Friendship Retirement Community, a non-profit organization that operates skilled nursing and healthcare centers, assisted living facilities, memory care facilities, and independent living apartments/cottages for the elderly and/or disabled in Roanoke County, Virginia, filed a lawsuit today against Roanoke County and P. Jason Peters, Commissioner of the Revenue, challenging the County’s denial of the tax-exempt status of its properties at Richfield Living.
Friendship purchased Richfield Living in October 2023. Both Friendship and Richfield Living have a 50+ year history of operating as nonprofit, senior living communities used exclusively for charitable and benevolent purposes. The purchase allowed Richfield to remain locally owned and operated rather than being sold in pieces to for-profit, out-of-town companies. Friendship has been able to maintain the same level of care, service and housing for approximately 550 Richfield Living residents without significantly increasing rates or making substantive changes to the services across the campus.
In 1987, the General Assembly of Virginia passed legislation that exempted Richfield Living property in Roanoke County and Friendship property in Roanoke County from local real estate taxes. Subsequently, Roanoke County recognized Richfield Living and Friendship property located in Roanoke County as exempt from real estate taxation. In relation to the tax-exempt properties, Richfield Living and Friendship paid a service fee to Roanoke County in lieu of real estate taxes, which amounts to 20% of the real estate tax levies that would be applicable to the properties if they were not exempt from taxation. When Friendship completed its due diligence in purchasing Richfield Living in 2023, it was with the expectation that the Richfield Living property would retain its tax-exempt status.
Just five weeks after purchasing Richfield Living, Roanoke County indicated its intention to raise the assessed value of the Richfield Living property by more than 41% from the prior year. After finding the County had many factual errors in its assessment of the property, Friendship asked Roanoke County to confirm that the property would continue to receive tax exempt status as it had since 1987. Roanoke County representatives told Friendship that the County would no longer consider the Richfield Living property to be tax exempt. The newly assessed property value combined with the loss of tax-exempt status on its Richfield Living property resulted in a 472% increase in Friendship Richfield Living’s annual taxes.
Despite both Friendship and Richfield Living being exempt from taxation under 26 USCA § 501(c)(3) and the continued charitable use of the property, Roanoke County assessed the property as they would a for-profit entity. The potential financial impact of the position taken by Roanoke County is substantial.
Friendship’s lawsuit makes two main claims:
1. Declaratory Judgment: Friendship seeks a court order declaring the property exempt from local taxation under Virginia Code § 58.1-3601, which we believe requires property exempt from taxation that is sold to a person having tax-exempt status to remain exempt from real estate taxation.
2. Relief from Erroneous Tax Assessment: Friendship argues that even if the property is not exempt, the County’s assessed value is erroneous and does not reflect the fair market value.
Hoff said, “Over the past year, Friendship has tried to work with Roanoke County administrative and elected officials to find an amicable resolution to no avail. Any home or business owner facing a nearly 500% tax increase would naturally question the reasonableness of the County’s position. The County’s lack of reasonable response left Friendship in an untenable position with only the legal system available to find an equitable solution.”
Friendship Retirement Community is a nonprofit senior living community that offers a variety of housing and on-site healthcare services to serve a wide range of residents, including those with limited financial means.
