| Washington State House of Representatives Office of Program Research |
BILL ANALYSIS |
| Finance Committee | |
HB 3110
This analysis was prepared by non-partisan legislative staff for the use of legislative members in
their deliberations. This analysis is not a part of the legislation nor does it constitute a
statement of legislative intent.
Brief Description: Concerning the taxation of nonprofit nursing homes.
Sponsors: Representatives Simpson, Green, Williams and Sullivan.
Brief Summary of Bill |
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Hearing Date: 2/15/08
Staff: Jeff Mitchell (786-7139).
Background:
Washington's major business tax is the business and occupation (B&O) tax. The B&O tax is
imposed on the gross receipts of business activities conducted within the state, without any
deduction for the costs of doing business. The tax is imposed on the gross receipts from all
business activities conducted within the state. Revenues are deposited in the State General Fund.
A business may have more than one B&O tax rate, depending on the types of activities
conducted. The tax rate for most types of businesses that provide services is 1.5 percent.
All property in this state is subject to the property tax each year based on the property's value,
unless a specific exemption is provided by law.
The gross income derived from services provided by a nonprofit nursing home is exempt from
business and occupation tax.
The real and personal property used by a nonprofit nursing home is exempt from property taxes.
The primary requirements to qualify for this exemption is that the property be used exclusively
for the purposes of the nonprofit nursing home and that the benefits of the exemption must be
retained by the home.
The Joint Legislative Audit and Review Committee (JLARC) periodically reviews tax
preferences. A tax preference is an exemption, exclusion, or deduction from the base of a state
tax; a credit against a state tax; a deferral of a state tax; or a preferential state tax rate. For each
reviewed tax preference, the JLARC provides recommendations to continue, modify, schedule
for future review, or terminate the preference.
In 2007 the JLARC reviewed the property tax exemption for nonprofit nursing homes. In the
analysis, the JLARC concluded that nonprofit nursing homes' share of total revenue from
medicaid patients has been lower than other nursing homes on average over the past four years.
The JLARC recommended that if the Legislature intended to provide a property tax exemption
under the assumption that a nonprofit nursing home is providing more charity or low-income
care, the Legislature should modify the property tax exemption to make it dependent upon
meeting a threshold amount of charity or low-income care.
Summary of Bill:
The business and occupation tax exemption for nonprofit nursing homes is narrowed to homes
that meet both of the following conditions:
(1) the ratio of medicaid patient days to total patient days to total patient days is at or above
50 percent according to the most recent annual nursing home cost report data collected by
the department of social and health services; and
(2) the net earnings received by the religious or charitable organization only benefit the
organization.
The property tax exemption for nonprofit nursing homes is narrowed to homes that meet both of
the following conditions:
(1) the ratio of medicaid patient days to total patient days is at or above 50 percent
according to the most recent annual nursing home cost report data collected by the
department of social and health services; and
(2) the property tax exemption benefits only the nursing home.
Appropriation: None.
Fiscal Note: Available.
Effective Date: The bill takes effect 90 days after adjournment of session in which bill is passed.