Assisted living communities may be able to take advantage of a 20% business income tax deduction in the 2017 Tax Cuts and Jobs Act that may elude skilled nursing facilities, according to an interpretation by the American Health Care Association / National Center for Assisted Living of a proposed rule issued Aug. 8 by the IRS.
The proposed rule, concerning the deduction for “qualified business income” under section 199A of the Internal Revenue Code, will be published in the Federal Register on Thursday.
“While the proposed rule does not directly address assisted living, it appears that the language may allow assisted living communities the deduction,” AHCA/NCAL President and CEO Mark Parkinson said Friday in an email to McKnight’s. Parkinson said AHCA/NCAL has been assured by leaders in Congress that their intention was that skilled nursing facilities would be able to use the deduction, too.
The Tax Cuts and Jobs Act, signed by President Trump in December, lowers the corporate tax rate to 21% and permits some businesses — but not those engaged in a “specified service trade or business” — to take a flat deduction equal to 20% of their qualified business income.
AHCA/NCAL previously had asked the Treasury Department to rule that assisted living communities and skilled nursing facilities “are not engaged in a [‘specified service trade or business’] within the meaning of IRC 199A.” In April, Parkinson told McKnight’s Senior Living that AHCA/NCAL was “optimistic” about its advocacy efforts after a meeting with officials from the White House Office of Management and Budget.
“The intent of the law was to provide tax cuts to job creators and those willing to put capital into the economy. We are both,” Parkinson said Friday. “Both skilled nursing facilities and assisted living communities are important economic drivers, creating jobs and sustaining local economies. We need favorable tax laws to reinvest capital into projects that propel our profession forward. We will provide comments to this proposal and hope that reason prevails and the final rule implements what we know Congress intended.”
The IRS plans to hold a hearing on the proposed regulation on Oct. 16. If AHCA/NCAL does not prevail in the rulemaking process, Parkinson said, then the organization will seek relief via the legislature.