JLARC Findings on Nonprofit Skilled Nursing Facilities

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In 2006, the Legislature enacted legislation to require periodic reviews of tax preferences to determine if continued existence or modification serves the public interest. Staff from the Joint Legislative Audit Review Committee (JLARC) is charged with conducting the reviews, and providing recommendations regarding the preferential tax treatment.

On July 31, the Joint Legislative Audit Review Committee (JLARC) released a preliminary report that included an analysis of the tax exemptions granted to non-profit nursing homes The section of the preliminary report dealing with the non-profit nursing home recommendations is posted to www.whca.org.

The preliminary report finds that:

“In terms of meeting the charitable service requirements of nonprofits, JLARC’s analysis shows that private, for-profit nursing homes (that do not receive a property tax exemption) have traditionally had a higher percentage of total revenue from low-income Medicaid patients. In addition, the nonprofit nursing homes are charging private pay patients more than other private nursing homes that do not receive the tax exemption. Overall, the data do not support the premise that nonprofit nursing homes are serving more low-income patients than other nursing homes. Information is not available that would allow for a comparison among other all nursing homes of other community service benefits that nursing homes may provide.

Based on these findings, the report recommends the following:

If the Legislature intended to provide nonprofit nursing home property tax exemption under the assumption that these organizations were providing more charity or low-income care than other nursing homes, then the Legislature should modify the property tax exemption to be dependent on meeting a threshold of charity or low income care.
If the Legislature wants information on community service activities performed by nursing homes, then it should require nursing homes to report an annual community service inventory.

The final report will be issued following a September 7, 2007 public hearing where WHCA will be providing testimony to the Committee regarding expansion of tax exemptions for facilities serving Medicaid residents, regardless of classification as for-profit or nonprofit.