Were rental charges at a structured transitional-housing and treatment facility exempt from Florida sales tax?

Plain-English summary

Florida concluded that rental charges at the transitional-housing facility were exempt from sales tax because its residents depended on special care and attention. The facility provided more than a room: it imposed significant structure and services for people recovering from substance abuse and other illnesses.

The nonprofit operated an 88-room, single-room-occupancy building. Its clients included people experiencing homelessness, people with mental-health and substance-use conditions, and veterans. Each resident was assessed and received a Living and Treatment Plan intended to prepare the resident to return to the community after two years.

Residents had to work and pay rent or, if unable to work, have another source of income for rent. Three meals a day were included in the payment.

The facility fit the special-care exemption

Section 212.08(7)(i) exempted rentals and meals for patients and inmates of a hospital or other facility designed and operated primarily for people who were ill, aged, infirm, mentally or physically incapacitated, or otherwise dependent on special care or attention.

The Department found that these residents required significant help to recover from addictions or other illnesses. The facility's structure, services, and two-year treatment plan placed the rental charges within the exemption.

The agreement's label did not control

The organization had considered replacing resident leases with a Living Agreement and Treatment Plan because leases limited searches for drugs. Florida said the tax exemption did not depend on whether the occupancy document was called a lease or a Living Agreement and Treatment Plan.

What this means for you

Transitional and supportive housing providers

Document the facility's primary care purpose, resident assessments, treatment or living plans, services, staffing, rules, and the residents' need for special care or attention.

Nonprofit and facility managers

Nonprofit status appeared in the facts, but the Department's determination centered on the facility and resident-care test in section 212.08(7)(i). Do not rely on a 501(c)(3) designation alone.

Accountants and tax professionals

Analyze the substance of the facility's operations and resident population. The contract label did not alter the result on these facts.

Common questions

Q: Were the facility's rental charges taxable?
A: No. They fell within the exemption for a qualifying special-care facility.

Q: Why did the residents qualify?
A: The Department found that they required significant help to recover from addiction or other illnesses.

Q: Did using a lease instead of a treatment agreement matter?
A: No. The ruling said either label produced the same exempt result.

Q: Did the ruling rest on the organization's federal nonprofit status?
A: The ruling mentioned its section 501(c)(3) designation, but the determination applied the facility-and-resident test in section 212.08(7)(i).

Citations and references

• Fla. Stat. § 212.08(7)(i) — rentals and meals at qualifying care facilities
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 03A-059

Original ruling text

SUMMARY

QUESTION: What is the taxable status of living
accommodations in a transitional housing facility, where
the residents consists of the homeless, the mentally ill,
and recovering drug addicts?

ANSWER - Based on Facts Below: The rental charges would
fall within the exemption provided for rentals to residents
of a "... facility designed and operated primarily for the
care of persons who are... dependent on special care or
attention."

Dec 11, 2003

Re: Technical Assistance Advisement 03A-059
XXX ["Organization"]
Sales and Use Tax - Living Accommodations
Section 212.08(7)(i), F.S.

Dear :

This is in response to your letter of September 26, 2003, in
which you request the issuance of a Technical Assistance
Advisement regarding the taxable status of certain rentals of
living accommodations, with the Organization being the lessor.
Your letter provides in part:

[Organization has] opened an 88-room building (single room
occupancy) for Transitional Housing. [Organization's]
clients consist of some Homeless, dual diagnosed, mental,
drug, and forty veterans. When they enter [Organization's]
building, an assessment is done, and [Organization] map[s]
out a Living and Treatment Plan that will make them ready,
after two years, to enter back into the community. While
they live at [Organization's] facility, they have to work
and pay rent. If they are unable to work, they must have
some kind of income to pay their rent. Included in their

rent payment, they are given three meals a day.

[Organization has] a professional management company
managing the building, and... the management company
recommended that [Organization entered into leases with its
clients]. Because the lease[s have] tied [Organization's]
hand in many areas regarding searches for drugs, [it] would
like to eliminate the lease, and only use a Living
Agreement and Treatment Plan....

You have indicated that the Organization has received a section
501(c)(3) designation from the Internal Revenue Service.

DETERMINATION

Section 212.08(7)(i), Florida Statutes, provides in pertinent
part:

(i) Hospital meals and rooms. - Also exempt from payment of
the tax imposed by this chapter on rentals and meals are
patients and inmates of any hospital or other physical
plant or facility designed and operated primarily for the
care of persons who are ill, aged, infirm, mentally or
physically incapacitated, or otherwise dependent on special
care or attention.... (Emphasis Supplied)

At issue is the charge imposed for residing in dwellings that
not only provide living accommodations, but also provide
significant structure and a host of services to those recovering
from substance abuse or other illnesses. The clients reside in
the facility pursuant to a Living and Treatment Plan that will
allow them, upon completing the two-year plan, to enter back
into society.

The residents in the facility at issue appear to be individuals
that are "dependent on special care and attention." That is,
these individuals require significant help in order to recover
from their addictions or other illnesses. As such, the rental
charges to these individuals would fall within the exemption
provided in section 212.08(7)(i), Florida Statutes, for rentals
to inmates of a "... facility designed and operated primarily

for the care of persons who are... dependent on special care or
attention." Whether the arrangement was designated as a lease or
whether it was designated as a "Living Agreement and Treatment
Plan" would not affect the exempt nature of the arrangement.

CLOSING STATEMENT

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S. which is binding on the department only
under facts and circumstances described in the request for this
advice as specified in s. 213.22, F.S. Our response is
predicated on those facts and the specific situation summarized
above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment than
expressed in this response.

You are further advised that this response, your request and
related backup documents are public records under Chapter 119,
F.S., which are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Your name, address, and any other
details which might lead to identification of the taxpayer must
be deleted by the Department before disclosure. In an effort to
protect the confidentiality of such information, we request you
provide the undersigned with an edited copy of your request for
Technical Assistance Advisement, backup material and response
within fifteen days of the date of this advisement.

Sincerely,
Jonathan E. Swift
Tax Law Specialist
Technical Assistance and Dispute Resolution
(850) 922-4840

Control #57392