 (1) , (2) , (5) , MCL. The pharmacy board's disciplinary subcommittee may deny, limit, suspend, or revoke a license, or fine or reprimand a licensee, or order the licensee to perform community service or make restitution upon certain specified findings, including that the applicant or licensee has violated, or attempted to violate, any of the statutes in Article 7, or any of the rules promulgated thereunder. Section 333.7311 (1) , MCL. The statutes require licensees to keep records of, and to annually inventory all stocked Schedule II-V controlled substances. Licensees must report their annual inventory to the Administrator. Section 333.7321 (2) , MCL.
http://www.legislature.mi.gov/ (S(nmvaaabic1r5tk45u0orwga0))/mileg.aspx?page=MclPASearch

Administrative rules: Michigan's administrative code specifies the particular type of activities a controlled substances license authorizes. There are six types of activities, and persons engaging in more than one type must obtain separate licenses for each. The list of activity types briefly describes the permissible practices under each license. Rules 338.3132 (1), Mich. Admin. Code. Other rules include provisions regarding the use of controlled substances for animal euthanasia, theft and diversion of controlled substances, storage, record-keeping obligations, and exceptions to the licensure requirement. Rules 338.3137 - .3143, and .3151 - .3153, Mich. Admin. Code.
http://www.state.mi.us/orr/emi/admincode.asp?AdminCode=Single&Admin_Num=33803101&Dpt=&RngHigh=33923405

Comparison of approaches: Similar to the controlled substances laws of Illinois, Iowa, and Wisconsin, Michigan's laws require that any person who uses controlled substances for purposes not related to medical treatment must obtain a license for such purposes from a state agency, in Michigan's case, the Michigan Board of Pharmacy. Unlike Illinois, Iowa, and Wisconsin, Michigan law compels licensed pharmacists to hold a separate license for the use of controlled substances within the scope of their practice. Moreover, Michigan's controlled substances statutes are far more comprehensive with respect to the licensing requirement than the Wisconsin special use authorization statute. The Michigan statutes contain many of the provisions that the Wisconsin controlled substances board proposes to codify as administrative rules. Michigan's approach to regulating controlled substances use thus differs significantly from Wisconsin's, and may ultimately be more onerous to its pharmacists than Wisconsin's approach.

Minnesota:

Statutes: Chapter 151 , Minn. Stats., authorizes the Minnesota Board of Pharmacy to regulate the practice of pharmacy, the manufacture, wholesale, and retail sale of drugs within that state, and to license wholesale drug distributors. The pharmacy board is also charged with administering ch. 152 , Minn. Stats., which regards scheduling and regulation of controlled substances. Section 152.02 , subd. 7, Minn. Stats. Pursuant to s. 151.06 , subds. 1. (a) (1), (2), (6), (7), (10), 1. (c), Minn. Stats., the board must promulgate uniform rules for carrying out and enforcing the governing statutes. The statutes require the board to register, on an annual basis, every person engaged in manufacturing drugs, medicines, chemicals, or poisons for medicinal purposes. Section 151.25 , Minn Stats. The Minnesota pharmacy and controlled substances statutes do not specifically address uses that are not directly or indirectly related to medical treatment of patients. The pharmacy board may deny, suspend, revoke, or refuse to renew any required registration or license on grounds such as fraud or deception in securing a registration or license, unprofessional conduct or conduct endangering public health, and gross immorality. https://www.revisor.mn.gov/statutes/?id=151

Administrative rules: Chapter 6800 of Minnesota's administrative code pertains to the state's board of pharmacy and its oversight of pharmacists and pharmacies. The code provides for four general types of licenses: pharmacists, pharmacies, drug manufacturers and wholesalers, and controlled substances researchers. Any person engaging in research, teaching, or educational projects involving the use of controlled substances must obtain registration for these uses, renewable annually, from the board. Section 6800.4400, subp. 1., Minn. Admin. Code. Registration requires that the registrant have policies and procedures for effective controls against theft and diversion of all stocked inventory, unauthorized access, substance waste, and returns. Further, registrants must maintain adequate records showing purchases and purchase receipts, use, transfer, and disposal of the controlled substances specified in the registration. To track the effectiveness of the required controls, registrants must inventory stocked controlled substances annually. Section 6800.4400, subpt. 3., Minn. Admin. Code. Disciplinary proceedings against any pharmacy board licensee or registrant are governed by ss. 6800.9100 - .9700, Minn. Admin. Code.
https://www.revisor.mn.gov/rules/?id=6800

Comparison of approaches: By administrative rule, Minnesota registers persons using controlled substances for research or instructional purposes separately from pharmacists and pharmacies. Minnesota's approach to regulating non-medicinal-related uses is, in that sense, similar to Wisconsin's. However, unlike Wisconsin, neither Minnesota's pharmacy or controlled substances statutes, nor its administrative rules address the use of controlled substances in humane shelters or for training narcotic dogs. Moreover, the law regarding research or educational use of controlled substances appears only in Minnesota's administrative code, and not in its statutes. The administrative rule specific to such uses references only persons involved in research or teaching. Finally, the enforcement procedures applicable to alternative use registration are subsumed within the pharmacy board's general enforcement authority, rather than set forth within the context of research or teaching use registration.

Minnesota's rules on controlled substances licensure thus appear to provide very little guidance to persons involved in research or teaching activities. For instance, there are no rules establishing the precise requirements and procedures for registration applications or record-keeping, and none defining violations warranting disciplinary action. The absence of such written requirements and procedures would seem to promote a lack of clarity, and generate numerous inquiries from applicants and current registrants. Inadequate clarity with respect to registration requirements and procedures could also permit more challenges to board decisions on registration issues than may otherwise occur. The rules proposed by the Wisconsin controlled substances board would serve to avoid such potentialities, and in doing so, conserve scarce state resources.

Summary of factual data and analytical methodologies

These proposed rules are for the purpose of clarifying the requirements and procedures regarding SUA permits for both applicants and the controlled substances board, and to establish procedures for the enforcement of an SUA's terms when violations occur. Under s. 961.335 (8) , the board "may promulgate rules relating to the granting of special use permits … and suspension or revocation of permits." Pursuant to s. 227.23 , Stats., following the enactment of s. 961.335 , the board created various forms outlining SUA requirements and procedures. However, the controlled substances board currently has no clear rules covering the enforcement aspect of its authority under s. 961.335 . Thus, these proposed rules will not only more clearly delineate the statutory requirements and the administrative procedures for obtaining and amending an SUA, it will also define those actions or the lack thereof that will result in permit suspension or revocation. As these new rules are necessary for both of such purposes, the board had no need to review empirical factual data, nor did it require the use of analytical methodologies in the drafting of this proposal.

Analysis and supporting documents used to determine effect on small business or in preparation of economic impact report

Pursuant to s. IV, 3. a., EO # 50, the rules proposed herein were posted on both the state's and the department's administrative rules websites for 14 days to solicit comments regarding the rule's potential economic impact on businesses, business sectors, professional associations, local government units, or potentially interested parties. In addition, e-mails solicitations were sent to several potentially interested parties. No responses to any of the solicitations were received. The economic impact analysis is attached hereto.

Moreover, this proposal constitutes the first implementation of s. 961.335 , Stats., the special permit authorization statute, by the Controlled Substances Board. Because the statutory requirements have been in place for several years, any economic or fiscal impact experienced by private businesses or public entities that may have resulted from the enactment of s. 961.335 , Stats., has already been absorbed by such entities as a part of routine operations.

Anticipated costs incurred by private sector

The department finds that this rule should have no significant fiscal effect on the private sector.

Fiscal estimate

The department estimates that these proposed rules will have no significant fiscal impact.

Effect on Small Business

The department concludes that the proposed rules will have no economic impact on small businesses. This proposal tracks legislation that has been in effect for several years. The department's Regulatory Review Coordinator may be contacted by email at [e-mail] , or by calling 608-266-8608.

Initial Regulatory Flexibility Analysis or Summary

These proposed rules will affect small businesses that employ persons who use controlled substances for non-medicinal-related purposes in the course of their employment. Such businesses would include, but are not limited to, those conducting scientific research, instructional activities, chemical analysis, drug-detecting animal training, and humane shelters. Special use authorization permits authorize only the uses and amounts of substances specified in the permit. Deviations require an amended permit. Permits must be renewed annually. Persons holding special use authorization will be required to keep current and accurate records of (a) all purchases of controlled substances authorized under a permit; (b) all disbursements, uses, and dispositions of such controlled substances; (c) the total weight of each authorized controlled substance; and (d) inventory discrepancies and investigations thereof. Applying for, and maintaining, a special use authorization permit will require knowledge of the purposes for, substances, and amounts requested. Completing applications, and keeping records could be delegated to clerical personnel by transmitting the required information to clerical staff.

Agency Contact Person

Kris Anderson, Department of Safety and Professional Services, Division of Board Services, 1400 E. Washington Ave., Room 116, P.O. Box 8935, Madison, Wisconsin 53708; telephone: [phone];
e-mail: [e-mail] .

STATE OF WISCONSIN DEPARTMENT OF ADMINISTRATION DOA 2049 (R 07/2011) ADMINISTRATIVE RULES FISCAL ESTIMATE AND ECONOMIC IMPACT ANALYSIS
Type of Estimate and Analysis
X Original Updated Corrected
Administrative Rule Chapter, Title and Number
Chapter CSB 3, Special Use Authorization Permits (creating chapter)
Subject
Authorization from the controlled substances board for non-medicinal uses of controlled substances
Fund Sources Affected			Chapter 20 , Stats. Appropriations Affected
GPR FED PRO PRS SEG SEG-S
Fiscal Effect of Implementing the Rule
X No Fiscal Effect Indeterminate	Increase Existing Revenues Decrease Existing Revenues		Increase Costs Could Absorb Within Agency's Budget Decrease Costs
The Rule Will Impact the Following (Check All That Apply)
State's Economy Local Government Units		X Specific Businesses/Sectors Public Utility Rate Payers
Would Implementation and Compliance Costs Be Greater Than $20 million? Yes X No
Policy Problem Addressed by the Rule
Under s. 961.335, Wis. Stats., the controlled substances board has the discretion to issue permits to persons who manufacture, possess, use, administer, or dispense controlled substances for non-medical purposes. Such purposes include scientific research, instructional activities, chemical analysis, and other special uses as approved by the board. The proposed rules will define the procedures associated with the board's exercise of its permitting authority, as allowed under s. 961.335 (9), Stats. In addition, under the authority granted by the statute, the board in these rules will set forth the acts constituting violations of a special use authorization permit, as well as the potential discipline the board may impose upon a finding of a violation.
Summary of Rule's Economic and Fiscal Impact on Specific Businesses, Business Sectors, Public Utility Rate Payers, Local Governmental Units and the State's Economy as a Whole (Include Implementation and Compliance Costs Expected to be Incurred)
These proposed rules track legislation that has been in effect for several years. Any economic or fiscal impact experienced by private businesses or public entities due to the creation of s. 961.335, Stats., has long since been absorbed by such businesses and entities as a part of routine operations. The rules promulgated by this proposal will therefore have no current economic or fiscal impact on any of those entities.
Benefits of Implementing the Rule and Alternative(s) to Implementing the Rule
The specification of acts constituting violations of special use authorization permits will provide permit holders and enforcement staff clearer notice of the acts that will garner board discipline. This will facilitate the board's ability to protect the public from injury caused by unlawful uses of such permits.
Long Range Implications of Implementing the Rule
Increased public safety through improved board oversight of the actions of permit holders, and decreased violations of permit provisions, both specific and general.
Compare With Approaches Being Used by Federal Government
The federal Controlled Substances Act, codified at ss. 21 U.S.C. 801- 971, is administered by the United States Department of Justice and its Drug Enforcement Administration (DEA). Subchapter I, pt. C of the those statutes contains comprehensive legislation for regulating the use of controlled substances, including a requirement that all persons using controlled substances for any purpose must obtain a registration from the U.S. attorney general. Sections 21 U.S.C. 821-831. The federal statutory registration requirements have served as a model for several of the states' versions of their controlled substances registration laws, whether in their statutes or administrative rules, either or both of which contain provisions substantially similar to those of the federal law. The DEA's rules regarding controlled substances registration are set forth at ss. 21 C.F.R. 1300-1399. It appears that the approach to registration for use of controlled substances in the Wisconsin statutes, and the approach taken by the Wisconsin controlled substances board in its rule-making proposal, is also substantially similar to the federal government's approach. Like several of the states neighboring Wisconsin though, the federal government does not separate registrations for non-medicinal-related uses from any other types of registration. That is because the federal government's regulation requirement applies to all persons using controlled substances in the course of their work, regardless whether they hold a state license or registration for use of controlled substances.
Compare With Approaches Being Used by Neighboring States (Illinois, Iowa, Michigan and Minnesota )
Illinois: Statutes : Under the Illinois Controlled Substances Act, all persons who manufacture, distribute, or dispense any controlled substance, or engage in chemical analysis or instructional activities using controlled substances, or who purchases, stores, or administers euthanasia drugs must obtain a registration issued by the Illinois Department of Financial and Professional Regulation. The Act requires the department to promulgate rules administering the registration function. Section 720 ILCS 570/301. Registered persons may possess, manufacture, distribute, or dispense controlled substances, or administer euthanasia drugs to the extent authorized by their registration and in conformity with the other provisions of the Act. Registration is site-specific, so persons operating at more than one site must have separate registration for each. Sections 720 ILCS 570/302 (a), (b), and (d). The department may deny, refuse to renew, suspend, or revoke a registration upon finding that the applicant or registrant has provided false information on an application, had his or her federal controlled substances registration suspended or revoked, been convicted of certain crimes, failed to take effective preventative measures against diversion, or violated any provision of the Illinois Controlled Substances Act or the Methamphetamine Precursor Control Act, or any of the rules promulgated under those Acts. Sections 720 ILCS 570/304 (a) and (b). http://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=072005700HArt%2E+III&ActID=1941&ChapterID=53&SeqStart=2600000&SeqEnd=5000000 . Administrative rules : The Illinois Administrative Code sets forth rules promulgated by the Department of Financial and Professional Regulation for implementing the provisions of the Controlled Substances Act. Title 77, ch. XV, pt. 3100, Ill. Admin. Code. Among other things, these rules require separate registrations for any of six different types of controlled substances activities deemed independent of each other. The independent-activities rule also describes several exceptions thereto. For instance, the first two of the different types of activities are 1) manufacturing controlled substances, and 2) distributing controlled substances. However, persons registered to manufacture a basic class of controlled substances, or one substance in particular, may distribute the same without a separate distribution registration. Sections 3100.50 a), b), Title 77, Ill. Admin. Code. Other rules provide instructions for registration applicants, and authorize the department to deny, limit, suspend, or revoke any registration upon finding the registrant in violation of any of the statutes or rules regarding controlled substances. Sections 3100.100, .160, Title 77, Ill. Admin. Code. http://www.ilga.gov/commission/jcar/admincode/077/07703100sections.html . Comparison of approaches : The Illinois laws regarding registration for use of controlled substances do not address "special uses" in a separate, or stand-alone, section as Wisconsin law does. Similar to Wisconsin though, the Illinois Controlled Substances Act includes a registration requirement, and charges a state agency with the administration of that requirement. The Illinois statutes and rules also contain provisions for certain non-medicinal-related uses that are substantially similar to the provisions of Wisconsin's special use authorization law, s. 961.335, Stats. One exception to the similarity is that, unlike the proposed Wisconsin rules, Illinois law does not specifically reference narcotic dog trainers in either its Controlled Substances Act or administrative code. While Illinois's approach to controlled substances user registration differs in part from the approach taken by the Wisconsin controlled substances board's proposed rules, the fundamental policy of regulating uses of controlled substances not related to medical treatment is the same. Unlike Wisconsin's controlled substances law, the Illinois law is silent regarding the use of controlled substances for training narcotic dogs. That silence may cause confusion for persons using controlled substances for that purpose. Wisconsin's special use authorization statute provides for uses not specified in the statute by permitting the controlled substances board to approve "other special uses, without restriction because of enumeration." s. 961.335 (1), Stats. Accordingly, in addition to the special uses the Wisconsin statute does specify, the board's proposed rules address other "special," but well-known purposes, such as euthanasia at humane shelters or under municipal animal control laws, and the training of narcotic dogs. The board believes increased clarity will result in less confusion for both permit applicants and administrators. Iowa: Statutes : The Iowa statutes require that all persons who manufacture, distribute, or dispense any controlled substance, or who propose to engage in the manufacture, distribution, or dispensing of any controlled substance, obtain and maintain a biennial registration from the Iowa Board of Pharmacy. Registration applies to one site only, so persons operating at more than one site must have separate registrations for each. Registered persons may possess, manufacture, distribute, dispense, or conduct research using controlled substances to the extent authorized by their registration only and in conformity with the other provisions of Iowa's controlled substances registration law. Sections 124.302, 1., 2., 4., Iowa Code. The pharmacy board may suspend, revoke, or restrict a registration to manufacture, distribute, or dispense a controlled substance upon certain findings, including that the registrant has committed such acts as would render the registrant's registration inconsistent with the public interest as determined under s. 124.304 1.d., Iowa Code. http://www.state.ia.us/ibpe/pdf/IC124.pdf

Administrative rules: Iowa's administrative code contains rules implementing the statutes regarding the use of controlled substances. The rules establish further specifications of who or what entities must register, and seven different types of activities, each of which requires separate registration. In addition, the rules include application instructions and procedures; specific requirements for the approved uses of controlled substances; descriptions of, and requirements for separate registrations of separate sites; requirements and procedures for modifying or terminating a current registration based on several different types of changes; and registration enforcement provisions. Beyond requiring "[m]anufacturers, distributors, reverse distributors, importers and exporters," of controlled substances to register, the list of persons and entities that must register includes all individual medical practitioners, pharmacies, hospitals, animal shelters, care facilities, researchers, dog trainers, analytical laboratories, and teaching institutions. Rules 657—10.1-.12, IAC.
http://www.legis.state.ia.us/aspx/ACODocs/ruleList.aspx?agency=657&chapter=10

Comparison of approaches: Like Illinois, and unlike Wisconsin, Iowa takes an approach to registration for controlled substances use that does not treat non-medicinal-related uses separately. Nevertheless, Iowa's controlled substances laws do require registration of persons using controlled substances for non-medicinal-related purposes, and charges a state agency with administering that requirement. Iowa sets forth comprehensive registration provisions in its administrative rules that are substantially similar to Wisconsin's special use authorization statute. In addition, the scope of Iowa's rules is more consistent with the Wisconsin board's proposed rules than not. Thus, Iowa's approach to administering its "special use" laws is essentially the same as the approach the Wisconsin controlled substances board contemplates in the instant rule-making proposal.

Michigan:

Statutes: Michigan's controlled substances law is set forth in that state's public health code, Act 368 of 1979, Art. 7. The statutes require any person who manufactures, distributes, prescribes, or dispenses a controlled substance in Michigan to obtain a license for such purposes issued by the Michigan Board of Pharmacy or its Administrator. Sections 333.7303 , Art. 7, Michigan Compiled Laws (MCL). The administrator is authorized to promulgate rules for controlled substances licensure and the enforcement thereof. Section 333.7301 , MCL. License holders may possess, manufacture, distribute, prescribe, dispense, or conduct research with the specified controlled substances to the extent authorized only, and as is consistent with all other provisions of Article 7. Licenses apply to specific sites, so persons operating at more than one site must have separate registrations for each. Persons licensed as pharmacists must also obtain a separate controlled substances license. Sections 333.7303 (1) , (2) , (5) , MCL. The pharmacy board's disciplinary subcommittee may deny, limit, suspend, or revoke a license, or fine or reprimand a licensee, or order the licensee to perform community service or make restitution upon certain specified findings, including that the applicant or licensee has violated, or attempted to violate, any of the statutes in Article 7, or any of the rules promulgated thereunder. Section 333.7311 (1) , MCL. The statutes require licensees to keep records of, and to annually inventory all stocked Schedule II-V controlled substances. Licensees must report their annual inventory to the Administrator. Section 333.7321 (2) , MCL.

http://www.legislature.mi.gov/ (S(nmvaaabic1r5tk45u0orwga0))/mileg.aspx?page=MclPASearch

Administrative rules: Michigan's administrative code specifies the particular type of activities a controlled substances license authorizes. There are six types of activities, and persons engaging in more than one type must obtain separate licenses for each. The list of activity types briefly describes the permissible practices under each license. Rules 338.3132 (1), Mich. Admin. Code. Other rules include provisions regarding the use of controlled substances for animal euthanasia, theft and diversion of controlled substances, storage, record-keeping obligations, and exceptions to the licensure requirement. Rules 338.3137 - .3143, and .3151 - .3153, Mich. Admin. Code.
http://www.state.mi.us/orr/emi/admincode.asp?AdminCode=Single&Admin_Num=33803101&Dpt=&RngHigh=33923405

Comparison of approaches: Similar to the controlled substances laws of Illinois, Iowa, and Wisconsin, Michigan's laws require that any person who uses controlled substances for purposes not related to medical treatment must obtain a license for such purposes from a state agency, in Michigan's case, the Michigan Board of Pharmacy. Unlike Illinois, Iowa, and Wisconsin, Michigan law compels licensed pharmacists to hold a separate license for the use of controlled substances within the scope of their practice. Moreover, Michigan's controlled substances statutes are far more comprehensive with respect to the licensing requirement than the Wisconsin special use authorization statute. The Michigan statutes contain many of the provisions that the Wisconsin controlled substances board proposes to codify as administrative rules. Michigan's approach to regulating controlled substances use thus differs significantly from Wisconsin's, and may ultimately be more onerous to its pharmacists than Wisconsin's approach.

Minnesota:

Statutes: Chapter 151 , Minn. Stats., authorizes the Minnesota Board of Pharmacy to regulate the practice of pharmacy, the manufacture, wholesale, and retail sale of drugs within that state, and to license wholesale drug distributors. The pharmacy board is also charged with administering ch. 152 , Minn. Stats., which regards scheduling and regulation of controlled substances. Section 152.02 , subd. 7, Minn. Stats. Pursuant to s. 151.06 , subds. 1. (a) (1), (2), (6), (7), (10), 1. (c), Minn. Stats., the board must promulgate uniform rules for carrying out and enforcing the governing statutes. The statutes require the board to register, on an annual basis, every person engaged in manufacturing drugs, medicines, chemicals, or poisons for medicinal purposes. Section 151.25 , Minn Stats. The Minnesota pharmacy and controlled substances statutes do not specifically address uses that are not directly or indirectly related to medical treatment of patients. The pharmacy board may deny, suspend, revoke, or refuse to renew any required registration or license on grounds such as fraud or deception in securing a registration or license, unprofessional conduct or conduct endangering public health, and gross immorality. https://www.revisor.mn.gov/statutes/?id=151

Administrative rules: Chapter 6800 of Minnesota's administrative code pertains to the state's board of pharmacy and its oversight of pharmacists and pharmacies. The code provides for four general types of licenses: pharmacists, pharmacies, drug manufacturers and wholesalers, and controlled substances researchers. Any person engaging in research, teaching, or educational projects involving the use of controlled substances must obtain registration for these uses, renewable annually, from the board. Section 6800.4400, subp. 1., Minn. Admin. Code. Registration requires that the registrant have policies and procedures for effective controls against theft and diversion of all stocked inventory, unauthorized access, substance waste, and returns. Further, registrants must maintain adequate records showing purchases and purchase receipts, use, transfer, and disposal of the controlled substances specified in the registration. To track the effectiveness of the required controls, registrants must inventory stocked controlled substances annually. Section 6800.4400, subpt. 3., Minn. Admin. Code. Disciplinary proceedings against any pharmacy board licensee or registrant are governed by ss. 6800.9100 - .9700, Minn. Admin. Code. https://www.revisor.mn.gov/rules/?id=6800

Comparison of approaches: By administrative rule, Minnesota registers persons using controlled substances for research or instructional purposes separately from pharmacists and pharmacies. Minnesota's approach to regulating non-medicinal-related uses is, in that sense, similar to Wisconsin's. However, unlike Wisconsin, neither Minnesota's pharmacy or controlled substances statutes, nor its administrative rules address the use of controlled substances in humane shelters or for training narcotic dogs. Moreover, the law regarding research or educational use of controlled substances appears only in Minnesota's administrative code, and not in its statutes. The administrative rule specific to such uses references only persons involved in research or teaching. Finally, the enforcement procedures applicable to alternative use registration are subsumed within the pharmacy board's general enforcement authority, rather than set forth within the context of research or teaching use registration.

Minnesota's rules on controlled substances licensure thus appear to provide very little guidance to persons involved in research or teaching activities. For instance, there are no rules establishing the precise requirements and procedures for registration applications or record-keeping, and none defining violations warranting disciplinary action. The absence of such written requirements and procedures would seem to promote a lack of clarity, and generate numerous inquiries from applicants and current registrants. Inadequate clarity with respect to registration requirements and procedures could also permit more challenges to board decisions on registration issues than may otherwise occur. The rules proposed by the Wisconsin controlled substances board would serve to avoid such potentialities, and in doing so, conserve scarce state resources.

Notice of Hearing

Safety and Professional Services
Pharmacy Examining Board

CR 12-009

NOTICE IS HEREBY GIVEN that pursuant to sections 15.08 (5) (b) , 227.11 (2) (a) , 450.19 (2) and (5) , 961.31 , Stats., and interpreting Chapters 450 and 961 , Stats., the Pharmacy Examining Board will hold a public hearing at the time and place indicated below to consider an order to create Chapter Phar 18 , relating to the prescription drug monitoring program and affecting small business.

Hearing Information

Date:   Monday, February 27, 2012

Time:   8:00 A.M.

Location:   1400 East Washington Avenue
  Room 121 A, B & C
  Madison, WI 53703

Appearances at the Hearing and Submittal of Written Comments

Interested persons are invited to present information at the hearing. Persons appearing may make an oral presentation but are urged to submit facts, opinions and arguments in writing as well. Facts, opinions and arguments may also be submitted in writing without a personal appearance by mail addressed to:

Chad Zadrazil

Department of Safety and Professional Services

Division of Board Services

P.O. Box 8935

Madison, Wisconsin 53708-8935

Written comments must be received before 8:00 a.m. on February 27, 2012 , to be included in the record of rule-making proceedings.

Copies of Proposed Rule, Fiscal Estimate, Economic Impact Analysis and Initial Regulatory Flexibility Analysis

Copies are available upon request to Chad Zadrazil, Department of Safety and Professional Services, Division of Board Services, 1400 East Washington Avenue, P.O. Box 8935, Madison, Wisconsin 53708-8935 or by email at [e-mail] .

Analysis Prepared by the Department of Safety and Professional Services

Statutes interpreted

Chapters 961 and 450 , Stats.

Statutory authority

Sections 15.08 (5) (b) , 227.11 (2) (a) , 450.19 (2) and (5) , 961.31 , Stats.

Explanation of agency authority

In s. 450.19 (2) , Stats., as amended by 2009 Act 362 , the legislature directs the Pharmacy Examining Board (Board) to establish by rule a prescription drug monitoring program (PDMP). In s. 961.31 , Stats., the legislature authorizes the Board to promulgate rules relating to the dispensing of controlled substances. Finally, in ss. 15.08 (5) (b) , and 227.11 (2) (a) , Stats., the legislature confers to the Board the powers to promulgate rules for the guidance of the profession and to interpret the provisions of statutes it enforces.

Related statute or rule

Section 146.82 , Chapters 450 and 961 , Stats., and Chapters Phar 1 and 8 and Chapter CSB 2 .

Plain language analysis

The proposed rule creates a prescription drug monitoring program (PDMP) to collect and maintain data regarding the prescribing and dispensing of monitored prescription drugs. The monitored prescription drugs are federally controlled substances in Schedules II-V, state controlled substances in Schedules II-V, as amended by the Controlled Substances Board, and Tramadol, a drug identified by the Board as having a substantial potential for abuse. A controlled substance that can be legally dispensed without a prescription order is not a monitored prescription drug under the proposed rule.

In general, the proposed rule requires dispensers to compile and submit to the Board data about each time they dispense a monitored prescription drug within 7 days. The proposed rule also requires dispensers to submit reports to the Board for each 7-day period during which he or she does not dispense a monitored prescription drug. For each dispensing of any of a monitored prescription drug, dispensers must compile and submit the following data to the Board:

- dispenser's full name;

- dispenser's NPI number or DEA registration number;

- date dispensed;

- prescription number;

- name and strength of the prescription drug;

- NDC number;

- quantity dispensed;

- estimated number of days of drug therapy;

- practitioner's full name;

- practitioner's NPI number or DEA registration number, if applicable;

- date prescribed;

- quantity prescribed;

- patient's full name;

- patient's address, including street address, city, state and ZIP code;

- patient's date of birth; and

- patient's gender.

Under the proposed rule, the Board may waive the 7-day reporting requirements for dispensers who only dispense monitored prescription drugs to non-human animal patients. Instead, the dispensers would be required to submit the required data or report indicating that they have not dispensed a monitored prescription drug every 90 days.

The proposed rule requires dispensers to submit the data to the Board electronically, in the standard established by the American Society for Automation in Pharmacy's Implementation Guide for Prescription Monitoring Programs.

Under the proposed rule, the Board may grant waivers to dispensers who are not able to comply with the 7-day reporting or the electronic data submission requirements. Therefore, dispensers who are not able to comply with one or both of the reporting or submission requirements may submit to the Board an application for a waiver.

The proposed rule requires the Board to develop and maintain a database to store all of the data submitted to it as part of the PDMP. Practitioners and dispensers will be able create accounts with the Board to access the database and view information that may be helpful in determining whether a patient is using any of the specific prescription drugs illicitly. Further, under the proposed rule, other entities, such as law enforcement authorities, patients and staff of the Department of Safety and Professional Services, may obtain data from the Board as permitted under s. 146.82 , Stats.

The proposed rule states that the data compiled and stored by the Board under the proposed rules is confidential and not subject to inspection or copying under the state's open records laws.

Under the proposed rule, the Board may exchange data obtained through the PDMP with relevant agencies and prescription monitoring programs in other states.

Summary of, and comparison with, existing or proposed federal legislation

There is no existing or proposed federal regulation.

Comparison with rules in adjacent states

Illinois: The statutes and administrative rules governing the Illinois Prescription Monitoring Program require dispensers to submit to a database similar information regarding the prescribing and dispensing of controlled substances (Schedules II-V) within seven days of the dispensing. See 720 Illinois Compiled Statutes 570/316-21 and Illinois Administrative Code Title 77, Chapter X, Subchapter e, Part 2080.

Iowa: The statutes and administrative rules governing the Iowa Prescription Monitoring Program require dispensers to submit to a database similar information regarding the prescribing and dispensing of controlled substances (Schedules II-IV) two times per month. See Iowa Code § 124.551 -58 and Iowa Administrative Code Title 657, Chapter 37 .

Michigan: The statutes and administrative rules governing the Michigan Automated Prescription System require dispensers to submit to a database similar information regarding the prescribing and dispensing of controlled substances (Schedules II-V) two times per month. See Michigan Public Health Code § 333.7333 a and Michigan Administrative Code R. 338.471.

Minnesota: The statutes governing the Minnesota Prescription Monitoring Program require dispensers to submit to a database similar information regarding the prescribing and dispensing of controlled substances (Schedules II-IV) on a daily basis. See Minnesota Statute 152.126.

Summary of factual data and analytical methodologies

The Board created a Work Group to develop the proposed rule. The Work Group analyzed information from national non-profit organizations that compiled information about other states' prescription monitoring programs. Further, the organizations provided analysis regarding the effectiveness of differing prescription drug monitoring models and processes.

The Board has also solicited feedback from approximately forty stakeholders that represent practitioners, pharmacists, pharmacies, public health agencies and law enforcement agencies. Stakeholders have been updated throughout the development of the draft rules and have provided comments on the proposed rule. The Board will consult with the stakeholders as implementation of the PDMP continues.

Further, there are currently forty operational state prescription monitoring programs in the United States, including programs in all four states neighboring Wisconsin. The Work Group solicited and compiled information from states' operational prescription monitoring programs regarding best practices and techniques to minimize the burden on practitioners and dispensers. Importantly, the Work Group used the information to ensure the compatibility of the PDMP with prescription monitoring programs in other states and better situate itself for future federal grant funding as required by 2009 Act 362 . The Work Group also identified criteria required to apply for other grants in an effort to maximize the possibility of obtaining future federal grant funding for the PDMP.

Finally, the Work Group relied on the requirements and guidelines of the Harold Rogers Grant that the department received to implement the PDMP. The federal grant requirements provide relevant information because they are based on best practices of operational PDMP and the previous experiences of grantees implementing prescription monitoring programs.

Analysis and supporting documents used to determine effect on small business or in preparation of Economic Impact Analysis

To prepare the Economic Impact Analysis and regulatory flexibility reports for the proposed rule, the department has actively solicited comments from the public and stakeholders representing pharmacies; pharmacists; health care practitioners, including physicians, dentists and veterinarians; hospitals; clinics and law enforcement officials since November 2011. Further, the department posted notice to solicit comments on the economic impact of the proposed rule on its website for more than 30-days, from December 16, 2011 to January 19, 2012. During that period, the department held an informal roundtable with stakeholders and members of the public who expressed interest on January 15, 2012 to solicit feedback.

During the solicitation period for comments regarding the economic impact of the proposed rule, the department received four comments that referred to the economic impact or funding of the PDMP. The comments are attached to the Economic Impact Analysis. Of the four comments, two provide specific estimates regarding the economic impact of the proposed rule on veterinarians in Wisconsin and two present general concerns regarding the ongoing funding of the PDMP beyond the federal grant.

For a complete analysis of the received comments, see the Fiscal Estimate, Economic Impact Analysis and Initial Regulatory Flexibility Analysis.

Anticipated costs incurred by the private sector

As described in the Economic Impact Analysis and Initial Regulatory Flexibility Analysis, the department anticipates that specific segments of the private sector may incur moderate costs to comply with the requirements of the proposed rule. However, while the health care sector may incur moderate costs to comply with the requirements of the proposed rule, the department does not find that the proposed rule would adversely affect in any material way the economy, any sector of the economy, productivity, jobs or the overall economic competitiveness of this state. Similarly, the department does not find that the proposed rule will have any economic effect on public utilities or their rate payers.

Fiscal Estimate

Attached is the Fiscal Estimate and Economic Impact Analysis.

Effect on Small Business

Attached is the Initial Regulatory Flexibility Analysis.

Agency Contact Person

Chad Zadrazil, Program and Policy Analyst – Advanced, Department of Safety and Professional Services, Division of Board Services, 1400 East Washington Avenue, Room 151, P.O. Box 8935, Madison, Wisconsin 53708; telephone [phone]; email at [e-mail] .

Initial Regulatory Flexibility

Proposed Order

An order of the Pharmacy Examining Board to create Chapter Phar 18 , relating to the prescription drug monitoring program and affecting small business.

Background

Under 2009 Act 362 , the legislature directed the Wisconsin Pharmacy Examining Board (Board) to create through rule a prescription monitoring program. The proposed rule fulfills the legislative directive by establishing a prescription drug monitoring program (PDMP) to collect and maintain data regarding the prescribing and dispensing of monitored prescription drugs. The monitored prescription drugs are federally controlled substances in Schedules II-V, state controlled substances in Schedules II-V, as amended by the Controlled Substances Board, and Tramadol, a drug identified by the Board as having a substantial potential for abuse. A controlled substance that can be legally dispensed without a prescription order is not a monitored prescription drug under the proposed rule.

In general, the proposed rule requires dispensers to compile and submit to the Board data about each time they dispense a monitored prescription drug within 7 days. The proposed rule also requires dispensers to submit reports to the Board for each 7-day period during which he or she does not dispense a monitored prescription drug.

Under the proposed rule, the Board may waive the 7-day reporting requirements for dispensers who only dispense monitored prescription drugs to non-human animal patients. Instead, the dispensers would be required to submit the required data or report indicating that they have not dispensed a monitored prescription drug every 90 days.

The proposed rule requires dispensers to submit the data to the Board electronically, in the standard established by the American Society for Automation in Pharmacy's Implementation Guide for Prescription Monitoring Programs.

Under the proposed rule, the Board may grant waivers to dispensers who are not able to comply with the 7-day reporting or the electronic data submission requirements. Therefore, dispensers who are not able to comply with one or both of the reporting or submission requirements may submit to the Board an application for a waiver.

The proposed rule requires the Board to develop and maintain a database to store all of the data submitted to it as part of the PDMP. Practitioners and dispensers will be able create accounts with the Board to access the database and view information that may be helpful in determining whether a patient is using any of the specific prescription drugs illicitly. Further, under the proposed rule, other entities, such as law enforcement authorities, patients and staff of the Department of Safety and Professional Services, may create accounts to request data from the Board as permitted under s. 146.82 , Stats.

Types of small businesses affected by the rule

The proposed rule will affect small businesses, as defined in s. 227.114 (1) , Stats., that dispense monitored prescription drugs. As pharmacies dispense most of the monitored prescription drugs in Wisconsin, pharmacies and pharmacists would be most affected by the rule. Still, as the proposed rule also requires health care practitioners that dispense monitored prescription drugs to submit information regarding each dispensing of a monitored prescription drug to the PDMP, some health care practitioners will also be affected. Health care practitioners are physicians, advanced practice nurses, dentists, optometrists and veterinarians. Therefore, the proposed rule will affect community pharmacies, other small pharmacies and pharmacists and practitioners that practice medicine within a small business.

Proposed reporting, bookkeeping, and other procedures required for compliance with the rule

The proposed rule requires pharmacies, pharmacists and health care practitioners that dispense monitored prescription drugs to submit information regarding each dispensing of a monitored prescription drug to the PDMP in the electronic format identified by the American Society for Automation in Pharmacy's (ASAP) Implementation Guide for Prescription Monitoring Program. The format identified by ASAP is the standard used by all operational state prescription monitoring programs. It defines the required data elements and acceptable inputs, which enables state prescription monitoring programs to share data with one another more easily.

The data elements identified in the proposed rule comply with the ASAP format. Therefore, to comply with the proposed rule, pharmacies, pharmacists and health care practitioners are required to compile and submit the following information to the PDMP within seven days of dispensing a monitored prescription drug:

  • dispenser's full name;

  • dispenser's NPI number or DEA registration number;

  • date dispensed;

  • prescription number;

  • name and strength of the prescription drug;

  • NDC number;

  • quantity dispensed;

  • estimated number of days of drug therapy;

  • practitioner's full name;

  • practitioner's NPI number or DEA registration number, if applicable;

  • date prescribed;

  • quantity prescribed;

  • patient's full name;

  • patient's address, including street address, city, state and ZIP code;

  • patient's date of birth; and

  • patient's gender.

As of December 5, 2011, there are 1,279 licensed pharmacies in Wisconsin according to the Department of Safety and Professional Services' database. According to the Department of Health Services (DHS), only 17 pharmacies in the state of Wisconsin are not capable of receiving electronic prescription orders. Therefore, the type of business most affected by the compliance requirements of the proposed rule is not expected to incur significant costs to comply with the proposed rule.

The use of EHR is also prevalent among physicians and other health care practitioners in large group practice. According to DHS, approximately 74% of physicians are in large group practice and almost all of them utilize electronic health records (EHR).

Conversely, the use of EHR is not as prevalent among veterinarians. According to the Wisconsin Veterinary Medical Association, approximately 273 of the 719 veterinary clinics in Wisconsin are able to access prescription information electronically.

Understanding that the use of EHR varies among types of businesses and health care practitioners, the Board developed the proposed rule to allow the submission of data to the PDMP in multiple ways.

If a pharmacy, pharmacist or health care practitioner currently utilizes EHR, they can comply with the requirement to submit data electronically in the proposed rule is to program their current prescription dispensing software to automatically collect and submit the data to the PDMP. Likely, there would be an up-front cost associated with the computer programming as it may require hiring a computer programmer or software vendor to make the necessary changes. However, there would not be any significant ongoing personnel costs required to maintain compliance with the proposed rule.

A pharmacy, pharmacist or health care practitioner who does not currently utilize EHR can comply with the requirement to submit data electronically in the proposed rule by manually submitting the data to the PDMP. Manual submission can still be accomplished electronically through an online account established with the Board, through secure email or mailing of compact disks that contain the data.

Further, if a pharmacy, pharmacist or health care practitioner does not have access to a computer or is otherwise unable to compile or submit data by any electronic means, they may apply for a waiver from the Board. Once waived, the pharmacy, pharmacist or health care practitioner would be able to submit data on paper to the PDMP.

By choosing a method that does not require computer programming and software development, there are no up-front compliance costs to retrofit computer software. However in order to maintain compliance, a pharmacy, pharmacist health care practitioner or a delegate must manually submit data regarding each dispensing of a monitored prescription drug within seven days of dispensing it. Therefore, the pharmacy, pharmacist or health care practitioner would incur personnel costs associated with compiling and submitting data to the PDMP.

By default, the proposed rule requires the submission of data within seven days of dispensing a monitored prescription drug or, if no monitored prescription drugs were dispense in a seven-day period, seven days from the previous data submission. Therefore, most pharmacies, pharmacists and health care practitioners that dispense a monitored prescription drug would be submitting data at least every seven days.

The proposed rule lessens the reporting burden on veterinarians who solely dispense monitored prescription drugs to non-human animal patients by allowing them to apply for a waiver from the seven-day reporting requirements. Instead, the veterinarian would be required to submit data to the PDMP every 90 days.

Under the proposed rule, a pharmacy, pharmacist or health care practitioner that does not dispense the monitored prescription drugs may apply for a complete exemption from the reporting requirements. The proposed rule associates the expiration of the exemption to licensure renewal to eliminate the administrative burden that applying for an exemption may have created. Under the proposed rule, the exemption would last until licensure renewal or until the pharmacy, pharmacist or health care practitioner dispenses a monitored prescription drug. Therefore, a pharmacy, pharmacist or health care practitioner applying for the exemption can indicate so as part of the licensure renewal process. There would be no compliance requirements or associated costs incurred by exempt pharmacies, pharmacists and health care practitioners.

Types of professional skills necessary for compliance with the rule

The proposed rule would not require a pharmacy, pharmacist or health care practitioner to obtain any professional skills beyond those common among the professions.

STATE OF WISCONSIN DEPARTMENT OF ADMINISTRATION DOA 2049 (R 07/2011) ADMINISTRATIVE RULES FISCAL ESTIMATE AND ECONOMIC IMPACT ANALYSIS
Type of Estimate and Analysis
X Original Updated Corrected
Administrative Rule Chapter, Title and Number
Wis. Admin. Code Chapter Phar 18
Subject
Prescription drug monitoring program
Fund Sources Affected			Chapter 20 , Stats. Appropriations Affected
GPR FED X PRO PRS SEG SEG-S			20.165 (1) (g) and 20.165 (1) (h) (g)
Fiscal Effect of Implementing the Rule
No Fiscal Effect Indeterminate	Increase Existing Revenues Decrease Existing Revenues		X Increase Costs Could Absorb Within Agency's Budget Decrease Costs
The Rule Will Impact the Following (Check All That Apply)
State's Economy Local Government Units		X Specific Businesses/Sectors Public Utility Rate Payers
Would Implementation and Compliance Costs Be Greater Than $20 million? Yes X No
Policy Problem Addressed by the Rule
The proposed rule implements the legislative mandate in 2009 Wisconsin Act 362, which directs the Pharmacy Examining Board to establish through rule a prescription drug monitoring program. The primary purpose of the prescription drug monitoring program is to decrease the illicit use of prescription drugs and the resulting social, health care and law enforcement costs. As noted in a 2011 report issued by the Executive Office of the President of the United States, "Epidemic: Responding to America's Prescription Drug Abuse Crisis," prescription drug abuse is the country's fastest-growing drug problem. According to the National Survey on Drug Use and Health (NSDUH), nearly one-third of people age 12 and over who used drugs for the first time in 2009 began by using a prescription drug non-medically ("Results from the 2009 National Survey on Drug Use and Health: National Findings," SAMHSA, 2010). The same survey also states that the vast majority of people abusing prescription pain relievers (over 70%) got those drugs from friends or relatives. The "Monitoring the Future" study — which surveys drug use among young people — showed that prescription drugs are the second most-abused category of drugs after marijuana ("Monitoring the Future: A Synopsis of the 2009 Results of Trends in Teen Use of Illicit Drugs and Alcohol," University of Michigan). Given the recent report from the President's office and other sources of data, it is clear that prescription drug abuse is a serious problem in America and it is a problem that has grown over the last decade. Wisconsin's problems mirror the nation's, with prescription drug abuse encompassing such activities as "doctor shopping" to obtain multiple prescriptions, illegal sales of prescription drugs by prescribers, and prescription forgery. Wisconsin's prescription drug abuse rate is on par with the national average, with 5.83% of state residents age 12 and older reporting use of pain relievers for non-medical purposes in 2005-06 (SAMHSA 2007; WIDHS 2008). It has been estimated that, in 2010, there were roughly 297,331 abusers in Wisconsin. The social costs of drug abuse include decreased productivity and absence from work, increased health care costs, and increased law enforcement costs (Birnbaum, H., et al., 2006, "Estimated Costs of Prescription Opioid Analgesic Abuse in the United States in 2001," Clinical Journal of Pain. 22(1): 667-676).
Summary of Rule's Economic and Fiscal Impact on Specific Businesses, Business Sectors, Public Utility Rate Payers, Local Governmental Units and the State's Economy as a Whole (Include Implementation and Compliance Costs Expected to be Incurred)
There will be ongoing staff costs related to monitoring and administering the program. DSPS will have the need for a full-time program and planning analyst to monitor the program and work with the vendor and others to manage the program. Further, there will be ongoing costs for a vendor to host and maintain the PDMP database, website and other related IT components of the PDMP. Based on the annual costs incurred by similar prescription monitoring programs in other states, we anticipate annual costs of approximately $210,000. While the health care sector will incur moderate costs to comply with the requirements of the proposed rule, the department does not find that the proposed rule would adversely affect in any material way the economy, any sector of the economy, productivity, jobs or the overall economic competitiveness of this state. Similarly, the department does not find that the proposed rule will have any economic effect on public utilities or their rate payers. During the solicitation period for comments regarding the economic impact of the proposed rule, the department received four comments that referred to the economic impact or funding of the PDMP. The comments are attached. Of the four comments, two provide specific estimates regarding the economic impact of the proposed rule on veterinarians in Wisconsin and two present general concerns regarding the ongoing funding of the PDMP. The two comments about the economic impact on veterinarians present differing estimates on the impact to the profession. The first comment, from Dr. Richard Spencer, the Chairperson of the Wisconsin Veterinary Examining Board, estimates that it would take a staff person one to two hours to compile and submit the required information to the PDMP and cost between $30 and $60 per submission. Dr. Spencer also states that he would likely cease dispensing monitored prescription drugs and merely prescribe them to be dispensed by a pharmacist. The other comments regarding the economic impact of the proposed rules on the veterinary profession are from the Wisconsin Veterinary Medical Association (WVMA). The WVMA estimates that the yearly impact on veterinarians would be $7,953,816, or approximately $11,000 of direct personnel costs and lost revenue for each of the 719 veterinarian clinics in Wisconsin as of December 2011. The estimate is based on the assumption that it would take approximately 4.5 hours per week to comply with the requirements of the proposed rule for a clinic with some electronic health records and 6.5 hours per week to comply for clinics without any electronic health records. The department sought further information regarding the WVMA's assumptions in their analysis. The department has yet to receive any further information. Specifically, the department asked for further information regarding: - the estimated number of times per week, on average, that veterinarians dispense a monitored prescription drug from their clinic and how it estimated the number; - the basis for assuming that that it will take a clinic 4.5 hours per week, on average, for clinics with some type of electronic records to comply with the requirements in the draft rules; and - the basis for assuming that it will take a clinic 6.5 hours per week, on average, for clinics without any electronic records to comply with the requirements in the draft rules. The department believes the information is required to estimate the proposed rule's economic impact on the veterinary profession and will continue to search for it. Without having information regarding the number of times veterinarians dispense the monitored prescription drugs, the department has no way to validate or calculate Dr. Spencer's or the WVMA's estimate economic impact. Further, the proposed rule already includes a less stringent compliance and reporting requirements for veterinarians, including less stringent schedules for compliance reporting requirements. Specifically, the proposed rule enables the Board to waive the 7-day reporting requirements for dispensers who solely dispense to non-human animal patients. Under the terms of the waiver, veterinarian dispensers would be required to submit data to the PDMP every 90-days. Finally, the proposed rule includes an exemption from all compliance requirements of the rule for pharmacies, pharmacists and health care practitioners that do not dispense any of the monitored prescription drugs. To make the administrative burden as small as possible, the proposed rule relates the application for an exemption to licensure renewal. Therefore, the pharmacies, pharmacists and health care practitioners that do not dispense any of the monitored prescription drugs will not have any additional filing requirements or deadlines.
Benefits of Implementing the Rule and Alternative(s) to Implementing the Rule
The benefit of implementing the proposed rule is to ultimately lessen the occurrences of prescription drug diversion, the illicit use of prescription drugs in Wisconsin and resulting social, health care and law enforcement costs. The proposed rule creates a tool that will enable the approximately 50,000 pharmacies; pharmacists; practitioners, including physicians, dentists and veterinarians; law enforcement agencies and public health officials to obtain invaluable information to assist in their efforts to curb prescription drug abuse in Wisconsin. Further, the proposed rules are in conformity with legislative directive in 2009 Wisconsin Act 362. An alternative to implementing the rule is to not comply with legislative directive in 2009 Wisconsin Act 362 and to not monitor the dispensing of controlled substances across the state.
Long Range Implications of Implementing the Rule
The anticipated long range results of implementing the proposed rule are a reduction in the non-medical use of controlled substances and other prescription drugs that have a substantial potential for abuse and reduction in related social, health care and enforcement costs. The reductions will be due to the ability of practitioners and dispensers to ensure that their patients are not "doctor shopping" or undertaking other activities associated with the non-medical use of prescription drugs.
Compare With Approaches Being Used by Federal Government
There is no existing or proposed federal regulation comparable to the proposed rule.
Compare With Approaches Being Used by Neighboring States (Illinois, Iowa, Michigan and Minnesota )
The proposed rule is similar to the approaches being used by Illinois, Iowa, Michigan and Minnesota, who currently have operational prescription monitoring programs. In addition, 36 other states currently have operational prescription monitoring programs similar to the one established by the proposed rule.
Name and Phone Number of Contact Person
Chad Zadrazil, Program and Policy Analyst – Advanced, 608-266-0011