The nation’s largest skilled nursing association has asked for clarification on new federal tax policy, hoping the Office of Management and Budget will exclude for-profit skilled nursing providers from a category of “specified trade services” that miss out on a new deduction.
Mark Parkinson, president and chief executive officer of the American Health Care Association and the National Center for Assisted Living met with OMB officials Friday to discuss a change in how pass-through entities file and whether they should benefit from a new, lower corporate tax rate.
The change also could affect assisted living providers.
“We have a good policy argument and based on the meeting, I am optimistic that we can succeed,” Parkinson said by email afterward. “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.”
Parkinson presented officials with a white paper on the issue, arguing that providers need the tax break in a time of shrinking margins and lower federal and state reimbursements. It’s an argument some providers are happy to have made on their behalf.
“The long-term care profession needs the resources [from the new tax rule] because of the importance of our workforce and what we do every day,” Bill Levering, president and CEO, Levering Management, said in an AHCA publication. “This is going to provide those resources to the provider to reinvest back into long term care, and that is going to help the very patients we take care of. So, understanding and utilizing this opportunity is just going to make our services better because the resources will be there to make the investment in what we do every day.”
Pass-through businesses, such as individually owned limited liability companies, pay taxes under the individual tax code and traditionally have done so to avoid the 35% corporate tax rate. But the new tax law lowered the corporate rate to 21%, and allows other types of businesses to take a flat deduction equal to 20% of their “qualified business income.”
AHCA/NCAL is seeking guidance from OMB, the Department of the Treasury and the Internal Revenue Service on how to interpret business income.
Parkinson said the response was “favorable.”
A positive interpretation could mean big money, especially for multi-site operators.
An estimate quoted by AHCA shows an 80-resident facility operating with a 1% margin pays an estimated $32,256 in taxes annually, but it could save $6,451 with an advantageous interpretation of the new tax rule.