ARIZONA STATE SENATE
RESEARCH STAFF
|
DENISSE GEE LEGISLATIVE RESEARCH ANALYST FINANCE COMMITTEE Telephone: (602) 542-3171 Facsimile: (602) 542-7833 |
FINANCE COMMITTEE
DATE: March 29, 2001
SUBJECT: Strike Everything Amendment
to H.B. 2391 - board of chiropractic examiners (NOW: corporate income tax reduction) relating to
tax exemptions; cultural
& civic events
Purpose
Retroactive to January 1, 1983, excludes, from transaction privilege taxation (TPT) sales and fees charged by nonprofit organizations at cultural and civic events. Limits the aggregate refund amount to $10,000 for all qualified taxpayers.
Background
In Arizona, TPT is levied upon the gross receipts or gross income received from a taxable business activity. The tax is the liability of the business or seller, but may be passed through to the consumer or purchaser. Purchases made outside of Arizona and then brought into the state are subject to use taxation. Use taxation is applied to the storage, use or consumption of tangible personal property in this state that has not been subject to an equivalent excise tax by another state.
Current law allows for various TPT exemptions from the retail and amusement classifications that apply to nonprofit organizations, if no part of the net income from these activities is for the benefit of any private shareholder or individual. Some of the current exemptions from the retail classification include events connected with major league baseball or a national touring professional golfing association or rodeos. Some of the current exemptions from the amusement classification include religious events, events by the state fair board, cactus league games, rodeos and activities by a musical or dance group, museums or zoos.
However, there is no specific tax exemption for sales by and fees charged by a nonprofit organization that qualifies as a 501(c)(6) under the Internal Revenue Code (IRC), which applies to nonprofit business leagues, chambers of commerce, real estate boards or trade or professional football leagues. The proposed strike everything amendment to H.B. 2391, retroactive to January 1, 1983, excludes from TPT sales by and fees charged by 501(c)(6) nonprofit organizations at cultural and civic events. Additionally, this measure limits the total refund amount to $10,000 for all claims.
Specifically, the Mill Avenue Merchants Association (MAMA) is such an organization that is exempt under 501(c)(6) of the IRC, and would qualify for the proposed exemption. MAMA organizes and executes a number of cultural and civic related festivals during which it sells commemorative apparel and charges parking fees or gate receipts. The Department of Revenue (DOR) audited MAMA in 1993 and subsequently imposed TPT on MAMA’s revenue derived from fundraising activities. DOR’s assessment was applied for the period between January 1983 and May 1993.
Provisions
1. Exempts, from the retail classification of TPT and use taxation, sales of tangible personal property by a nonprofit organization that is exempt from taxation under the 501(c)(6) of the IRC, if:
· That organization produces, organizes or promotes cultural or civic related festivals or events; and
· The organization’s net earnings in no part benefit any private shareholder or individual.
2. Exempts, from the amusement classification of TPT, activities and events of, or fees received by a nonprofit organization that is exempt from taxation under the 501(c)(6) of the IRC, if:
· That organization produces, organizes or promotes cultural or civic related festivals or events; and
· The organization’s net earnings in no part benefit any private shareholder or individual.
3. Requires any refund claims to be submitted to DOR before January 1, 2002 and specifies that failure to claim a refund on a timely basis constitutes a waiver of the claim for refund.
4. Specifies that the burden of proof is on the taxpayer to establish the claimable refund amount.
5. Requires DOR to review all timely filed claims, determine the accuracy of the claimable refund amount and notify the taxpayer of DOR’s final determination.
6. Specifies that DOR must not issue any refunds until after a final determination has been made as to the total amount of all refund claims filed by 501(c)(6) exempt nonprofit organizations.
7. Limits the total amount of all refunds claimed to $10,000. If refund claims exceed $10,000, DOR must reduce each claim proportionately so that the total amount of claims does not exceed the $10,000 limit.
8. Specifies that no interest will be paid on the refund amounts unless DOR issues the refund after June 30, 2002.
9. Specifies that section of the bill dealing with retroactivity and refunds is nonseverable.
10. Applies changes retroactively to January 1, 1983.
DG/jas