Provider group 'optimistic' about tax law benefits for senior housing and care operators

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Mark Parkinson
Mark Parkinson

A Friday meeting with officials from the White House Office of Management and Budget left American Health Care Association and National Center for Assisted Living President and CEO Mark Parkinson “optimistic” that assisted living and skilled nursing operators will be able to see tax savings from the Tax Cuts and Jobs Act, he told McKnight's Senior Living.

“We have a good policy argument, and based on the meeting, I am optimistic that we can succeed,” Parkinson said via email after the meeting. “I believe that if we had not intervened and done this, there is a very good chance we would not prevail. We still have some work to do, but we are off to a good start.”

AHCA/NCAL's advocacy efforts center around Internal Revenue Code 199A, which relates to the deduction of “qualified business income” of pass-through entities. Under the Tax Cuts and Jobs Act, signed into law by President Donald Trump in December, entities engaged in a “specified service trade or business” are not eligible for the deduction.

Most assisted living communities and skilled nursing facilities are for-profit businesses that are owned or operated by individuals or pass-through entities such as limited liability companies and partnerships, the organization said in a white paper it presented to government officials.

Parkinson said that AHCA/NCAL received a “favorable” response to the document, which he said “makes a very strong argument that our members should be eligible for these tax benefits.”

Assisted living communities employ more than 400,000, and SNFs employ more than 1.8 million people, according to the white paper. Because of their roles as employers and because of the need for their services, which will grow as baby boomers age, AHCA/NCAL said, it is “vitally important that the job-creating taxpayers who derive income from the ownership and/or operation of SNFs and assisted living communities achieve the maximum tax savings possible under IRC 199A.”

Toward that end, AHCA/NCAL is asking 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.” If the department makes such a clarification, then income derived from the operation of assisted living communities and skilled nursing facilities would be able to take the 20% qualified business income deduction, assuming all other requirements of IRC 199A are satisfied.

Assisted living communities should not be defined as a “specified service trade or business,” according to AHCA/NCAL, “for the fundamental reason that they are neither a trade nor business involving the performance of services in the field of health.” Rather, AHCA/NCAL said, assisted living communities “focus on providing a home-like atmosphere for their residents by providing such things as exercise, health and wellness programs in addition to housekeeping and maintenance services.” In this way, AHCA/NCAL said, assisted living communities are more like health clubs or health spas, which the Treasury Department said in temporary regulations “was not the performance of services in the field of health.”

SNFs also should be permitted to take the 20% qualified business income deduction, AHCA/NCAL said, because IRC 199A “was designed primarily to help level the playing field when it comes to the taxation of United States income earned by ‘main street' employers that provide hundreds of thousands of much-needed jobs to Americans and do business using passthrough entities, on the one hand, and large C corporations that received tax relief elsewhere within the Tax Cuts and Jobs Act.”

Another reason, according to the organization, is that “SNFs are inpatient institutions that provide an array of items and services to their residents that have nothing to do with the provision of medical services, such as housing, food services and laundry services.”

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