October 29, 1997

To:Senator Joe Wineke and Representative Frank Urban, Co Chairs Members, Joint Survey Committee on Tax Exemptions

From: John Sauer, Executive Director and Tom Ramsey, Director of Government Relations

Subject:1997 Senate Bill 261

Senate Bill 261 would replace the property tax exemption for benevolent retirement homes for the aged with an exemption for charitable retirement homes for the aged, effective with property assessed as of January 1, 1998. To be exempt from property taxation, a charitable retirement home for the aged would have to meet all of the following conditions: 1) No part of the home’s net earnings could inure to the benefit of any shareholder, member, director or officer; 2) A substantial number of the residents would pay fees that do not fully cover the costs of providing the housing and the services they receive; and 3) The home would benefit a substantial number of persons who are legitimate objects of charity.

WAHSA members oppose SB 261 because the bill creates a property tax exemption standard of charitability solely for a single class of taxpayer and because the bill’s lack of clarity makes it virtually impossible for a retirement home for the aged to determine with certainty whether that entity will remain exempt from property taxation under SB 261.

That lack of clarity manifests itself in several ways:

  1. SB 261 fails to define “retirement home for the aged.” Would this definition apply only to unlicensed housing for the elderly, or would it also apply to residential care apartment complexes and/or community-based residential facilities (CBRF) either licensed, registered or certified under Chapter 50, Wis. Stats.? The only statutory definition we can find which approximates “retirement home for the aged” is found under s.77.54(20)(c)4, which defines “retirement home” as a “nonprofit residential facility where three or more unrelated adults or their spouses have their principal residence and where support services, including meals from a common kitchen, are available to residents.” That definition provides no clarification since it could apply to any or all of the entities listed above. To what type of entity does SB 261 apply?

  2. SB 261 fails to define a “substantial number of the residents” who pay fees “ that do not fully cover the costs” of providing the housing and the services they receive. Nor does the bill define or clarify who or what is a “substantial number of persons who are legitimate objects of charity.” To whom do these provisions apply? What is a “substantial number” of residents or persons? What is a “legitimate object of charity?” How are “costs” determined? Who will make all these determinations and how?

  3. Without further clarity to these definitions, how will a WAHSA member know if it will continue to be exempt from property taxation? And what can it do to change its operations to meet this new criteria if it does not know what the new criteria is?

As members of the joint committee are aware, an amendment which duplicates SB 261 was attached and later removed from 1997 Wisconsin Act 27, the 1997-98 State budget. What was approved by the Legislature in its final version of the budget and signed into law by the Governor was the creation of a 10-member Benevolent Retirement Home for the Aged Task Force, which was directed to “investigate the property tax exemption for benevolent retirement homes and all problems that are associated with it.” The task force is further directed to submit its report and proposed legislation to the Legislature on or before June 30, 1999.

Although WAHSA did not suggest the creation of this task force, our members support its objectives. Hopefully, it will provide a forum for our members to ask who or what the problem is that warrants a legislative response such as SB 261 and why the benevolent retirement home for the aged is the sole source of that perceived problem. Having stated that, our members have raised a pertinent question: Why proceed with SB 261, which would appear to offer a solution to a perceived problem, when the Legislature and the Governor both recently agreed to create a task force to determine if a problem exists and to offer a solution if it is determined a problem indeed does exist?

WAHSA members have other questions and concerns with SB 261:

  • As of yesterday, a fiscal note was not available for the bill. However, the fiscal impact of the similar AB 100 budget amendment indicated there would be a slight broadening of the property tax base in certain municipalities. WAHSA members would like to know: How slight and in which municipalities?