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Senate Finance Committee approves S.127 as amended, removes Wake Robin tax exemption from bill
Summary
After drawn debate on whether monthly fees at continuing-care communities should be deductible as medical expenses, the Senate Finance Committee voted to approve S.127 as amended. Lawmakers removed a proposed tax exemption tied to Wake Robin and left further tax changes to other committees and appropriations analysis.
The Senate Finance Committee voted to approve S.127 as presented in draft 1.1 (03/26) after lengthy debate, leaving a proposed tax exemption for continuing-care facility fees out of the version the committee advanced.
The discussion centered on whether entrance fees and recurring monthly payments at so-called continuum-of-care facilities (Wake Robin was repeatedly cited) can be treated the same as long-term-care insurance for tax purposes. Committee members and legislative staff debated differences between federal treatment under IRS rules and Vermont’s current medical-expense deduction.
Kirby Keaton, Legislative Counsel, summarized Vermont’s position: “in Vermont, the deduction for medical expenses is limited because the entrance fees and recurring monthly payments, can be deducted in Vermont, but there’s a cap on that. You can’t get a deduction for the amount that exceeds the deductibility limits for premiums paid during the taxable year.” Keaton explained that Vermont applies the state standard deduction and personal exemption before allowing excess medical expenses, which produces a smaller state deduction than the federal treatment in many cases.
Staff and members cited two practical complications raised during testimony: the Wake Robin facility (which witnesses and staff described as the only continuing-care facility of its type in Vermont) has not provided a clear breakdown showing what portion of an entrance or monthly fee is attributable to medical care, and some analysts use a common allocation of roughly 30% of monthly fees as the portion attributable to long-term care. “There there is a standard that seems to be used and it may very well be accepted with IRS and that is 30%,” a committee member observed during the meeting.
Lawmakers pressed whether allowing the federal-style treatment statewide would create a large revenue loss; staff noted a fiscal-note estimate that following the federal exemption would reduce state revenue by about $500,000 annually. Members discussed alternatives, including a means-tested exemption (one proposal mentioned limiting the exemption to taxpayers with incomes under $160,000), or requiring facilities to break out the medical-cost percentage for residents.
Several senators said the policy question intersects with housing policy and the availability of middle-class senior housing in Vermont; supporters argued parity with federal rules could help preserve continuum-of-care options, while opponents called Wake Robin a high-end facility and urged caution about broad tax breaks when state revenues are constrained.
After debate and clarification that appropriations had already removed the standalone tax-expenditure language from the version across the hall, the committee voted to advance S.127 as amended (the tax-expenditure portion had been pulled from the amendment and placed with appropriations). The motion to approve S.127 as presented was made by Senator Chittenden. A roll-call was taken and the bill was recorded as approved by the committee; the excerpted transcript records recorded “yes” responses from several senators including Senator Beck, Senator Brock, Senator Matos, Senator Cummings and Senator Gullet, though the full roll call is not present in the transcript excerpt.
The committee left open further work on tax treatment of continuing-care fees. Members asked staff to provide clearer language and to confirm how double-dipping would be prevented (for example, ensuring a resident could not both take a federal-style percentage of monthly fees and separately claim the full federal long-term-care premium limit). Committee staff said they would follow up and legislators suggested a stand-alone bill or additional amendment in appropriations so the tax policy could be considered with a clear fiscal picture.
Votes: The committee approved S.127 as presented in draft number 1.1 (dated 03/26). The committee recorded the bill as approved; the transcript excerpt lists several senators answering “yes” during the roll call but does not include a full, explicit tally in this excerpt.
