washington state and local taxation of nonprofit …...b&o tax & nonprofits – special...
TRANSCRIPT
![Page 1: Washington State and Local Taxation of Nonprofit …...B&O Tax & Nonprofits – Special Problems 9 •Contributions, Donations and Grants –Are significant goods, services or benefits](https://reader034.vdocument.in/reader034/viewer/2022042305/5ed1289a6480da46ab6a6109/html5/thumbnails/1.jpg)
WashingtonStateandLocalTaxationofNonprofitOrganizations
PresentedbyBobHellerClarkNuberP.S.
November 2, 2017Seattle, Washington
![Page 2: Washington State and Local Taxation of Nonprofit …...B&O Tax & Nonprofits – Special Problems 9 •Contributions, Donations and Grants –Are significant goods, services or benefits](https://reader034.vdocument.in/reader034/viewer/2022042305/5ed1289a6480da46ab6a6109/html5/thumbnails/2.jpg)
NonprofitsPayStateandLocalTaxesinWashington
• UnliketheFederalGovernment,WashingtonStatehasnogeneraltaxexemptionfornonprofits
• Potentiallyapplicabletaxes:– WashingtonBusinessandOccupation(B&O)tax– CityB&Otaxes– Retailsales/usetaxes– Realandpersonalpropertytaxes– Stateincome/franchisetaxes(otherstates)
• Stateregistrationrequirements– Taxesapplyto“persons”– Awordaboutorganizationalstructure
2
![Page 3: Washington State and Local Taxation of Nonprofit …...B&O Tax & Nonprofits – Special Problems 9 •Contributions, Donations and Grants –Are significant goods, services or benefits](https://reader034.vdocument.in/reader034/viewer/2022042305/5ed1289a6480da46ab6a6109/html5/thumbnails/3.jpg)
Business&OccupationTax• Natureofthetax
– Businessprivilegetax– Imposedonallbusinessactivity– Notanetincometax(nodeductionsforthecostofdoingbusiness)
• Classifications– Determinedbasedonnatureofactivity– Over30classifications– Differentmeasures(taxbase)andtaxrates
![Page 4: Washington State and Local Taxation of Nonprofit …...B&O Tax & Nonprofits – Special Problems 9 •Contributions, Donations and Grants –Are significant goods, services or benefits](https://reader034.vdocument.in/reader034/viewer/2022042305/5ed1289a6480da46ab6a6109/html5/thumbnails/4.jpg)
Business&OccupationTax
4
• Commonclassifications– Retailing
• Grossproceedsofsale/.471%
– Wholesaling• Grossproceedsofsale/.484%
– Manufacturing• ValueofproductsmanufacturedinWashington/.484%
– Service&Other• Grossincomeofthebusiness/1.5%
![Page 5: Washington State and Local Taxation of Nonprofit …...B&O Tax & Nonprofits – Special Problems 9 •Contributions, Donations and Grants –Are significant goods, services or benefits](https://reader034.vdocument.in/reader034/viewer/2022042305/5ed1289a6480da46ab6a6109/html5/thumbnails/5.jpg)
B&OTaxDeductions,Exemptions,ExclusionsforAllTaxpayers
• Wages• Investmentincome• Smallbusinesscredit• Realestateexemption• Baddebts• Cashandtradediscounts• Advancesandreimbursements
– Agency– Noliabilitytothirdpartyexceptasagent
5
![Page 6: Washington State and Local Taxation of Nonprofit …...B&O Tax & Nonprofits – Special Problems 9 •Contributions, Donations and Grants –Are significant goods, services or benefits](https://reader034.vdocument.in/reader034/viewer/2022042305/5ed1289a6480da46ab6a6109/html5/thumbnails/6.jpg)
NonprofitB&OTaxExemptions
• Exemptionsarestrictlyconstruedinfavoroftaxationandagainstexemption.Theorganizationhastomeetalltherequirementsforexemption.
• Basicconsiderations– Who(entitybased)?– What(revenuebased)?– How(activitybased)?
6
![Page 7: Washington State and Local Taxation of Nonprofit …...B&O Tax & Nonprofits – Special Problems 9 •Contributions, Donations and Grants –Are significant goods, services or benefits](https://reader034.vdocument.in/reader034/viewer/2022042305/5ed1289a6480da46ab6a6109/html5/thumbnails/7.jpg)
NonprofitB&OTaxExemptions
7
• Entitybased– AmericanRedCross– Bloodbanksandtissuebanks– Comprehensivecancercenters– Organprocurementorganizations– Shelteredworkshops,adultfamilyhomes– Creditunions– TheWashingtonhealthbenefitexchange– DepartmentsandinstitutionsoftheStateofWashington
![Page 8: Washington State and Local Taxation of Nonprofit …...B&O Tax & Nonprofits – Special Problems 9 •Contributions, Donations and Grants –Are significant goods, services or benefits](https://reader034.vdocument.in/reader034/viewer/2022042305/5ed1289a6480da46ab6a6109/html5/thumbnails/8.jpg)
NonprofitB&OTaxExemptions
8
• Revenuebased– Membershipduesandinitiationfees– Contributionsanddonations– Grantsandsponsorship– Tuitionfees
• Activitybased– Fundraising– Healthorsocialwelfareservices– Legalservicestolowincomepersons– Creditcounseling– Daycareprovidedbychurches
![Page 9: Washington State and Local Taxation of Nonprofit …...B&O Tax & Nonprofits – Special Problems 9 •Contributions, Donations and Grants –Are significant goods, services or benefits](https://reader034.vdocument.in/reader034/viewer/2022042305/5ed1289a6480da46ab6a6109/html5/thumbnails/9.jpg)
B&OTax&Nonprofits–SpecialProblems
9
• Contributions,DonationsandGrants– Aresignificantgoods,servicesorbenefitsprovidedtothe“donor”inexchangeforthegiftorgrant?
– Normalaccountabilityprovisionsareacceptableunlesstheyresultinadirectbenefittothedonor.
• FundraisingActivities– Fundraisingactivitiesareexempt,unlessconductedata“regularplaceofbusiness”thatkeepsregularbusinesshours.
– Definitionofregularbusinesshoursmayvarydependingontypeofbusinessbeingconducted.
![Page 10: Washington State and Local Taxation of Nonprofit …...B&O Tax & Nonprofits – Special Problems 9 •Contributions, Donations and Grants –Are significant goods, services or benefits](https://reader034.vdocument.in/reader034/viewer/2022042305/5ed1289a6480da46ab6a6109/html5/thumbnails/10.jpg)
SpecialProblems(Cont.)• FormofOrganizationandGovernance
– HealthorSocialWelfareOrganizationsmustbeorganizedunderChap.24.03RCW
– ArtisticorCulturalOrganizationsmustbefor“organizedandoperatedexclusivelyforthepurposeofprovidingartisticorculturalexhibitions,presentations,orperformancesorculturalorarteducationprograms...forviewingorattendancebythegeneralpublic.”
– BoardComposition• HealthorSocialWelfareandArtisticofCulturalOrganizationmustbemanagedbyagoverningboardofnotlessthaneightindividualsnoneofwhomisapaidemployeeoftheorganization.
• Executivedirectorasboardmembernotpermitted(maybeanon-memberadvisor)
• Employeesofaffiliateentitiesmaybeaproblem
10
![Page 11: Washington State and Local Taxation of Nonprofit …...B&O Tax & Nonprofits – Special Problems 9 •Contributions, Donations and Grants –Are significant goods, services or benefits](https://reader034.vdocument.in/reader034/viewer/2022042305/5ed1289a6480da46ab6a6109/html5/thumbnails/11.jpg)
SpecialProblems(Cont.)• CostSharing
– Eachlegallyrecognizedentityisaseparatetaxable“person”underWashingtontaxlaw
– Inter-entitychargesaretaxable– Advances/reimbursementsareproblematicandrequirea
particularformtobenontaxable
• Purchases– Software– Digitalgoodsandservices– Telecommunicationsservices
![Page 12: Washington State and Local Taxation of Nonprofit …...B&O Tax & Nonprofits – Special Problems 9 •Contributions, Donations and Grants –Are significant goods, services or benefits](https://reader034.vdocument.in/reader034/viewer/2022042305/5ed1289a6480da46ab6a6109/html5/thumbnails/12.jpg)
SpecialProblems(Cont.)• MembershipOrganizations
– Membershipdues– Conferencesandseminars
![Page 13: Washington State and Local Taxation of Nonprofit …...B&O Tax & Nonprofits – Special Problems 9 •Contributions, Donations and Grants –Are significant goods, services or benefits](https://reader034.vdocument.in/reader034/viewer/2022042305/5ed1289a6480da46ab6a6109/html5/thumbnails/13.jpg)
CityTaxes
• CityB&Otaxes:Seattle,Bellevue,Tacoma,Everett,36othercities
• B&Otaxapportionmentrules• Squarefootagetax:largerB&Otaxcities• Headtax:variousnon-B&Otaxcities• Seattleparkingtax• Admissiontax
![Page 14: Washington State and Local Taxation of Nonprofit …...B&O Tax & Nonprofits – Special Problems 9 •Contributions, Donations and Grants –Are significant goods, services or benefits](https://reader034.vdocument.in/reader034/viewer/2022042305/5ed1289a6480da46ab6a6109/html5/thumbnails/14.jpg)
SalesTax• Taxonsales/rentalsoftangiblepersonalpropertyandspecificservices
• Paidbytheconsumer
• Collectedbytheseller
• Purchasesforresale– mustobtainresellerpermitfromDepartmentofRevenueinadvanceofmakingpurchases
![Page 15: Washington State and Local Taxation of Nonprofit …...B&O Tax & Nonprofits – Special Problems 9 •Contributions, Donations and Grants –Are significant goods, services or benefits](https://reader034.vdocument.in/reader034/viewer/2022042305/5ed1289a6480da46ab6a6109/html5/thumbnails/15.jpg)
SalesTaxExemptions• AmericanRedCross• Foodandfoodingredients• Salestoartisticorculturalorganizations• Salesofmedicalsuppliestobloodbanks,tissuebanks,organprocurementorganizationsandcomprehensivecancercenters
• Amusementandrecreationservicesprovidedbyyouthorganizations
• Manufacturingmachineryandequipment• Fundraisingsales
![Page 16: Washington State and Local Taxation of Nonprofit …...B&O Tax & Nonprofits – Special Problems 9 •Contributions, Donations and Grants –Are significant goods, services or benefits](https://reader034.vdocument.in/reader034/viewer/2022042305/5ed1289a6480da46ab6a6109/html5/thumbnails/16.jpg)
UseTaxandNonprofits
• Companiontosalestax– samerate• Everyoneowesusetaxonpropertypurchasedforuseinthestatewhennosalestaxiscollectedbytheseller
• Generallyparallelexemptionsfromsalestaxandusetax
• Usetaxisnotdueondonateditems– Donoralsoexempt
![Page 17: Washington State and Local Taxation of Nonprofit …...B&O Tax & Nonprofits – Special Problems 9 •Contributions, Donations and Grants –Are significant goods, services or benefits](https://reader034.vdocument.in/reader034/viewer/2022042305/5ed1289a6480da46ab6a6109/html5/thumbnails/17.jpg)
PropertyTaxOverview
• Allpropertyisassumedtobetaxableunlessaspecificexemptionexists
• Exemptionsareconstruednarrowlyinfavoroftaxation
• TheDepartmentofRevenueischargedwithadministeringpropertytaxexemptions,includingdisseminatinginformationtotaxpayers
![Page 18: Washington State and Local Taxation of Nonprofit …...B&O Tax & Nonprofits – Special Problems 9 •Contributions, Donations and Grants –Are significant goods, services or benefits](https://reader034.vdocument.in/reader034/viewer/2022042305/5ed1289a6480da46ab6a6109/html5/thumbnails/18.jpg)
WhatisaPropertyTaxExemption?
• Exemptionscoverrealandpersonalpropertytaxandleaseholdexcisetax
• Doesnotexemptanorganizationfromothercountyimposedfees
• Notautomatic,exemptionsrequireanapplicationandannualrenewal
![Page 19: Washington State and Local Taxation of Nonprofit …...B&O Tax & Nonprofits – Special Problems 9 •Contributions, Donations and Grants –Are significant goods, services or benefits](https://reader034.vdocument.in/reader034/viewer/2022042305/5ed1289a6480da46ab6a6109/html5/thumbnails/19.jpg)
GeneralConditionsWAC458-16-165
• Exemptpropertymustbeusedexclusively fortheactualoperationoftheactivityforwhichtheexemptionwasgranted
• Theexemptareamustnotexceedtheareareasonablynecessarytofacilitatetheexemptpurpose
• Generallythenot-for-profitmustowntheproperty,butinsomecasesleasedpropertyqualifies
• Loanorrentaloftheexemptpropertytoothersislimitedtospecifiedthresholds,dependingontheuser
![Page 20: Washington State and Local Taxation of Nonprofit …...B&O Tax & Nonprofits – Special Problems 9 •Contributions, Donations and Grants –Are significant goods, services or benefits](https://reader034.vdocument.in/reader034/viewer/2022042305/5ed1289a6480da46ab6a6109/html5/thumbnails/20.jpg)
GeneralConditionsWAC458-16-165(con’t)
• Propertymustbeirrevocablydedicatedtotheexemptpurpose(exceptionforleasedproperty)
• Discriminationnotallowed,propertyandservicesmustnotbediscriminatory
• Organizationmustcomplywithalllicensingandcertificationrequirementsimposedbylaw
• Dutytoproducerecords,reasonableaccess
![Page 21: Washington State and Local Taxation of Nonprofit …...B&O Tax & Nonprofits – Special Problems 9 •Contributions, Donations and Grants –Are significant goods, services or benefits](https://reader034.vdocument.in/reader034/viewer/2022042305/5ed1289a6480da46ab6a6109/html5/thumbnails/21.jpg)
QualifyingExemptActivity• Publicproperty(governmentagenciesandinstitutions)
• Churches,conventsandcemeteries• Propertyusedtoprovidecertainsocialservices• Hospitals,blood/bone/tissuebanks,cancercenters,andpropertyusedinmedicalresearch
• Schoolsandcolleges• Museumsandperformingartsfacilities• Publicassemblyhallsandmeetingplaces,ifavailabletoallorganizationsandpersons
![Page 22: Washington State and Local Taxation of Nonprofit …...B&O Tax & Nonprofits – Special Problems 9 •Contributions, Donations and Grants –Are significant goods, services or benefits](https://reader034.vdocument.in/reader034/viewer/2022042305/5ed1289a6480da46ab6a6109/html5/thumbnails/22.jpg)
LoanorRentalofExemptPropertyAlwayssubjecttouselimitations:• Byanotherqualifyingorganization,generallynotlimitedifusedbyanorganizationthatwouldbeexemptifitownedtheproperty
• Byotherusers(non-commercialactivities),can’texceed50daysineachcalendaryear
• Forcommercialactivitiesortoproduceincome,can’texceed15daysineachcalendaryear
• And… rentorfeescan’texceedmaintenanceandoverheadcosts
![Page 23: Washington State and Local Taxation of Nonprofit …...B&O Tax & Nonprofits – Special Problems 9 •Contributions, Donations and Grants –Are significant goods, services or benefits](https://reader034.vdocument.in/reader034/viewer/2022042305/5ed1289a6480da46ab6a6109/html5/thumbnails/23.jpg)
ImportantDates
• Applicationsforexemptionshouldbefiledwithin60daysofthestartoftheexemptactivity
• Generallyexemptioniseffectivefortheassessmentyearfollowingtheyearwhentheexemptactivitybegins
• AnnualrenewalsmustbefiledannuallybyMarch31st
• Lastsforever,withmaintenanceandnodisqualifyinguse