Borough considers tax break for seniors

Posted: Tuesday, August 13, 2002

The Kenai Peninsula Borough Assembly is considering an ordinance that would exempt senior citizens from paying sales taxes on the homes, apartments and rooms they rent as primary dwellings.

Ordinance 2002-34, introduced at the assembly meeting Aug. 6, would give residents over the age of 65 a break from the borough's 2-percent sales tax on rents.

The borough proposal mirrors one requested by Soldotna Mayor David Carey who wants seniors' rents exempted from that city's 5-percent sales tax.

Jeff Sinz, finance director for the borough, said it's a matter of fairness. Borough law already exempts seniors who own their primary residences from paying property taxes. In addition, he said, when they purchase their residences, either by a lump sum or through time payments, they pay no borough sales taxes.

"However, senior citizens who do not own but instead rent their permanent place of abode are subject to the payment of sales tax on their periodic rent payments," Sinz said in a memo to the assembly. "In addition, the property they rent may also be subject to property tax, which they might indirectly pay through the rent payments."

Thus, renting seniors may be hit with property taxes and sales taxes, where their property-owning counterparts are exempt from both, Sinz said. The proposed ordinance would not address any property tax payment hidden within rental payments but would eliminate the expense of the borough's sales tax.

That would "help reduce this inequity," Sinz said.

How much this would cost the borough cannot be accurately calculated, because there is no way now to know the total amount of rents that would be subject to the exemption, Sinz said. That is, there is no reporting category for senior renters.

The ordinance envisions development of a form that a prospective senior tenant would fill out attesting to his or her age eligibility for the tax exemption. Landlords merely would be required to keep such affidavits on file. They would not be required to verify a person's age, Sinz said.

To try to get some handle on at least a portion of any possible fiscal impact, the borough analyzed sales tax revenue generated by senior housing complexes, he said.

In 2001, the borough received $8,089 from senior complexes. The city of Soldotna got $7,739, while the city of Kenai took in $4,394. Senior citizen housing in Seward and Homer are exempted from city sales taxes and do not generate such revenues. Seldovia has no senior housing complex, Sinz said.

The actual impact of the proposed ordinance includes not only the amounts identified with the housing complexes, but also some unknown amount associated with senior rental housing provided outside of senior housing complexes, Sinz said.

Ordinance 2002-34 is scheduled for a public hearing at the assembly's Sept. 3 meeting.

If adopted as proposed, the ordinance would exempt residents over 65 from paying sales tax on rents paid for homes, apartments or rooms in a residential facility such as congregate housing or assisted living. The renter must have lived in the borough at least six months and be a resident of the state of Alaska.

The law also provides that the exemption would not be granted if any additional person under 65, other than the spouse of the senior, lives in the residential unit with the qualifying senior, unless the senior is the principal source of support for that person.

Assembly member Chris Moss of Homer said he doesn't think there will be much opposition to the proposed sales tax ordinance change. The question is when it would become effective if it should pass.

The borough's Sales Tax Com-mittee, made up of three members of the assembly and three from the administration, has been discussing several sales tax issues -- largely having to do with closing loopholes and other bookkeeping measures, he said. The issue is whether this ordinance would be handled as part of a package of sales tax amendments or on its own, Moss said.

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