The nation’s largest skilled nursing trade group expressed “disappointment” Friday that for-profit skilled nursing facilities won’t benefit from the Trump administration’s new tax law.
As McKnight’s reported in April, the American Health Care Association/National Center for Assisted Living had been seeking clarification on new federal tax policy. It hoped the Office of Management and Budget would allow its members and other for-profit skilled nursing providers to benefit from new deduction options. But the IRS said last week that the SNFs cannot take advantage of the 20% business income tax deduction.
“We are disappointed that the proposed rule appears to prevent skilled nursing facilities from fully capitalizing on the benefits of the 2017 Tax Cuts and Jobs Act,” Parkinson told McKnight’s by email. “The rule is inconsistent with Congressional intent. 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. 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.”
The new tax law lowers the corporate tax rate to 21%, along with allowing some businesses to take a flat deduction equal to 20% of their “qualified business income.” About 75% of long-term care businesses are privately owned, according to the AHCA, with many structures as pass-through entities.
An estimate quoted by AHCA showed that 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.
Those dollars are “critical during these challenging times,” with providers operating on all-in margins of less than 1%, Parkinson said. His group plans to further fight the decision in D.C. in the weeks to come. The IRS will hold a hearing on the proposed regulation in its Washington, D.C., headquarters on Oct. 16.
“We will definitely submit comments and will forcefully advocate our position,” Parkinson said. “If we don’t prevail in the rulemaking process we intend to go to the Hill and seek legislative relief.”