For seniors, tax-free condo association fees unlikely

It is unlikely that the city will try to find a way to make condo association fees tax exempt for seniors, even though these fees often include utilities that would otherwise be considered tax free by the city, according to the city finance director.

 

The marathon public-comment portion of Monday’s City and Borough of Juneau Assembly meeting was one for the books. Seniors turned out in droves to speak against an ordinance restricting the senior sales tax exemption, which the Assembly ultimately passed 7-2.

After the nearly two hours of comments from almost 40 people, Assembly members had heard reasons not to pass the ordinance. They had heard threats of a senior exodus and some seniors wrote letters to the Empire urging tax-free online purchasing. And city officials on Monday heard at least one question that city Finance Director Bob Bartholomew has been working to answer since.

During the public-comment period, Tom Perkins asked the Assembly what it planned to do about condo association fees, which often include some of the “essential purchases” that seniors will still be exempted from paying taxes on. These fees can include electricity, heating fuel, garbage and water, and wastewater, or a mix of any and all of those mentioned, Perkins told the Assembly.

Taking Perkins’ concern to heart, Assemblywoman Mary Becker asked Bartholomew to assess the feasibility of making condo fees tax exempt for seniors and to report back to the Assembly with his findings.

Bartholomew doesn’t have an official report ready, and he doesn’t think he will until mid-October. But as for now, he doesn’t think Juneau’s seniors will be seeing tax-free condo fees any time soon.

“You start going down a rabbit hole of issues with that,” he said.

And that rabbit hole is an administrative boondoggle.

Currently, the senior sales tax exemption can only be applied to items purchased directly by seniors. This means that if a condo association buys heating fuel in bulk — as many do, according to Bartholomew — the city can’t then give a tax exemption to seniors who purchase that fuel from the association in the form of a condo fee.

“If the purchase is made by a senior, it’s exempt,” Bartholomew said. “If it’s made by a business or association, there’s not a good way to administer or keep track of how much is exempt and how much isn’t.”

What complicates this matter further is that, as far as Bartholomew knows, there aren’t any condominium complexes that market exclusively to seniors. This makes it difficult to determine which condo associations the city would be able to provide with exemptions.

“The main challenge is having to treat all the situations or all the associations the same,” Bartholomew said. “To treat everybody fairly, you can’t just give it to the condos that are all seniors. There’s no simple way to implement this.”

Implementation would likely require some form of pro-rata system to make sure that senior condo owners everywhere are able to benefit from their tax-exempt status, Bartholomew said. But even then there would be problems. The city would have to start tracking who is living in each condo to make sure that young people aren’t renting from seniors and receiving an exemption for utilities.

The good news, however, is that the majority of utilities condo owners pay aren’t tied to association fees, Bartholomew said.

“Usually what’s communal is the heating system,” Bartholomew said. “That and the garbage.”

Which means that for many seniors living in condos, electricity, water and wastewater utilities will still be tax free.

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