HOUSE BILL NO. 674
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H0674...............................................by REVENUE AND TAXATION
SALES TAX - Repeals and adds to existing law to provide that certain
private and public organizations are exempt from the sales and use tax; to
define terms; to provide exceptions; and to provide procedures.
03/19 House intro - 1st rdg - to printing
03/20 Rpt prt - to Rev/Tax
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-ninth Legislature Second Regular Session - 2008
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 674
BY REVENUE AND TAXATION COMMITTEE
1 AN ACT
2 RELATING TO THE SALES AND USE TAX; PROVIDING LEGISLATIVE INTENT; REPEALING
3 SECTION 63-3622O, IDAHO CODE, RELATING TO EXEMPT PRIVATE AND PUBLIC ORGA-
4 NIZATIONS; AMENDING CHAPTER 36, TITLE 63, IDAHO CODE, BY THE ADDITION OF A
5 NEW SECTION 63-3622O, IDAHO CODE, TO PROVIDE THAT CERTAIN PRIVATE AND PUB-
6 LIC ORGANIZATIONS ARE EXEMPT FROM THE SALES AND USE TAX, TO DEFINE TERMS,
7 TO PROVIDE EXCEPTIONS AND TO PROVIDE PROCEDURES; AND PROVIDING AN EFFEC-
8 TIVE DATE.
9 Be It Enacted by the Legislature of the State of Idaho:
10 SECTION 1. LEGISLATIVE INTENT. It is the intent of this act to provide
11 exemptions to the State Sales and Use Tax to those nonprofit organizations and
12 governmental entities that provide assistance for charitable, health, educa-
13 tional, scientific and public safety endeavors.
14 SECTION 2. That Section 63-3622O, Idaho Code, be, and the same is hereby
16 SECTION 3. That Chapter 36, Title 63, Idaho Code, be, and the same is
17 hereby amended by the addition thereto of a NEW SECTION, to be known and des-
18 ignated as Section 63-3622O, Idaho Code, and to read as follows:
19 63-3622O. EXEMPT PRIVATE AND PUBLIC ORGANIZATIONS. (1) There are exempted
20 from the taxes imposed by this chapter sales to or purchases by the state of
21 Idaho and its agencies and its political subdivisions:
22 (a) For the purposes of this section, "political subdivision" means:
23 (i) A governmental organization that:
24 1. Embraces a certain territory;
25 2. Is organized for public advantage and not in the interest of
26 private individuals or classes;
27 3. Has been delegated functions of government; and
28 4. Has the statutory power to levy taxes; or
29 (ii) A public health district created pursuant to section 39-408,
30 Idaho Code; or
31 (iii) A soil conservation district as defined in section 22-2717,
32 Idaho Code; or
33 (iv) A drainage district created pursuant to chapter 29, title 42,
34 Idaho Code; or
35 (v) An irrigation district created pursuant to title 43, Idaho
36 Code; or
37 (vi) A state grazing board created pursuant to section 57-1204,
38 Idaho Code; or
39 (vii) A water measurement district created pursuant to section
40 42-705 or 42-706, Idaho Code; or
41 (viii) A ground water management district created pursuant to chapter
1 51, title 42, Idaho Code; or
2 (ix) A cooperative service agency created pursuant to section
3 33-317, Idaho Code; or
4 (x) An urban renewal agency or district created pursuant to chap-
5 ter 20 or 29, title 50, Idaho Code.
6 (b) "Agency of the state of Idaho" means an office or organization cre-
7 ated by the constitution or statutes of this state and constituting a com-
8 ponent part of the executive, judicial or legislative branch of the gov-
9 ernment of this state.
10 (c) Nonprofit resource management and protective organizations and asso-
12 (d) Emergency response organizations and associations.
13 (2) There are exempted from the taxes imposed by this chapter sales to
14 and purchases by:
15 (a) Nonprofit hospitals licensed under chapter 13, title 39, Idaho Code;
17 (b) Nonprofit educational institutions; and
18 (c) Volunteer fire departments or licensed emergency medical service
19 agencies; and
20 (d) Forest protective associations; and
21 (e) Canal companies.
22 (3) (a) For the purposes of this section "educational institution" shall
23 mean nonprofit colleges, universities and other primary and secondary
24 schools, the income of which is devoted solely to education and in which
25 systematic instruction in the usual branches of learning is given. An edu-
26 cational institution must maintain a regular faculty and curriculum and
27 have a regularly enrolled body of pupils or students in attendance at the
28 place in this state where its educational activities are regularly carried
29 on. This definition does not include schools primarily teaching business,
30 dancing, dramatics, music, cosmetology, gymnastics, exercise and other
31 special accomplishments nor parent-teacher associations, parent groups,
32 alumni or other auxiliary organizations with purposes related to the edu-
33 cational function of an institution or collective group of institutions. A
34 museum shall qualify as an educational institution if it is a nonprofit
35 entity, provides services or access free of charge or for a reduced fee to
36 low-income patrons or shall provide substantive programming free of charge
37 to communities or educational institutions for the scientific, cultural or
38 artistic enrichment of Idaho's school children or adult residents.
39 (b) For the purposes of this section "volunteer fire department" means an
40 entity exempt from federal income taxation under section 501(c)(3) of the
41 Internal Revenue Code and which primarily provides fire protection on a
42 not-for-profit basis to surrounding residents.
43 (c) For the purposes of this section, "licensed emergency medical service
44 agency (EMS)" means an emergency medical service licensed by the EMS
45 bureau of the department of health and welfare and which is exempt from
46 federal income taxation under section 501(c)(3) of the Internal Revenue
47 Code and that provides emergency medical services on a not-for-profit
49 (d) For the purposes of this section, "forest protective associations"
50 means associations whose purpose is the furnishing, operating and main-
51 taining of a protective system for the detection, prevention and suppres-
52 sion of forest or range fires. Forest protective associations shall
53 include only those associations with which the state of Idaho has con-
54 tracted or become a member of pursuant to chapter 1, title 38, Idaho Code.
55 (e) For the purposes of this section "canal companies" means nonprofit
1 corporations that are incorporated solely for the purpose of operating and
2 maintaining dams, reservoirs, canals, lateral and drainage ditches, pumps
3 or pumping plants.
4 (4) Organizations that are not exempt under subsections (1) and (2) of
5 this section may qualify for an exemption from sales and use tax and become
6 eligible for a refund of sales taxes paid on purchases of items used primarily
7 for charitable purposes in the performance of the organization's regular char-
8 itable functions.
9 (a) Qualifying organizations shall be those exempt from income taxes
10 under section 501(c)(3) of the Internal Revenue Code and qualify as a
11 charitable direct service organization in that:
12 (i) They advance the public purpose, donate, render gratuitously or
13 at a reduced rate a substantial portion of their services to the per-
14 sons who are the subject of their charitable services; and
15 (ii) They are not-for-profit organizations whose budgets and opera-
16 tions are dedicated to benefitting a substantial and indefinite class
17 of persons who are legitimate subjects of charity; and
18 (iii) Such charitable direct service organizations provide services
19 that are otherwise required to be provided by a local government, the
20 state of Idaho and its agencies or the federal government. Such ser-
21 vices are intended to include, but are not limited to, lifesaving
22 services; direct health and mental health and substance abuse treat-
23 ment, recovery, support and prevention services; medical, dental,
24 psychological, nutritional, shelter or other therapeutic, support and
25 advocacy services which, if not provided by government, can be demon-
26 strated to produce outcomes which reduce the need for government ser-
27 vices from the department of health and welfare, department of cor-
28 rection, county indigent health care, law enforcement and other wel-
29 fare, crisis care, treatment or correctional facilities.
30 (b) Other than organizations providing services to individuals based on
31 age, gender or the presence of a disability or a specific medical condi-
32 tion, to qualify for the refund, the organization must offer services to
33 recipients regardless of race, religion and other classifications
34 described in section 67-5909, Idaho Code.
35 (c) Organizations have applied to the tax commission for approval and,
36 having received approval for an exemption under this section, may apply
37 for qualifying refunds at the end of each calendar quarter; however, an
38 organization shall not file a quarterly claim of refund for purchases
39 totaling less than three thousand dollars ($3,000) in the aggregate. Qual-
40 ified organizations may file for an annual refund of taxes paid on quali-
41 fied purchases after December 31 for any calendar year, regardless of
42 whether the value of the purchases for the year claimed total three thou-
43 sand dollars ($3,000) in the aggregate. Interest does not apply to amounts
44 refunded. Refunds must be claimed within three (3) years of the end of the
45 quarter in which the qualifying purchases were made.
46 (d) The exemption provided by subsection (4) of this section does not
47 apply to sales and purchases of motor vehicles except for trucks, buses or
48 passenger vehicles, if the vehicle is designed and used for carrying more
49 than nine (9) persons including the driver, intended to be used primarily
50 to transport tangible personal property or individuals, other than employ-
51 ees, to whom the organization provides service in performing its charita-
52 ble, religious or educational purpose.
53 (5) There is exempted from the taxes imposed by this chapter, the sale of
54 temporary lodging by a nonprofit organization whose primary purpose is to pro-
55 vide lodging to families of individuals requiring hospitalization.
1 (6) There are exempted from the taxes imposed by this chapter, sales of
2 admissions to museums. "Museum" means a public institution or entity exempt
3 from income tax pursuant to section 501(c)(3) of the Internal Revenue Code,
4 which stores, preserves and exhibits objects of art, history, science or other
5 objects of historical, educational or cultural value on a permanent basis in a
6 building, portion of a building or outdoor location and that provides museum
7 services to the public on a regular basis.
8 (7) The exemption granted by subsection (1) of this section does not
9 include any association or other organization whose members are political sub-
10 divisions or state agencies unless the organization is expressly created under
11 the joint powers provision of sections 67-2328 through 67-2333, Idaho Code.
12 (8) In addition to the requirements set forth in this section, an organi-
13 zation is created for charitable or educational purposes if:
14 (a) No part of the net earning of any such organization inures to the
15 benefit of a private shareholder, individual or entity;
16 (b) The business of the organization is not conducted for profit;
17 (c) No substantial part of the business of the organization is devoted to
18 the advocacy of any political principle or the defeat or passage of any
19 state or federal legislation;
20 (d) The organization does not participate or intervene in any political
21 campaign on behalf of or in opposition to any candidate for public office;
22 (e) Any property sold to the entity for which an exemption is claimed is
23 used by the organization in this state in furtherance of the charitable or
24 educational purposes of the organization.
25 (9) The exemption granted by subsection (1) of this section does not
26 include the use of tangible personal property by a contractor used to improve
27 real property of an exempt entity when such use is within the definition pro-
28 vided by section 63-3615(b), Idaho Code, whether the use tax liability is
29 included in a contract total or stated separately in a contract.
30 (10) The state tax commission may promulgate rules to implement the provi-
31 sions of this section and state criteria for the application process for
32 refund and additional criteria for qualification by organizations as the state
33 tax commission deems necessary.
34 (11) Any person or entity aggrieved by a decision of the state tax commis-
35 sion may appeal in the following manner. Process and procedure before the
36 state tax commission shall be as summary and simple as reasonably may be, and,
37 as far as possible, in accordance with the rules of equity. Process and proce-
38 dure before the state tax commission pursuant to this section are not con-
39 tested cases within the meaning of chapter 52, title 67, Idaho Code.
40 SECTION 4. This act shall be in full force and effect on and after July
41 1, 2009.
STATEMENT OF PURPOSE
This legislation simplifies Idaho's statutes addressing
exemptions to the sales tax. For years, individual non-profit entities
have approached the legislature one by one to be named in this statute
and thus exempted from the obligation to pay taxes on their purchases.
This legislation reorganizes this section of code for clarity and
creates global exemptions which encompass the exemptions provided by
the previous statute without naming entities.
The effect will be to create consistent tax policy by creating
classes of entities that are exempt. In every way possible, this bill
attempts to include in the exemption all entities named in the
previous statute. The result is that entities similar to those
previously exempt will now also qualify for this exemption but will
not have to seek approval from the legislature to be included.
This legislation also provides new accountability provisions to
reduce the possibility of improper use of the exemption. Under these
provisions, charitable, non-profit direct service organizations will
apply to the tax commission to qualify for the exemption. For
qualified non-profits, the exemption will then be granted in the form
of a refundable credit.
The tax commission estimates between $200,000 and $300,000.
Name: Rep. Nicole LeFavour
STATEMENT OF PURPOSE/FISCAL NOTE H 674