Senior Living Business Interactive: Tax Law Changes, Developments, And Issues: The Impact On Senior Living Providers

On May 16, the House Ways and Means Committee, Subcommittee on Oversight, held the first in a series of hearings on tax-exempt organizations; and it was clear from the introductory remarks by Chairman Charles Boustany (R-LA) and other members that they are looking very closely at the not-for-profit sector to make sure that there is a legitimate reason to maintain the tax status of various not-for-profit entities under the Federal Tax Codes.

Basically, the subcommittee members are seeking to understand not-for-profits in light of the clear indication—certainly from the perspective of the House Republican caucus—that tax law changes may be in the offing in the near future. In any event, there certainly will be some impact on tax-exempt organizations included in any kind of tax reform.

Stephen Maag, Director, Residential Communities, at Leading Age in Washington, D.C., attended the hearing and reported on a couple of “significant takeaways.”

1. The qualification process
The comments by a number of the panelists, particularly from Roger Colinvaux, Associate Professor at the Columbus School of Law in Washington, DC, emphasized the enforcement process and the way that the Internal Revenue Service (IRS) has looked at not-for-profits in the past. Colinvaux characterized the current approach to tax-exempt policy as a “negative connotation”; that is, the process involves determining what somebody should not do rather than trying to develop a proactive view of what a not-for-profit should provide to the community in order to earn its tax-exempt status.

Mainly because of the proliferation of not-for-profits in the last several years, sentiment to examine the current qualification procedure—and then set objective eligibility standards for not-for-profit or charitable organizations­— has grown. Maag reported that the clear indication at the hearing was that the government is considering ways to measure what a not-for-profit does—what it needs to do to exist—and then compare that information with the benefits that the organization receives as a not-for-profit provider. That would include creating a qualification process in order to become a 501(c)(3) organization rather than having a blanket series of prohibitions. “That would be a rather significant shift in attitude,” he said. “In fact, it would effectively turn the process around.”

Colinvaux was eloquent in explaining that approach, according to Maag, and the subcommittee members appeared interested. They also appeared interested in creating a wider range of sanctions against not-for-profits, creating an arsenal of actions that the IRS could take beyond just revoking the not-for-profit status..............Want to read more? Click here for a free trial to Senior Living Business Interactive  and download the current issue today