Benevolent Retirement Home for the Aged
Task Force

The Not-for-Profit Perspective
July 2000

Respectfully Submitted to:

Mr. Tom Ourada, Executive Assistant
Department of Revenue
Madison, WI

By Task Force Members:

Michael Kittleson, Grand View Care Center, Blair
Jim Olson, Schmitt Woodland Hills, Richland Center
Dennis Sampson, Tudor Oaks Retirement Community, Hales Corners (Alternate/Proxy)
John Sauer, Wisconsin Association of Homes and Services for the Aging, Madison
Robert Schaefer, LindenGrove, Inc., New Berlin
Glenda Zielski, Lutheran Home of River Falls, River Falls


Indigent Standard v. Community Benefit Standard

Not-For-Profit Entity v. For-Profit Entity

An Analysis of Three Proposals Reviewed by BRHA Task Force
Sauer Proposal
The Treatment of CCRCs
IRC 501(c) As a Standard for Property Tax Exemptions
Weissenfluh Proposal
DOR Proposal


Section 9156(2m) of 1997 Wisconsin Act 27 created the Benevolent Retirement Home for the Aged BRHA) Task Force. The legislative directive to the Task Force was to “investigate the property tax exemption for benevolent retirement homes and all problems that are associated with it.” The 10-member Task Force, which consists of four members appointed by the Governor, two members appointed by the speaker of the Assembly, two members appointed by the Senate majority leader and one member each selected by the Assembly minority leader and the Senate minority leader, was directed to “submit its report and proposed legislation to the Legislature on or before June 30, 1999, on which date the Task Force is dissolved.”

The Task Force neither was formed nor ever met prior to its June 30, 1999 sunset date. However, leaders from both houses of the Legislature and the Governor agreed to extend the sunset date to June 30, 2000. This final report seeks to comply with the legislative directive contained in 1997 Act 27.

The Task Force met seven times (assuming a scheduled August 15th meeting is held) and it became clear from the very first meeting on 12/15/99 that reaching a consensus would be difficult. Five of the ten Task Force members, representing local government officials, assessors, and for-profit health care providers, felt the current system of extending property tax exemptions to benevolent retirement homes for the aged was unfair, unclear and/or indefensible. The remaining five members, all representing not-for-profit, tax-exempt health care providers, argued the current system may be in need of further clarity but was both justifiable and defensible. Little was said by either side which proved to be persuasive to any member of the other side. Our expectation, therefore, is two final reports will be issued, neither of which will garner majority support from Task Force members.

Although the legislative directive of the BRHA Task Force was to investigate the property tax exemption for benevolent retirement homes for the aged, the focus of much of the discussion during the Task Force’s first six meetings was broader in scope than that directive of the Legislature. Those discussions delved into not only the entire long-term care continuum, from nursing home to assisted living to independent senior housing, but into the even broader and more generic realm of who should and who should not be exempt from property taxation. Before this report specifically addresses the three primary statutory modifications discussed by Task Force members, we would like to briefly touch upon the broader policy question of who should be exempt from property taxation in Wisconsin.

Indigent Standard v. Community Benefit Standard

Simply stated, the signatories of this report believe an exemption from property taxation under the s.70.11(4), Wis. Stats., benevolency standard is warranted if the entity seeking a tax exemption provides its local community with some form of a community benefit and the revenues generated by the goods and services provided by that entity are used to further benefit the recipients of those goods and services, not to benefit a private shareholder or individual. That “community benefit” could come in many forms: Care or service to the indigent; the provision of goods or services which otherwise might have to be provided by government; charitable donations to the needy; community health care outreach; subsidized care; opening up the entity for community use; and many others. The key is to allow the flexibility to enable the entity to “give back to its community” in ways that are consistent with that entity’s mission and purpose, rather than shoehorning all entities into an inflexible system within which that entity can’t operate. Inflexibility ultimately deprives not the entity but the community.

The chief policy difference between the two Task Force “camps” is that those seeking substantive change to the current property tax exemption under s.70.11(4), Wis. Stats., wish to impose a tax-exemption standard primarily based on indigency: If an entity provides no direct financial assistance or relief of poverty to a recipient in need of such assistance or relief, that entity is not deserving of a property tax exemption.

The signatories of this report oppose that point of view. We believe society can be benefited in ways other than providing care and services to the indigent and that those “other ways” are equally deserving of a property tax exemption. The federal government seemingly would concur with this approach since its exemption from federal income taxation under s.501(c) of the Internal Revenue Code (IRC) is predicated on a similar “community benefit” standard.

In the long-term care continuum, which would include benevolent retirement homes for the aged, we believe not-for-profit, tax-exempt entities provide community benefits which warrant their tax exemptions in a number of different ways:

In each of the above instances, organizations are serving a non-indigent population but are providing corresponding benefits to the community. They are, in a way, Robin Hoodesque, although robbing the rich to give to the poor might be a bit harsh a description. However, under the proposal(s) offered by the Task Force members seeking substantive change to the current system, all of these entities would lose at least a portion of their current property tax exemption; some most likely would pay the full property tax. How will that benefit the kids on scholarship to South Madison Day Care Center or the single mom who works as a certified nursing assistant who lost her job at the nursing home because inadequate Medicaid reimbursement forced staff reductions?

Not-For-Profit Entity v. For-Profit Entity

One of the most difficult tasks this Task Force undertook and policymakers throughout the country wrestle with is how to distinguish a for-profit from a not-for-profit entity. Some believe that that distinction is even more difficult to identify in long-term care because in many instances, not-for-profit and for-profit providers are offering similar services to similar residents.

The signatories of this report believe one of the best responses heard to that question was offered to Task Force members at their March 3, 2000 meeting by Mark Wimmer, president of National Regency Senior Care Community (NRSCC) of New Berlin. NRSCC has two business activities: It offers development/management services to not-for-profit senior housing and health care facilities and it owns and operates a portfolio of for-profit independent and supportive care retirement centers.

Mr. Wimmer told Task Force members that as president of a company which owns and operates for-profit senior housing but develops and manages similar not-for-profit ventures, he believes there is a legitimate place in the market for both for-profit and not-for-profit retirement facilities but there are differences between them in terms of the missions and goals, community involvement in addressing senior health issues, and financial focus (emphasis added).

Mr. Wimmer estimates that the property taxes paid by his for-profit facilities represent about $100 per unit per month. He told Task Force members that the financial assistance, the expanded programming and the community benefits provided by not-for-profits well exceed any property tax benefits enjoyed by exempt facilities. Because the not-for-profit focus is not on return on investment, it can focus on financial aid to its needy residents and its community.

Mr. Wimmer also said from his experience, not-for-profit facilities address special needs and create programming for the minority of the market, while for-profit facilities generally address the majority of the market. Not-for-profits are more likely to pioneer and create the model for special needs services such as Alzheimer’s or incontinence care because they are more responsive to unfunded or underfunded community needs.

The signatories of this report believe commitment to the community and motivation are the two key distinctions between a for-profit entity and a not-for-profit. While a not-for-profit is tied to its local community by a Board of Directors from that community and takes its direction from that local Board, a for-profit ultimately takes its direction from its stockholders/owners, who may or may not have ties to the community. To state that “when the going gets tough, the for-profit business may be going or gone” probably is a bit harsh and a poor play on words but it makes its point: When a business decision needs to be made, the for-profit takes its lead from its stockholders, not the local community. And if curtailing services, leaving the community or getting out of the business is the best business decision, then all but certainly that’s the decision the for-profit will make. What’s good for the stockholders, therefore, may not be good for the community.

Possibly of more significance is the distinction between what motivates a for-profit provider from his/her not-for-profit counterpart. Because when all is said and done, regardless of the commitment to quality and compassion, a for-profit ultimately is in the business to make money for its shareholders and owners. For the good, for-profit provider, quality of service is the means to the end of making money. However, if that good, for-profit provider is unable to make money, either quality will suffer or the service will end. One only has to examine the recent Chapter 11 filings for bankruptcy protections on behalf of several national for-profit long-term care providers to fully appreciate this point. (Note: Approximately 10% of all Wisconsin nursing homes currently are operating under Chapter 11; all are for-profit nursing homes).

A not-for-profit ultimately is motivated by the desire to provide quality services. We are not foolish enough to argue against the truism “no margin, no mission,” but contrary to the for-profit provider, generation of revenue is a means to the not-for-profit’s end of providing quality services, not the end itself.

The ultimate question is this: What motivates an individual to operate as a for-profit rather than a not-for-profit? Somehow, we don’t believe receiving or not receiving a property tax exemption enters into that equation.

An Analysis of Three Proposals Reviewed by BRHA Task Force

The following section of this report will analyze three proposals offered to and discussed by BRHA Task Force members: A proposal offered by WAHSA Executive Director and Task Force member, John Sauer; a proposal offered by Milwaukee City Assessor and Task Force member, Peter Weissenfluh; and a draft proposal prepared by Department of Revenue (DOR) staff.


Section 70.11(4), Wis. Stats., provides a property tax exemption to “property owned and used exclusively by educational institutions offering regular courses 6 months in the year; or by churches or religious, educational or benevolent associations, including benevolent nursing homes and retirement homes for the aged,… but not exceeding 10 acres of land necessary for location and convenience of building while such property is not used for profit.” (emphasis added). This is the section of statute that creates the property tax exemption for BRHAs and this is the section of statute which is under attack by proponents of change to the current system.

It also is a section of statute which all agree is subject to differing interpretations because there is neither a statutory nor a specific judicial definition of “benevolent.” And it is indeed the courts which have provided the interpretations of “benevolent” which govern us today.

The key decision in the interpretation of “benevolent” under s.70.11 (4), Wis. Stats., came in Milwaukee Protestant Home v. City of Milwaukee 41 Wis.2d 284,293,164 N.W.2d289 (1969). The facts in that case were as follows: In 1963, Milwaukee Protestant Home added a second facility, Bradford Terrace, to its Lake Drive campus in Milwaukee. Bradford Terrace was constructed entirely from resident endowments; there was no charity or donations used in its construction. Residents were required to pay nonrefundable endowments plus a monthly service fee to live in the facility and were required to qualify both financially and by proof of the ability to live independently as preconditions to admission. Admission was limited to those who could pay; no charity was provided for applicants who could not afford the endowment and monthly service fee.

The city of Milwaukee sought to deny a property tax exemption to Bradford Terrace based on the following arguments: Entrance to the facility was limited to a segment of society which could afford its endowment and monthly service fees; the facility did not provide on-site medical care; and financial screening excluded the needy while health screening excluded the infirm.

In its 1969 decision in favor of Milwaukee Protestant Home, the Wisconsin Supreme Court issued a three-part general judicial test for “benevolence”:

  1. The Court stated: “Retirement homes are not primarily nursing homes or hospitals. They are not almshouses, and the residents do not consider themselves objects of public or private charity. They are what the name implies, homes for retired persons, places of congregate living where retirees go to live, expecting to pay the fees charged and to receive the usual incidents of group home living.”

  2. “Benevolent” does not mean the same thing as “charitable.” A retirement home limited to those who can pay can be benevolent, even if it does not provide free services to any one. “[T]he word ‘benevolent’ has no built-in implication or requirement of almsgiving. To help retired persons of moderate means live out their remaining years is ‘benevolent’ whether or not it is also considered, as we would consider it, to be ‘charitable.’”

  3. The facility must be judged as an integral part of the entire Milwaukee Protestant Home, not in a vacuum. “A wing need not be chopped off a chicken to determine its form, or function.”

This three-part judicial test of “benevolence” was later reaffirmed by the Wisconsin Supreme Court in Family Hospital Nursing Home v. City of Milwaukee 78 Wis.2d 312, 254 N.W. 2d 268 (1977), and by the Court of Appeals in Friendship Village of Greater Milwaukee v. City of Milwaukee 181Wis.2d 207, 511 N.W. 2d 345 (Ct.App. 1993), (Rev. denied, 515 N.W. 2d 714).

There also have been a number of attempts over the years by the Legislature to amend s.70.11(4), Wis. Stats. Those legislative proposals included the following;

Since 1991, therefore, legislative efforts to modify statutorily the Wisconsin Supreme Court’s three-part “benevolency” test have been unsuccessful: No individual bill to create a “charitable” standard ever has been adopted in its house of origin while the only budget provision to arrive on the Governor’s desk (although later vetoed) would have exempted from property taxation any “charitable association” exempt from federal income taxation under IRC s.501(c)(3). These facts would seem to belie the argument posed by some Task Force members that the Legislature has spoken with “stark clarity” that the BRHA standard under s.70.11(4) Wis. Stats., is problematic. We would argue if such were true, this Task Force never would have been created.

With that background, we would like to address the three aforementioned proposals.

Sauer Proposal

At the outset, the signatories of this report wish it to be known that the Sauer proposal is the recommended legislation we wish to forward to the Legislature.

Under the Sauer proposal, a “benevolent retirement home for the aged,” which is defined as “property owned and operated by a nonprofit organization providing housing for five or more residents, which meets the definition of ‘housing for older person’ under s.106.04(1m)(m), Wis. Stats., and which may provide care or services that are above the level of room and board,” would be exempt from property taxes if the organization has received a determination of exempt status under IRC s.501(c) from the IRS and meets the criteria for “homes for the aged” outlined under IRS Revenue Ruling 72-124.

The signatories of this report took the legislative history of this issue into account when trying to determine just what it was the Legislature wished the BRHA Task Force to accomplish. What became clear to us was the Legislature was unclear what problems, if any, existed with the property tax exemption for BRHAs and asked the BRHA Task Force to investigate and report its findings back to them.

Definitional Issues: The first task we undertook was to define the scope of our investigation because there is no definition of a “benevolent retirement home for the aged.” For a BRHA Task Force not to define what a BRHA is struck us as perhaps missing the mark. Our definition of a BRHA basically is what long-term care providers refer to as “independent living facilities”: Its residents are able to live independently and receive hotel-type services but receive none of the government-regulated, medically-oriented services provided in a nursing home, a community-based residential facility (CBRF) or a residential care apartment complex (RCAC). Indeed, we specifically excluded benevolent nursing homes, CBRFs and RCACs from our definition of a BRHA (and thus, would allow them to remain exempt from property taxation), not only because those entities are based on a government-regulated medical model but for other reasons as well. Benevolent nursing homes, for instance, were not included in the legislative directive to the BRHA Task Force even though they are specifically exempted from property taxation under s.70.11(4). If the Legislature had concerns with the property tax exemption for benevolent nursing homes, it would have expanded its directive to the Task Force to include benevolent nursing homes as well as BRHAs. One reason the Legislature chose not to do so may have been because Medicaid reimburses for-profit nursing homes for the property taxes they pay based on their Medicaid census. If not-for-profit nursing homes would be required to pay property taxes, the Medicaid appropriation would have to be increased dramatically to reimburse those property taxes paid. Another reason may have been the Legislature is unaware of any problems with the property tax exemption for benevolent nursing homes.

To include a CBRF as a BRHA shows a clear misunderstanding of what is a CBRF. While nearly 60% of the state’s over 1,300 CBRFs identify advanced age as their target client group, CBRFs also treat and care for the developmentally and physically disabled, the chronically mentally ill and AODA clients among the 12 client groups they may serve. To include a CBRF in the definition of a benevolent retirement home for the aged clearly indicates those making the suggestion are unaware that CBRFs do not solely serve the elderly.

By the same token, while RCACs are settings solely for the elderly, the acuity of their health care needs cannot be ignored. By statute, a RCAC must be prepared to provide its individual tenants up to 28 hours per week of personal, supportive and nursing care; that amount of care is as much or more than many nursing home residents receive. In fact, based on the acuity levels of its tenants, a RCAC is much closer in nature to a nursing home than it is to a retirement home; indeed, when the Legislature created the RCAC (then called an “assisted living facility”) in 1997, the newly-created health care setting was viewed by many as a nursing home replacement model.

The Treatment of CCRCs:

The fourth and last exclusion from our definition of a benevolent retirement home for the aged also appears to the most controversial: The continuing care retirement community, or CCRC. As noted earlier, a CCRC must receive a permit from the OCI to provide a “continuing care contract,” which is defined under s.647.01(2), Wis. Stats., to mean “a contract entered into on or after January 1, 1985, to provide nursing services, medical services or personal care services, for the duration of a person’s life or for a term in excess of one year, conditioned upon any of the following payments: (a) An entrance fee in excess of $10,000; (b) Providing for the transfer of at least $10,000 if the amount is expressed in dollars or 50% of the person’s estate if the amount is expressed as a percentage of the person’s estate to the service provider upon the person’s death.”

As noted earlier, in terms of physical structure, CCRCs are a campus setting including a nursing home, a CBRF, a RCAC and/or an independent living facility (or BRHA). In a recent WAHSA survey, of the 11 CCRCs responding, all 11 operated nursing homes; 9 operated CBRFs, 4 operated RCACs and 10 operated independent living facilities. Because of the significant investment a CCRC resident makes in terms of entrance and monthly service fees to secure lifetime health care and service needs, the OCI pays particular attention to the financial solvency of a CCRC. CCRCs are required to provide the OCI with audited financial statements, including an income statement and a balance sheet, on an annual basis. The CCRC also is required to provide the OCI with the actual or projected length of stay of each resident in the facility. In addition, liquidity requirements promulgated by the National Association of Insurance Commissioners are now being used by OCI examiners who review CCRC financials. The OCI also has established a required reserve for CCRCs equal to 12 months of mortgage principal and interest or 18 months of interest alone.

On 3/3/00, BRHA Task Force members heard from Cruz Flores of the OCI Financial Examination Analysis Bureau, the Bureau which is responsible for overseeing the financial viability of the state’s 21 CCRCs. Flores explained OCI looks at CCRC costs, interest rates and rates of return in analyzing financial solvency. He cautioned that a CCRC may appear to have a lot of money and it may seem their income exceeds their costs. But, according to Flores, it is the present value of future services as compared to the present value of future revenue that is of concern to the actuary, the accountant and to OCI. They must consider the CCRC’s expected ability to raise entrance and monthly service fees as food, labor, maintenance and medical costs rise.

The establishment of entrance and service fees, therefore, is not a willy-nilly exercise by a CCRC nor is it an exercise that is only of concern to a CCRC. Those fees are the product of mission, marketplace and the OCI. And apparently that mission is of no interest to for-profit providers in Wisconsin since there are no for-profit CCRCs in this State.

It is the establishment of entrance and service fees, and CCRCs themselves, that appear to be the primary target of those supporting the Weissenfluh proposal. Their position is summed up in this excerpt from the initial draft executive summary to their final report:

The signatories of this report believe this one sentence displays either a misunderstanding or a misrepresentation of the purpose and operation of a CCRC.

Indeed, at a May 23, 2000 continuing legal education seminar on property tax issues affecting senior housing sponsored by the UW-Madison Law School, the issue was raised that a CCRC is of greatest benefit not to the wealthy, but to the middle income. Attorney Alan Marcuvitz, a partner in the Milwaukee law firm of Weiss, Barzowski, Brady & Donahue LLP who specializes in property tax assessments, condemnation, land use matters, and municipal law, told Milwaukee Assistant City Attorney and BRHA Task Force member Gregg Hagopian, who provided seminar participants with an overview of the activities of the BRHA Task Force, that it was his belief that the Weissenfluh proposal takes care of the wealthy and the poor but it leaves out the middle income. And there is surely justification for that statement: While no one can argue that many inhabitants of CCRCs are wealthy, by anyone’s definition of the term, the wealthy are also the only ones able to purchase significant amounts of health care in their own homes and are the primary targets of homecare agencies and the principal users of private homecare services. On the other hand, governmental programs, as they rightly should, provide services to the poor. The signatories of this report believe it is the middle income which most benefits from a CCRC, which rewards those who plan for their future health care needs (do the truly wealthy need to plan?) with the care and services they will need for the duration of their lives.

If a not-for-profit CCRC or any of its CBRF, RCAC, independent living and/or nursing home components, is required to pay property taxes in the future, those taxes clearly will be passed on to the CCRC resident. The signatories of this report believe that CCRC residents do not deserve such a penalty because of the clear community benefit a CCRC provides. Specifically,

We suggest that individuals reviewing issues related to the work of the BRHA Task Force examine any proposed changes to s.70.11(4), Wis. Stats., not only from a property tax perspective but also from the potential impact those changes might have on the long-term care system’s financing incentives and delivery structure.

IRC 501(c) As a Standard for Property Tax Exemptions

As noted above, the second component of the Sauer proposal is a requirement that the BRHA receive a determination of exempt status under IRC s.501(c) from the IRS. Proponents of the Weissenfluh proposal have argued that the Sauer proposal, “distilled to [its] essence,” is an attempt to preserve the status quo.

That statement is essentially correct. However, the signatories of this report believe the suggested addition of the IRS Revenue Ruling 72-124 requirements to property tax law under the Sauer proposal would narrow the “benevolent” standard.

As representatives of not-for-profit organizations which currently enjoy exemptions from property taxation, the signatories of this report obviously entered these Task Force discussions with an eye toward the status quo. Self-preservation alone would dictate that position. So when the time came to identify the “problems” with the BRHA tax-exemption, those problems were going to have to be identified by individuals other than those who believed there were no significant “problems.”

Some might argue that nothing could possibly be offered that would sway those currently benefiting from the BRHA tax exemption to accept changes that might modify or even eliminate those exemptions, i.e., that some “problems” do exist. We would contest that assertion if for no other than purely political reasons: We do not intend to go before the Legislature to defend the indefensible. If we were convinced the status quo could not be justified, we would not adhere to it as a position.

We support the Sauer proposal because the advocates of change on the Task Force failed to provide any evidence that substantive problems exist with the current system.

At nearly every Task Force meeting, Mr. Hagopian railed against the “abusers” of the system. Finally, at the April 27th meeting, he was directly asked to specify what these “abuses” were and who were the problem facilities committing these abuses. His response was the Weissenfluh proposal sought to address facilities which charge “high” endowment and service fees, which provide little or no medical, nursing or other care and which screen out the poor and the infirm. Based on that description, the signatories of this report conclude that no substantive problems exist with the current system because we are aware of no such facility described by Mr. Hagopian that exists in Wisconsin.

To our knowledge, there are no “abusers” of the current benevolency standard as it applies to retirement homes for the aged. There are no substantive “problems” with the BRHA tax exemption. What is really at issue is whether a property tax exemption should be based on a benevolent standard or a standard of charitability or indigence. The signatories of this report could support either standard, as long as a community benefit component remains and the new standard reflects the public mission and purpose of the tax-exempt entity. But that is an issue much broader in scope than the legislative directive given this Task Force.

We do believe the current BRHA tax exemption suffers from a lack of clarity which, though not a problem substantive in nature, needs to be addressed. That is why the IRC s.501(c) requirement and adherence to IRS Revenue Ruling 72-124 are contained in the Sauer proposal.

Simply stated, as not-for-profits, we believe long-term care recipients are best served when care and service decisions are made based on need, personal preference and cost effectiveness, not on rate of return on investment or stockholder expectations. We believe the IRC s.501(c) mandates to mission-driven service and community involvement/control are in the best interests of not only those receiving those mission-driven services but of the community as a whole. We also believe no one on the Task Force objects to requiring a BRHA to be exempt from federal income taxation under IRC s.501(c) as a condition of being exempt from property taxation.

The signatories of this report also believe that BRHAs should adhere to the provisions of IRS Revenue Ruling 72-124 as an additional property tax exemption test. Indeed, if they are not currently doing so, they could be subject to loss of their IRC s.501(c) tax-exempt status.

Under IRS Revenue Ruling 72-124 (the “72” refers to the year of issuance, 1972), the IRS for the first time allowed a “home for the aged” to be exempt from federal taxation if the “home for the aged” otherwise qualifies for a federal tax exemption under IRC s.501(c) and if the facility operates to satisfy all three of these basic needs of aged persons: 1) The need for suitable housing, which would be met if an organization provides residential facilities that are specifically designed to meet the physical, emotional, recreational, social, religious and similar needs of aged persons; 2) The need for health care, which would be met if an organization either directly provides or arranges for health care services designed to maintain the physical and mental well-being of its residents; and 3) The need for financial security, which would be met if an organization: A) Maintains a policy of financial assistance which would guarantee continued residence at the facility for any resident who is no longer able to pay for services provided; B) Provides services to its residents at the lowest feasible cost; and C) Maintains a payment structure set at a level that is within the financial reach of a significant segment of a community’s elderly persons. The IRS continues to audit Wisconsin not-for-profit facilities to determine their compliance with these provisions.

Weissenfluh Proposal

The Weissenfluh proposal has changed form a number of times over the course of the Task Force discussions. Under the most recent proposal, there is a two-part test that must be met in order to be granted a property tax exemption:

As Mr. Hagopian noted at the May 31st Task Force meeting, the Weissenfluh proposal would tax a senior housing facility to the extent that it does not serve the elderly in financial need. This proposal would in essence scrap the benevolence standard for retirement homes for the aged and create a charitable standard. It also ignores in totality the long-standing tax-exemption principle of a community benefit. Before getting into the specifics of our opposition to this proposal, the signatories of this report would like to raise the following issue:

Our opposition to the Weissenfluh proposal is principally predicated on its failure to include a community benefit standard as justification for a property tax exemption. We have a number of other concerns, however.

DOR Proposal

At the May 31, 2000 BRHA Task Force meeting, Ron Rosner of DOR staff explained the DOR developed a proposal that recognized that current law and case law rulings favor the continued exemption of nonprofit retirement homes under the benevolent exemption. The DOR proposal would exempt nursing homes, CBRFs and RCACs which: 1) Maintain a policy of not discharging residents due to inability to pay; 2) Operate free from profit motive; and 3) As of January 1 of the exemption year, serve a population of residents at least 60% of whom are 65 years of age or older. An independent living unit of a CCRC or that is part of a continuing care campus (undefined) would have to meet two additional exemption tests: 1) The units could be no greater that 1,000 square feet for single occupancy or 1,200 square feet for double occupancy; and 2) The units could not exceed a “luxury” fee factor of $400,000, which would be the sum of the entrance fee and an annuitized value of monthly service fees. According to Mr. Rosner, the purpose of this approach is to target those units that go beyond the standard needs of a retirement home or provide “excess comfort.”

Because the Department of Revenue staff who drafted this proposal indicated it would not be forwarded to the Legislature as part of the BRHA Task Force final report -- unless it is adopted by the Task Force and that is highly unlikely -- we will not spend much time on the DOR proposal. We will say, however, that despite the fact we cannot support the DOR proposal, at least as drafted, it did seek to address a perceived problem. We simply don’t hold the same perception.

The signatories of this report commend the DOR for developing a proposal which is reasonably close to the legislative directive given the Task Force and for targeting a perceived problem area. However, for the following reasons, we can not support the DOR proposal:


The signatories of this report support the current benevolent standard for purposes of granting a property tax exemption to retirement homes for the aged. No compelling evidence was provided by Task Force members to justify dismantling this standard. We do seek further clarification of the standard by defining a BRHA and by specifying that BRHAs must receive a determination of exempt status under IRC s.501(c) from the IRS and must adhere to the provisions in IRS Revenue Ruling 72-124. We oppose any modification to current statute to impose a purely indigent/charitable standard because it ignores the benefits to the entire community of a community benefit standard. To allow an entity to meet its tax exempt responsibilities through tangible means other than solely providing services to the indigent should not be dissuaded because government most likely would have to step in where that entity was forced to opt out.

In closing, we wish to urge policy-makers to consider any changes to the property tax-exempt status of benevolent retirement homes within the context of the current long-term care crisis. By all accounts, long-term care providers are engaged in daily battles to overcome staffing shortages, reimbursement shortfalls and quality concerns. While imposing property tax payments on solid, mission-driven, not-for-profit organizations may prove helpful to some financially-strapped local units of government looking to fill budget holes, this policy shift could prove disastrous to a long-term care system that is expected to serve the largest elderly population in our State’s history. And finally, although our report clearly speaks of the differences between the not-for-profit community and its for-profit counterparts, this is necessary to clearly educate the readers on why an organization chooses to operate as a not-for-profit; it is not our goal to minimize the important role for-profits play in the provision of long-term care housing and services.


We would like to thank those members of the Task Force with whom we ultimately could not agree. We respect your opinions, we admire your commitment, we appreciate the sharing of your expertise and we applaud your willingness to disagree without being disagreeable.

We especially would like to extend our thanks and appreciation to Tom Ourada, Rebecca Boldt and Ron Rosner of the Department of Revenue for their efforts in what might at times have struck them as a thankless task. Although they ultimately were unable to surmount the insurmountable, their expertise and objectivity enabled us all to at least frame the issue.

Respectfully Submitted,

Michael Kittleson, Administrator, Grand View Care Center, Blair
Jim Olson, Administrator, Schmitt Woodland Hills, Richland Center
Dennis Sampson, Administrator, Tudor Oaks Retirement Community, Hales Corners (Alternate/Proxy)
John Sauer, Executive Director, Wisconsin Association of Homes and Services for the Aging, Madison
Robert Schaefer, President, LindenGrove, Inc,. New Berlin
Glenda Zielski, Administrator, The Lutheran Home, River Falls

WAHSA 204 South Hamilton Street Madison, WI 53703
Telephone: (608)255-7060 FAX:(608)255-7064