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2019 SESSION
Be it enacted by the General Assembly of Virginia:
1. That § 58.1-609.11 of the Code of Virginia is amended and reenacted as follows:
§ 58.1-609.11. Exemptions for nonprofit entities.
A. For purposes of this section, "nonprofit organization" or "nonprofit entity" means an entity that meets the requirements of subsection D. "Nonprofit organization" or "nonprofit entity" includes a single member limited liability company whose sole member is a nonprofit organization.
B. Any nonprofit organization that holds a valid
certificate of exemption from the Department of Taxation, or any nonprofit
church that holds a valid self-executing certificate of exemption, that exempts
it from collecting or paying state and local retail sales or use taxes as of
June 30, 2003, pursuant to § 58.1-609.4, 58.1-609.7, 58.1-609.8, 58.1-609.9, or
58.1-609.10, as such sections are in effect on June 30, 2003, shall remain
exempt from the collection or payment of such taxes under the same terms and
conditions as provided under such sections as such sections existed on June 30,
2003, until: (i) July 1, 2007, for such entities that were exempt under §
58.1-609.4; (ii) July 1, 2008, for such entities that were exempt under §
58.1-609.7; (iii) July 1, 2004, for the first one-half of such entities that
were exempt under § 58.1-609.8, except churches, which will remain exempt under
the same criteria and procedures in effect for churches on June 30, 2003; (iv)
July 1, 2005, for the second one-half of such entities that were exempt under §
58.1-609.8; and (v) July 1, 2006, for such entities that were exempt under §
58.1-609.9 or under § 58.1-609.10. At the end of the applicable period of such
exemptions, to maintain or renew an exemption for the period of time set forth
in subsection E G, each entity must follow the procedures set
forth in subsection B C and meet the criteria set forth in
subsection C D. Provided, however, that any entity that was
exempt from collecting sales and use tax shall continue to be exempt from such
collection, and any entity that was exempt from paying sales and use tax for
the purchase of services, as of June 30, 2003, shall continue to be exempt from
such payment, provided that it follows the other procedures set forth in
subsection B C and meets the criteria set forth in subsection
C D. Provided further, however, that an educational institution
doing business in the Commonwealth which provides a face-to-face educational
experience in American government and was exempt pursuant to subdivision 4 of §
58.1-609.4 from paying sales and use tax for the purchase of services, as of
June 30, 2003, shall continue to be exempt from such payment, provided that it
follows the other procedures set forth in subsection B C and
meets the criteria set forth in subsection C D.
B. C. 1. On and after July 1, 2004, in addition
to the organizations described in subsection A B, and except as
restricted in subdivision 2, the tax imposed by this chapter or pursuant to the
authority granted in §§ 58.1-605 and 58.1-606 shall not apply to purchases of
tangible personal property for use or consumption by any nonprofit entity that,
pursuant to this section, (i) files an appropriate application with the Department
of Taxation, (ii) meets the applicable criteria, and (iii) is issued a
certificate of exemption from the Department of Taxation for the period of time
covered by the certificate.
2. If the entity that is exempt under this section is exempt from federal income tax under § 501(c)(19) of the Internal Revenue Code, or has annual gross receipts of less than $5,000 and is organized for at least one of the purposes set forth in § 501(c)(19) of the Internal Revenue Code, then the exemption under this section for such entity shall not apply to purchases of tangible personal property that are used primarily (i) for social and recreational activities for members or (ii) for providing insurance benefits to members or members' dependents.
C. D. To qualify for the exemption under
subsection B C, a nonprofit entity must meet the applicable
criteria under this subsection as follows:
1. a. The entity is exempt from federal income taxation (i) under § 501(c)(3) of the Internal Revenue Code; (ii) under § 501(c)(4) of the Internal Revenue Code and is organized for a charitable purpose; or (iii) under § 501(c)(19) of the Internal Revenue Code; or
b. The entity has annual gross receipts of less than $5,000, and the entity is organized for at least one of the purposes set forth in § 501(c)(3) of the Internal Revenue Code, one of the charitable purposes set forth in § 501(c)(4) of the Internal Revenue Code, or one of the purposes set forth in § 501(c)(19) of the Internal Revenue Code; and
2. The entity is in compliance with all applicable state
solicitation laws, and, where applicable, provides appropriate
verification of such compliance; and
3. The entity's annual general administrative costs, including salaries and fundraising, relative to its annual gross revenue, under generally accepted accounting principles, is not greater than 40 percent; and
4. If the entity's gross annual revenue was at least $750,000 in the previous year, then the entity must provide a financial review performed by an independent certified public accountant. However, for any entity with gross annual revenue of at least $1 million in the previous year, the Department may require that the entity provide a financial audit performed by an independent certified public accountant. If the Department specifically requires an entity with gross annual revenue of at least $1 million in the previous year to provide a financial audit performed by an independent certified public accountant, then the entity shall provide such audit in order to qualify for the exemption under this section, which audit shall be in lieu of the financial review; and
5. If the entity filed a federal 990 or 990 EZ tax form, or the successor forms to such forms, with the Internal Revenue Service, then it must provide a copy of such form to the Department of Taxation; and
6. If the entity did not file a federal 990 or 990 EZ tax form, or the successor forms to such forms, with the Internal Revenue Service, then the entity must provide the following information:
a. A list of the Board of Directors or other responsible agents of the entity, composed of at least two individuals, with names and addresses where the individuals physically can be found; and
b. The location where the financial records of the entity are available for public inspection.
D. E. On and after July 1, 2004, in addition to
the criteria set forth in subsection C D, the Department of
Taxation shall ask each entity for the total taxable purchases made in the
preceding year, unless such records are not available through no fault of the
entity. If the records are not available through no fault of the entity, then
the entity must provide such information to the Department the following year.
No information provided pursuant to this subsection (except the failure to
provide available information) shall be a basis for the Department of Taxation
to refuse to exempt an entity.
E. F. Any entity that is determined under
subsections B, C, and D, and E by the Department of
Taxation to be exempt from paying sales and use tax shall also be exempt from collecting
sales and use tax, at its election, if (i) the entity is within the same class
of organization of any entity that was exempt from collecting sales and use tax
on June 30, 2003, or (ii) the entity is organized exclusively to foster,
sponsor, and promote physical education, athletic programs, and contests for
youths in the Commonwealth.
F. G. The duration of each exemption granted by
the Department of Taxation shall be no less than five years and no greater than
seven years. During the period of such exemption, the failure of an exempt
entity to maintain compliance with the applicable criteria set forth in
subsection C D shall constitute grounds for revocation of the
exemption by the Department. At the end of the period of such exemption, to
maintain or renew the exemption, each entity must provide the Department of
Taxation the same information as required upon initial exemption and meet the
same criteria.
G. H. For purposes of this section, the
Department of Taxation and the Department of Agriculture and Consumer Services
shall be allowed to share information when necessary to supplement the
information required.