Download House Bill 584 (Introduced During the 2011 Session) – Research

House Bill 584 (Introduced During the 2011 Session) – Research and Background
Continuing Care in Retirement Communities, Aging in Place, and Hotel Tax
Part A: Continuing Care in Retirement Community
1. What is Continuing Care in a Retirement Community?
A Continuing Care Retirement Community (CCRC) is a regulated activity
in the State of Maryland combining housing and long term medical care with an
emphasis on encouraging senior citizens to plan for their retirement. In exchange,
the State highly regulates CCRCs’ activities to protect senior citizens’ health care
needs and housing needs as they grow older. Technically, CCRCs are defined as
facilities that provide shelter and either medical and nursing or other health
related services, or make such services readily accessible through a provider. A
CCRC is only available to an individual over the age of 60 who generally requests
lifetime care in exchange for a sizable entrance fee (usually equal to the value of a
person’s home), and a monthly charge (roughly equal to a person’s mortgage,
utilities payment and food costs). CCRCs are part of a larger policy decision by
governments at all levels to assist the senior community to “age in place.”
(Human Resources, MD Annotated. Code, Subtitle 4 Continuing Care, Section 10
-401 et. seq.)
2. Who can own or operate CCRCs?
According to the Code of Maryland Regulations (COMAR), “a provider
may not offer continuing care, enter into, or renew an agreement for continuing
care, begin construction for a new facility, or collect deposits for continuing care
without having secured the necessary Feasibility Study approval or Certificate of
Registration from the Department.” (COMAR 32.02.01.02 A.)
Many providers use management firms to oversee the operations of the
facilities. For example Erickson Living manages the operations for Charlestown,
Oak Crest Village, and Riderwood Village. In the original approval of a
Feasibility Study or Certificate of Registration for a new community, the
Secretary of the Department of Aging may require the use of a management firm
selected by the provider subject to approval by the Department of Aging.
A proposed CCRC must submit a Feasibility Study to the Department of
Aging before developing a CCRC. That study must demonstrate a long list of
aspects of the project to the Department for approval. The Department must
affirm many aspects of the project including that the number of licensed units
proposed for the facility is consistent with the State Health Plan, that the facility is
financially feasible, that there is a market for the continuing care facility, and has
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positive cash flow and population flow projections for a 20-year period.
(Maryland Department of Aging; COMAR 32.02.01.07)
3. How many counties have CCRCs and how many are in each?
Thirteen counties in Maryland have CCRCs:
County
Anne Arundel
Baltimore City
Baltimore County
Calvert
Carroll
Frederick
Garrett
Howard
Kent
Montgomery
Prince George’s
Talbot
Washington
Number of
CCRCs
1
2
11
1
2
2
1
1
3
6
1
1
2
(Department of Assessments and Taxation)
4. Are CCRCs exempt from taxation?
Yes, in most cases. Non-profit Continuing Care Facilities, the majority of
CCRCs, are licensed by the state, certified by the Department of Aging, and are
exempt from federal income tax under § 501(c)(3) of the Internal Revenue Code.
These CCRCs are not subject to real property tax on their health care units. (§7207, Annotated Code of Maryland, Tax – Property) Additionally, living units
(apartments) are eligible for real property tax exemption so long as they are an
“integral part” of a non-profit CCRC’s non-profit activities.
5. Why are CCRCs exempt from some taxes?
Some CCRCs are exempt from federal income tax under 501 (c)(3) of the
Internal Revenue Code because they are operated as non-profit organizations.
Some structures in a CCRC, like health care units, dining halls, nursing facilities,
craft rooms, etc., that are primarily for those things that are considered
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contributing to non-profit activities supporting senior citizens, are exempt from
real property taxes. (Maryland State Department of Assessments and Taxation;
§7-202 and §7-206, Annotated Code of Maryland, Tax – Property
6. What is the history of real property tax relief provided to long term housing
and nursing facilities for the elderly?
Maryland has a long-standing policy, reflected in its tax code, of
exempting not-for-profit (charitable) organizations and companies from real
property taxes (see: code 1957, Art. 81 § 9 (e) (Repealed); Property Tax Code
(1986) § 7-202 (updated as of 2007 – 2010 supplement). This tax-exempt status
included nursing homes, health care facilities and apartments, or independent
living units, for the elderly. For example, up until 1983, places such as the Asbury
Methodist Home, Inc. (the Home), provided a campus on 128 acres, which had
three parts. One was a home, which provided domiciliary care only, housing
approximately 175 residents in single room apartments with shared baths; a health
center, comprising 279 beds providing nursing care; and, three apartment
buildings containing studio and one bedroom units, housing approximately 500
residents. From 1926 when it first opened its doors until the late 1980s, whatever
housing was being provided by the Home was exempt from real estate taxes
because the company, owning the Home, had articles of incorporation that
directed it to be dedicated exclusively to the charitable purpose of providing
“homes” for aged members of society.
In 1983 the State Department of Assessment and Taxation (SDAT),
reversed this policy, and issued a real-estate assessment on the Home, leaving
only the domiciliary (one room apartments) and nursing home untaxed. The
Home appealed. The first Tax Court decision agreed that the Home in its entirety
should remain tax free. Then the Tax Court changed its mind. The Home appealed
again to the Circuit Court, and the Circuit Court agreed with the Home that
regardless of whether the Home’s apartments were single rooms, studio, or had
separate bedrooms they should all remain tax free. SDAT appealed and for the
third time a Maryland court, this time the Maryland Court of Special Appeals,
agreed that the Home should remain free from real property taxes in its entirety.
The SDAT took another appeal, to the State’s highest court, and finally in
a narrow, strained, fact driven decision, the Maryland Court of Appeals reversed
the lower courts, and allowed real property taxes to be levied on the apartments
for the elderly. The Court made no attempt to explain why the studio and onebedroom apartments should be taxed while the one-room apartments should not.
Rather, the court simply upheld the second Tax Court decision which claimed
there was not enough “charitable giving” between the apartments in the three
buildings, and the Home’s one room apartments and health center. The Court
relied on a “substantial evidence test” finding that the Tax Court was not
“erroneous” in its interpretation of the law and the reasonable facts were
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substantial enough to support the Tax Court’s reversal of 50 years of tax
decisions. The Court of Appeals said it was not proper to substitute its own
judgment of the facts or undertake an independent review.
The tax-exemption at the time was in § 9 (e) of the Tax Code, and now in
§ 7-202 of the Code, which says in pertinent parts that the real property is exempt
when owned by “any non-profit charitable … benevolent institution or
organization when … actually used exclusively for and necessary for charitable
benevolent … purposes … in the promotion of the general public welfare of the
people of the State.” The Court of Appeals, siding with the second Tax Court
decision, did little to address the following facts, that: individuals had to be 65
years or older, had priority admission to the health center (just as the individuals
from the one room apartments) if the need for nursing care arose, that about 75%
of the general public was also admitted to the health center, and that the
apartments received charitable support. Additionally, the Court acknowledged
that there was a financial misfortune clause for every person stating that if a
resident became unable to pay the monthly charges for the apartments, health care
costs and living expenses, the Home would provide the necessary housing, health
care and financial assistance at no charge and that the Home was not allowed to
pass any of the costs of the financially unfortunate residents on to the other
apartment residents. It appears the Court struggled with the degree to which
residents invoked the financial misfortune clause (no resident of the apartments
had ever invoked the protection of this provision when the tax assessment was
revised).
While the State’s highest court has not denied non-profits tax exemption
status to facilities which provide housing along with assisted living and medical
care to the elderly, the Asbury Methodist Home case was a shock. It has left the
whole idea of how integrated a housing component has to be with the medical and
assisted living components of a continuing care facility in a state of great doubt
and confusion. Even though Maryland has passed an entire code section relating
to CCRCs since 1988, including allowing independent living units as the
apartments are now called, to be tax-exempt, the decision is done on a case-bycase basis.
The unclear, ambiguous Asbury ruling has resulted in a chilling effect on
all housing combined with medical facilities for the elderly requests for what was
once the historically understood tax exemption granted so long as the organization
was a charity or not-for-profit. Should a differing opinion again arise between
such a facility and SDAT, a final resolution could take 5 years to resolve (the
average length of time an administrative case is decided by the Maryland Court of
Appeals). (Supervisor of Assessments of Montgomery County v. Asbury
Methodist Home, Inc., No. 155, Sept. Term, 1987)
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7. What are the Proposed Entrance fees and monthly fees for the Presbyterian
Homes CCRC proposed in Harford County and what is the average home
value and annual income for the area?
The entrance fees at the proposed Presbyterian Homes CCRC range from
about $224,000 to $640,000 for an individual and $239,000 to $666,000 for a
couple. Monthly fees range from around $2,780 a month to $4,150 for an
individual, for an annualized cost of between $33,400 and $49,800.
The average selling price for a home Harford County in December 2010
was $281,841. There are 44,600 homes in Harford County worth between
$200,000 and $700,000. The number of individuals age 65 and older in Harford
County is 27,646. In 2008, the per-capita income in Harford County was
$45,091.
Of the 32 people who have thus far paid to reserve a unit at the CCRC in
Harford County, the vast majority have income in the $50,000 to $70,000 range.
Those people report their home values at $200,000 to $400,000. Among those
people interested in a unit at the CCRC, 47% reported income up to $75,000 a
year. (Harford County Department of Economic Development; Department of
Assessment and Taxation; U.S. Census Bureau, 2008 American Community
Survey; U.S. Department of Economic Analysis Table CAO4, April, 2010)
8. Does Presbyterian Homes provide fully subsidized housing, assisted living,
and medical care to residents if they invoke the financial misfortune clause?
Yes. Currently Presbyterian Homes has at least one facility in which it is
subsidizing residents (and not passing that cost onto other residents). This subsidy
is valued at $1.8 million annually.
9. Where are CCRCs located and what are the tax implications, if any, on their
location?
A significant majority of CCRCs are not located in municipalities (20 out
of 34 are outside of municipalities) and are therefore not subject to municipal
taxes. A number of those CCRCs were able to negotiate other financial relief or
incentives so that they could be built and provide the unique and substantial
services to the elderly community where they are located. (Maryland State
Department of Assessments and Taxation)
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10. Have Harford County Senators supported tax credits for independent living
units before?
Yes. In 2009 the Harford County Senators introduced SB 821, which
mandated a 100% tax credit be given to a CCRC in Harford County and
Aberdeen. The bill passed the Senate Budget and Taxation Committee as
mandatory, passed the Senate on Second Reader as mandatory, and only after the
House of Delegates changed the cross file bill, HB 1017, to non-mandatory, was
the Senate bill modified to conform to its House counterpart. (SB 821, 2009 is
attached as Exhibit A; Votes from the committee and floor are attached as
Exhibits B and C)
11. Have the Harford County State Delegates supported the tax credits for
independent living units?
Yes, see above regarding HB 1017, 2009. (HB 1017, 2009 - Bill and vote
are attached as Exhibits D and E)
12. Have the local governments in Harford County supported tax credits for
independent living units?
Yes. In 2009, the Harford County government gave full support to a 100%
real property tax credit from both the county and the municipalities regarding real
property taxes that might otherwise be levied on a CCRC’s living units in
perpetuity. (Letter from Harford County Executive David R. Craig, dated
January 5, 2009, is attached as Exhibit F)
Additionally, the City of Aberdeen gave its full support to a permanent
real property tax credit for the living units of a CCRC saying it was necessary to
“allow the project to move forward.” (Letter from the City of Aberdeen, dated
February 10, 2009, is attached as Exhibit G)
Likewise, the City of Havre de Grace gave its full support for a 100% real
property tax credit permanently to a CCRC, and in so doing stated, “the campus
will serve Harford County’s 60 and over population, a population that is slated to
grow significantly over the next two decades, and which no CCRC is available to
service this population’s retirement needs. Consequently, Harford County’s senior
population has been and continues to migrate to neighboring jurisdictions
including Baltimore County, and Southern Pennsylvania.” (Letter from the City of
Havre de Grace, dated February 2, 2009, is attached as Exhibit H)
In 2011, the City of Aberdeen withdrew its support after the introduction
of HB 584 was introduced in the 2011 session of the General Assembly. This bill
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would have granted only a temporary tax credit for 15 years, capped the value of
the tax credit (preliminarily $600,000) and allowed for new revenues to be
generated by Harford County from a new hotel tax, the revenues of which in part
would also be directed to pay for capital or operating needs of Ripken Stadium, a
newly proposed conference center and funds for tourism and general promotion of
the County and for grants to the municipalities of the County. Upon termination
of the CCRC 15 year capped tax credit, the balance of the hotel tax revenues
would revert to funds for tourism and general promotion of the County and for
grants to the municipalities of the County.
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Part B: Aging In Place
1. What does the term aging in place mean?
There are several definitions of “Aging in Place,” however they
commonly coalesce around the following:
a. The ability to live in one's own home, for as long as confidently
and comfortably possible;
b. Individuals are encouraged to remain in their community, as they
grow older. People living as independently as possible, using
products and services to enable them to stay in their communities
as their needs change; or,
c. The phenomenon in which older individuals are choosing to
remain in the area they live in after retirement rather than moving
to new communities. (Maryland Department of Aging)
2. What efforts are under way to help our senior citizens age in place?
The vision of the The Maryland Department of Aging is that
Maryland be a State where all people are able to age with dignity,
opportunity, choice and independence.
The Maryland Department of Aging, partnering with the Area
Agencies on Aging and other organizations, provides leadership, advocacy
and access to information and services for Maryland seniors, their families
and caregivers. Some of the programs that deal with this at the
Department are as follows:
a. Aging and Disability Resource Centers / Maryland Access Point – Provide
b.
c.
d.
e.
f.
g.
h.
the public with faster and more efficient access to information and
services for seniors;
Congregate Nutrition and Home Delivered Meals Services
Programs – More than 17,000 additional individuals received
meals through this program;
CCRC creation and regulation;
Grandparent Resource Guide;
Maryland Medicare Part D Phone-A-Thon;
Maryland Senior Health Insurance Program;
Maryland Senior Prescription Drug Assistance Program;
Medicaid Waiver for Older Adults – Provided services and other
long-term care support to 3,571 low income individuals aged 50
and older who would otherwise reside in nursing homes;
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i. Money Follows the Person – A 5-year federally funded program to
identify individuals in nursing homes who wish to transition back
into the community. Eligible individuals would transition into one
of several Medicaid Home and Community-Based Services
Waivers;
j. Nursing Home Diversion Initiative/Community Living Program –
Work with the federal Veterans Administration to plan for a
flexible benefit for those individuals at risk of Medicaid spend
down and nursing home placement;
k. Senior Farmers’ Market Nutrition Program;
l. Senior Information and Assistance Program;
m. The budget for the Department of Aging for 2011 is $59.2 million
(Maryland Department of Aging)
3. Are there other government programs that assist senior citizens in this way?
The Federal Department of Health and Human Services has many
programs and grants it provides to state and local agencies to assist senior
citizens. In addition, there is the Maryland Departments of Health and
Mental Hygiene, the Department of Human Resources, and the
Department of Disabilities. Substantial resources are dedicated to these
departments to assist low, moderate, and middle income senior citizens.
The State’s Medicaid budget is approximately $7 billion. The Department
of Human Resources Budget is approximately $2 billion.
4. What are the average costs to the elderly who are forced to move into
nursing homes?
The average monthly charges from a nursing home are $5,800, which
annualize into the range of $70,000. Seniors, who qualify for Medicaid, have the
full amount of this sum paid for by the federal government and the states at a
roughly 50/50 split. Seniors may also be dually eligible for both Medicaid and
Medicare.
Additionally, middle class senior citizens can spend down their resources
to qualify for Medicaid long term care if they medically need. Senior citizens,
who do advance planning, can transfer all of their assets to relatives 5 years
before they apply for Medicaid long term care and therefore qualify for full
federal and state government funding of nursing home care. (Maryland
Department of Aging)
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5. Are there any tax credits currently in place to let lower income seniors stay
in their homes?
The State of Maryland has developed a program that allows credits
against the homeowner's property tax bill if the property taxes exceed a
fixed percentage of the person's gross income. In other words, it sets a
limit on the amount of property taxes any homeowner must pay based
upon his or her income.
This plan has been in existence since 1975 when it was known as
the "circuit breaker" plan for elderly homeowners. The plan was called
circuit breaker because it shut off the property tax bill at a certain point
just like an electric circuit breaker shuts off the current when the circuit
becomes overloaded. The Maryland General Assembly has improved the
plan through the years so that now this program is available to all
homeowners regardless of their age, and the credits are given as needed
based upon the person's income. (Maryland Department of Aging)
Additionally, in 2009, HB 781 - Property Tax Credit - Seniors, was
passed into law and allows Harford County and all 3 municipalities,
including Aberdeen, to give additional real property tax relief to any low
income senior. The bill was amended to be statewide. The purpose of the
bill is to allow all local jurisdictions to determine appropriate tax relief for
low-income senior citizens, so they can remain in their homes and “age in
place.”
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Part C: Hotel Tax
1. What is a Hotel Tax?
Under Title 9, Subtitle 3 of Article 24 of the Annotated Code of Maryland
counties are authorized to, “impose, by resolution, a tax on a transient charge paid
to a hotel located in that county.” This is a tax that a county may impose on those
who pay to stay at a hotel.
2. How many local governments have the authority to enact a hotel tax and
what is the amount of the tax in those jurisdictions?
Currently, in the state, twenty-two out of twenty-three counties and
Baltimore City have enacted a hotel tax. The tax rates range from 3.0% to 9.5%.
This year, 2011, Howard County is requesting their hotel tax rate be increased
from 5.0 to 7.0 percent.
Allegany
8.0%
Anne Arundel
7.0%
Baltimore City
9.5%
Baltimore County
8.0%
Calvert
5.0%
Caroline
5.0%
Carroll
5.0%
Cecil
3.0%
Charles
5.0%
Dorchester
5.0%
Frederick
3.0%
Garrett
5.0%
Howard
5.0%
Kent
5.0%
Montgomery
7.0%
Prince George’s
5.0%
Queen Anne’s
5.0%
St. Mary’s
5.0%
Somerset
5.0%
Talbot
4.0%
Washington
6.0%
Wicomico
6.0%
Worcester
4.5%
(HB 700 - Howard County – Hotel Rental Tax Rate is attached as Exhibit
I; Maryland Annotated Code, Article 24 § 9-304)
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3. How have local jurisdictions used the revenues generated from the local hotel
tax?
Several local jurisdictions allocate revenue from their hotel taxes to,
“develop tourism attractions,” or for “tourism and general promotion of [the
County],” or for, “the promotion of the county,” while others use hotel tax
receipts to contribute “to the general fund of the county.” The counties that use
funds for “the promotion of the county” have very broad categories on which they
can spend money including generally promoting the area. The counties that direct
their hotel tax to the general fund can use the revenues any way they see fit. In
either case, there is broad discretion with no practical restrictions. Most counties
allow for the broadest discretion possible.
For example, Wicomico County dedicates 16.7% of its hotel tax revenue
to the Salisbury Zoological Park and 16.7% to the Wicomico County Youth and
Civic Center for improvements and renovations. This Civic Center is a local
events center that hosts meetings, weddings, and entertainment. The Center’s
annual operating budget is $1,800,000. It generates $1,573,000 in revenue and
requires tax subsidy of $225,000 to balance its budget. The Center charges
competitive fees for events including weddings, meetings, and entertainment. The
Center competes with 29 venues of equal or larger size for cultural entertainment
and sports business. The Center charges as much as $3,300 to rent the arena for
weddings or meetings. (Maryland Annotated Code, Article 24 § 9-318; Wicomico
County)
4. What, if any, effort does the State of Maryland make to support the hotel
industry and/or tourism, and what is the source of the funds?
In the 2011 budget, the State of Maryland budgeted $26.3 million for the
Division of Tourism, Film and the Arts. For the 2012 budget proposal, the
Governor budgeted $26.5 million. There is not a state-wide dedicated funding
source to support tourism but nonetheless the State uses general funds from all
sources of taxes to support the tourism industry in Maryland.
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5. Are there any other sources of support for tourism at the State or local level?
Yes. The Maryland Tourism Development Board distributes funds in the
form of grants to Maryland political subdivisions to supplement local funds for
tourism marketing and development. Each Maryland county, Ocean City and the
City of Baltimore are eligible for these grants. For FY 2011, $2.35 million in
grants were awarded as follows:
Destination Marketing
Organization
FY 11 Grant
Award
Allegany
$52,215
Anne Arundel
$153,769
Baltimore City
$369,021
Baltimore County
$117,658
Calvert
$46,385
Caroline
$19,156
Carroll
$50,663
Cecil
$57,042
Charles
$39,841
Dorchester
$69,134
Frederick
$100,673
Garrett
$42,308
Harford
$63,871
Howard
$66,694
Kent
$56,211
Montgomery
$218,048
Prince George's
$133,367
Queen Anne's
$31,502
Somerset
$22,100
St. Mary's
$59,291
Talbot
$78,985
Washington
$73,197
Wicomico
$45,576
Worcester
$60,723
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Ocean City
$322,571
TOTAL
$2,350,000
(Department of Legislative Services)
There is no state-wide dedicated funding source for these grants; rather the
general funds of the State of Maryland, collected from all sources of taxes are
used to fund these grants. The grants are part of the budget from the Division of
Tourism, Film and the Arts.
At the local level Harford County has an amusement and admissions tax,
which is generated from gross receipts derived from admissions and amusement
charges in the County (but not for golf, drive-in movies, agricultural tourism, or
roller skating), and raises approximately $500,000 annually. These funds
contribute to the County’s general fund.
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Attachments
A:
SB 821, 2009
B:
Committee vote on SB 821, 2009
C:
Floor vote on SB 821, 2009
D:
HB 1017, 2009
E:
Floor vote on HB 1017, 2009
F:
Letter from Harford County Executive David R. Craig, dated January 5, 2009
G:
Letter from the City of Aberdeen, dated February 10, 2009
H:
Letter from the City of Havre de Grace, dated February 2, 2009
I:
HB 700 - Howard County – Hotel Rental Tax Rate
(Attachments available upon request)
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