Tax Type
Retail Sales and Use Tax
Description
Nonprofit home for abused and neglected children; Exemption criteria
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
12-10-1987
December 10. 1987
Re: Ruling Request/ Sales and Use Tax
Dear *****************
This will reply to your letter of May 14, 1987 seeking an exemption from the sales and use tax for four group homes operated under the auspices of two separate corporations, the ********** (taxpayers). We apologize for the delay in providing you with this response.
FACTS
According to their articles of incorporation the taxpayers are organized separately to either "have, hold, equip, maintain and conduct a child welfare agency and...to provide such other social services as the governing body of the corporation may from time to time deem needful to fulfill the needs of society," or for "...charitable, religious, education[al], and scientific purposes, including, for such purposes, the making of distributions to...Internal Revenue Code §501(c)(3) organizations,...and for the specific purpose of improving the spiritual, mental, social and physical condition and well being of men, women and families of all ages..."
Pursuant to these organizational objectives, the taxpayers operate four group homes for children. Two of the homes are licensed by the Department of Mental Health and Mental Retardation for the care and treatment of mentally retarded children, or children suffering from mental illness, emotional disturbances, or substance abuse. The remaining two homes are licensed child caring institutions under the purview of the Department of Social Services.
Accordingly, the taxpayers seek a ruling whether the group homes described above qualify for the recently enacted exemption found in §58.1-608(67) of the Virginia Code.
RULING
Effective July 1, 1987, Section 58.1-608(67) of the Virginia Code has provided an exemption from the sales and use tax for "[t]angible personal property purchased for use or consumption by an organization exempt from taxation under §501(c)(3) of the Internal Revenue Code and organized exclusively for the purpose of providing education, training, services, and assistance in independent living to foster care children and youth without families." (Emphasis added)
Accordingly, to qualify for this exemption an organization must be exempt from federal income taxation under I.R.C. §501(c)(3), and be organized exclusively to provide education, training, services and assistance in independent living to foster care children and youth without families.
While the taxpayers are organized for many worthy, charitable purposes, their articles of incorporation show that they are not organized exclusively to provide education, training, services and assistance in independent living to foster care children and youth without families, as required for this exemption. Accordingly, I find no basis for extending this exemption to the taxpayers and their affiliated group homes. In addition, since the group homes themselves have no corporate existence apart from their relationship to the taxpayers, they may not qualify for this exemption independently of the taxpayers.
For similar reasons, the taxpayer's group homes fail to qualify for either of the following statutory exemptions. Virginia Code §58.1-608(24) provides an exemption for "[t]angible personal property purchased by an organization exempt from taxation under §501(c)(3) of the Internal Revenue Code and organized exclusively for the purpose of providing education, training and services to retarded citizens of the Commonwealth, provided such property is used exclusively for the purpose set forth herein and further provided that such organization receives more than fifty percent of its total funding from federal, state, or local governments." (Emphasis added)
§58.1-608(61) of the Code provides an exemption from the tax for "[t]angible personal property, including food and food products, purchased for use or consumption by a residential youth shelter organization exempt from taxation under §501(c)(3) of the Internal Revenue Code provided such organization is organized exclusively for maintaining and operating group homes for the shelter and care of abused and neglected children in the Commonwealth on a long term or short term basis." (Emphasis added)
I regret that we are unable to provide you with a more positive response, but please let the department know if you have any further questions.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner