TN 47 (07-99)

Citations:

Regulations, 20 CFR 416.1144

A. Introduction

A private nonprofit residential care institution is a facility that provides food, shelter, and some services to its residents. It is not a penal, educational, vocational, or medical treatment facility. Often, this type of facility is referred to as a rest home, a care home, or a retirement home.

For purposes of this section, nonprofit means an organization which is tax exempt under section 501(a) of the Internal Revenue Code and is of the kind described in section 501(c) or (d) of that code.

B. Policy - General

1. Individual or Third Party Pays for All Food and Shelter

When the individual or a third party pays for all of the food and shelter, the policies in this section do not apply. Instead, follow the basic policies and procedures in SI 00835.706 and SI 00835.707.

2. Some or All of Food and Shelter Paid for by Institution

When the nonprofit institution or its controlling organization is paying for at least some of the food and shelter, it is necessary to determine if one of the following policies applies:

a. ISM is Excluded When the “Church Amendment” Exclusion Applies:

Food and shelter provided by the institution are not countable as ISM if the “Church amendment” requirements for excluding ISM in SI 00835.710C.1. are met.

b. ISM is Countable When the “Church Amendment” Exclusion Does Not Apply:

If the “Church amendment” exclusion does not apply, the food and shelter provided by the institution is countable as ISM unless the support and maintenance assistance (SMA) exclusion in SI 00830.605 applies.

3. Donations vs. Third Party Payments

Nonprofit institutions frequently receive donations. In some cases friends or relatives of the resident make the donations. The following policies apply to donations:

1. Donations to the institution or its controlling organization are not considered third party payments toward the food and shelter provided to the eligible individual (even if the donation is made “in the name of” the eligible individual).

2. Donations to the institution do not count as ISM for the eligible individual (even if the donation is made “in the name of” the eligible individual).

C. Policy - Determining Whether the Support and Maintenance Exclusion (“Church Amendment”) Applies

1. When the Exclusion Applies

Based on a 1974 amendment to section 1612(a)(2)(A) of the Social Security Act (commonly called the “Church amendment”), the value of food and shelter provided to an eligible individual by a private nonprofit residential care institution is excluded from income when all of the following 3 criteria are met:

a. No Express Obligation to Provide Support

The institution or private organization controlling it does not have an express obligation to furnish full support and maintenance to the individual, regardless of whether the individual makes any payment for the food and shelter provided. See SI 00835.710D. for instructions on how to determine whether an express obligation exists.

b. Institution is Tax-Exempt

The institution (or the private organization controlling it) is tax exempt under section 501(a) of the Internal Revenue Code (IRC) and is of the kind described in section 501(c) or (d) of that code.

NOTE: Nonprofit organizations which are described in section 501(c) or (d) of the IRC include organizations operated for religious, educational, or charitable purposes; labor organizations; business leagues; clubs for recreation or pleasure; fraternal associations; voluntary employee associations; and war veterans' organizations.

c. Institution is Not Paid for Food and Shelter

The institution or private organization controlling it:

• provides some food and shelter to the individual for which it does not receive payment expressly on behalf of that individual; or

• receives payment only from another tax-exempt nonprofit organization which is of the kind described in section 501(c) or (d) of the IRC.

2. When ISM Exclusion Does Not Apply

The “Church amendment” exclusion does not apply unless all 3 of the requirements in
SI 00835.710C.1. are met. If this exclusion does not apply, the value of food and shelter which the institution provides is countable ISM unless another exclusion applies (e.g., the SMA exclusion in SI 00830.605).

NOTE: An institution may be a multiple purpose facility, e.g., it may provide both residential care and medical care. In such cases, an individual residing in the residential section of the institution might qualify for the exclusion. Although an individual in the medical section of the institution would not qualify for this exclusion, which is limited to residential facilities, the value of food and shelter received during a medical confinement is not income and is not ISM. (SI 00815.100).

D. Policy - Determining Whether an Express Obligation to Provide Full Support and Maintenance Exists

When a nonprofit institution or nonprofit organization has an express obligation to provide all of an individual's food and shelter, the “Church amendment” exclusion does not apply. This section provides the policies for determining whether an express obligation exists.

1. Express Obligation Based on Lump-Sum Prepayment

An express obligation exists when the following conditions are met:

1. There is a written enforceable agreement requiring the institution to provide lifetime care (at least all of an individual's food and shelter) in return for a lump-sum payment; and

2. No further payment (current or future) is required even if the individual is or becomes financially able to make such payments; and

3. No part of the lump-sum prepayment is refundable unless the individual leaves the institution.

NOTE: Current or future payments include agreements to transfer or convey property (income or resources) which may be acquired in the future.

EXAMPLE: Express Obligation Exists Based on Lump-Sum Payment

An eligible individual enters a private nonprofit tax-exempt retirement home which meets the requirements of section 501(c) of the IRC. Under a written, enforceable contract, he is required to make a lump-sum payment of $20,000. There is no requirement for any additional payments and none of the $20,000 is refundable unless he leaves the home. In return he will receive lifetime care (at least all of his food and shelter).

In this case the institution has undertaken an express obligation to provide full support and maintenance. Therefore, the “Church amendment” exclusion does not apply and ISM may be countable. Even if the individual decides later to make voluntary payments, the “Church amendment” exclusion would not apply since the institution must fulfill its contract regardless of any further contributions from the individual.

Because the “Church amendment” does not apply, the CR would need to determine if the food and shelter could be excluded under the SMA exclusion in SI 00830.605. If not excludable, then the CR would follow the procedures in SI 00835.707 to determine if the food and shelter provided is countable as ISM. In addition, the CR would follow the instructions in SI 00835.480D.3. to determine how the individual's lump-sum prepayment would be allocated as a contribution towards food and shelter costs.

2. Express Obligation Exists Based on Membership

An express obligation also exists when the following conditions are met:

1. There is a written document (e.g., signed certificate, bylaws, etc.) requiring the nonprofit institution itself or a related nonprofit organization to provide lifetime care (at least all of an individual's food and shelter); and

2. The lifetime care is provided as a result of membership of the individual, or that of a relative, in a certain organization (fraternal or religious order, union, etc.); and

3. There is no requirement of current or future payment for food and shelter.

NOTE: See SI 00810.700 for additional instructions about members of religious organizations and the vow of poverty.

EXAMPLE: Express Obligation Based on Membership

The widow of a deceased Mason becomes impoverished and is accepted as a resident in a Masonic retirement home. There is a written document which shows that the widow is allowed to reside in the Masonic home and she is to receive full support and maintenance (at least all of her food and shelter) by virtue of her late husband's membership in the Masons.

In this case the Masonic Lodge (a related nonprofit organization) has undertaken an express obligation to provide full support and maintenance for her lifetime. Therefore, the “Church amendment” exclusion does not apply. The fact that the widow may choose to surrender to the Lodge any income she receives (e.g., SSI) does not negate the existence of the express obligation. The Masonic Lodge must fulfill its obligations regardless of any payments received from her.

E. Reference

Income of Members of Religious Orders, SI 00810.700