2008 Legislation
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HOUSE BILL NO. 674<br /> – Sales tax, organizations, exempt


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Bill Status

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

Bill Text

  ]]]]              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
  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
 15    repealed.

 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-
 11        ciations;
 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;
 16        and
 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
 48        basis.
 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 / Fiscal Impact

                       STATEMENT OF PURPOSE

                             RS 18091

     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.

                          FISCAL IMPACT

The tax commission estimates between $200,000 and $300,000.

Name: Rep. Nicole LeFavour 
Phone: 208-724-0468

STATEMENT OF PURPOSE/FISCAL NOTE                           H 674