Marriott Corp., the Bethesda-based food and lodging chain, is the leading lobbying force pushing for a tax bill that would give special tax advantages to elderly residents of Marriott's proposed retirement communities.
The company has hired two former top aides to congressional tax-writing committees, as well as a lobbying firm, to preserve a provision in legislation coming up for a House-Senate conference in the next week or two.
Sen. John Chafee (R-R.I.), an opponent of the provision, called it the "Marriott Corporation Relief Act of 1985" on the floor of the Senate, and said the special break discriminates against people who want to live someplace other than in the communities.
The complex provision is part of legislation passed two weeks ago by the Senate and earlier passed by the House that deals with the tax aspects of interest rates on seller-financed transactions. Only the Senate bill includes the portion covering the affected "life-care communities," which works this way: Elderly persons put up a substantial deposit, often in the high five-figures. The communities house and feed them and provide long-term medical care for free, or at a low monthly fee.
That deposit is refundable -- the resident can have it back if he decides to leave. In the meantime, the operator of the community invests the money, earns interest and, with some of the money, pays the expenses of the resident. The resident thus receives those services in part paid for by the interest on his deposit, without having to pay tax on that interest or to treat the services as income.
The tax reform law passed last year would have made that "imputed" interest taxable to the resident. But the amendment to this year's bill, sponsored by Sen. John Heinz (R-Pa.), would specifically exempt the "imputed" interest from taxation for the first $90,000 invested in a life-care community.
Marriott has not yet opened the first of its communities, which will occupy 40 acres in Fort Belvoir, Va., and include tennis courts, a swimming pool and a fitness center. But it has hired former Ways and Means Committee chief counsel John J. Salmon and former Senate Finance Committee minority tax counsel David W. Hardee, both now lawyers with firms here, to lobby and do technical work on the proposal. Hardee did no lobbying in the Senate.
Marriott also has retained the lobbying firm of Gold & Liebengood Inc., including the services of Denise Bode, former tax aide to Senate Finance Committee member David L. Boren (D-Okla.). And Marriott's own lobbyists are working on the issue, although Marriott officials emphasize that a host of health-care and elderly-advocate groups, as well as other providers of the facilities, are also pushing the provision.
Heinz contends that his provision protects a way for elderly persons to turn the equity in their homes, which they often sell to pay the deposit, into a way to meet their living expenses for the rest of their lives. The life-care system reduces the cost to the government of medical care for the residents who would otherwise be covered by Medicaid, and gives the elderly more flexibility than they now have in providing for their future, Heinz said on the Senate floor.
Chafee says the exemption means that a senior citizen with $90,000 in the bank, earning taxable interest, pays more taxes than a person in otherwise identical circumstances who has made a refundable deposit of $90,000 to the life-care facility where he lives. One pays for his living expenses in pre-tax dollars, the other with the income left over after taxation.
"If we are going to do something for the elderly, let us treat them all the same," Chafee said. "Let us treat the person who does not have the amount to put into Marriott Corp., cannot pay the monthly charges that go along with these arrangements -- let that person have the same break." He proposed an amendment to create a tax-free account of up to $90,000 for all elderly persons, but it was defeated.
Chafee, Senate Majority Leader Robert J. Dole (R-Kan.) and five other senators unsuccessfully opposed the Heinz amendment when it was proposed in committee, and the Treasury Department also opposed it there and during the full Senate debate.
Stephen Norris, vice president for taxes of Marriott, pointing out that 100,000 senior citizens with an average age of 80 live in life-care facilities, said that doing away with the exemption would hurt the elderly.
"It makes it more costly for an elderly person to move into a facility that is more in keeping with that age," he said. "If it increases the cost, it narrows the number of people who have the ability to live in those facilities. . . . We think the health-care aspects simply outweigh tax concerns."