NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A3271A
SPONSOR: McDonald
 
TITLE OF BILL:
An act to amend the tax law, in relation to exempting certain senior
citizen organizations from paying sales and compensating use taxes
 
PURPOSE:
To specifically provide that not-for profit Senior Citizen organizations
are exempt from paying sales and compensating use taxes.
 
SUMMARY OF PROVISIONS:
Sections 1 and 2 amend Subdivision (a) and (g) of section 1116 of the
Tax Law to specifically include not-for-profit senior citizen organiza-
tions which limit membership to members fifty and older, and which are
organized for pleasure, social, educational, recreational and/or other
nonprofit purposes, in the list of organizations which are exempt from
paying sales and compensating use taxes. These organizations are exempt
provided that no part of net earnings benefit any private share holder
or individual and the organizations' substantial part of activities is
not carrying propaganda, attempting to influence legislation or
campaigning on behalf of any candidate for public office. The exemption
applies to purchases made by the organization itself and not for
purposes of its members individually.
Section 3 provides that the Commissioner of Taxation and Finance is
authorized to include senior citizen organizations on Form ST-119.2 ,
the "Application for an Exempt Organization Certificate."
Section 4 states the effective date is January 1, 2017.
 
EXISTING LAW:
Senior citizen organizations are not explicitly named as tax-exempt.
 
JUSTIFICATION:
Senior citizen organizations have an easier time under federal law
attaining a tax exempt status than under New York State Law. New York
Tax Law Section 1116(a) (4) of Article 28 language mirrors the language
of Internal Revenue Code 501(c)(3). Organizations qualifying under
501(c)(3) of the Internal Revenue Code are exempt from Federal income
tax and may use their exempt status to receive automatic exemption from
New York Sales and Use Tax. The language providing exemption both feder-
ally and in New York is "Any corporation, Association, trust or communi-
ty chest, fund or foundation, organized and operated exclusively for
religious, charitable, scientific, testing for public safety, literary
or educational purpose. or to foster national or international sports
competition or for the prevention of the cruelty of animals...." The
problem for senior citizen organizations is that unless they are organ-
ized and operated exclusively for any of these purposes, it cannot
attain tax exempt status. Senior citizen organizations attempt to claim
tax exempt status by stating that they are educational. The Division of
Tax Appeals in New York has determined that unless the senior organiza-
tion was organized and operated exclusively for educational purposes, it
is not exempt. In such a determination the appellate court looks at the
organization's purposes as defined by its organizing documents. If the
court finds that the purposes are broader than the educational purpose
specified in Section 1116(a), the organizational test is not met and
there is no grant of tax-exempt status. The court also looks at the
operational activities of the organization to see that all of its activ-
ities accomplish one or more of the exempt purposes. Unfortunately for
the senior citizen organizations, it has been determined that in most
instances a substantial part of the organizations' functions are social
and recreational, and the educational activities appear to be secondary.
Furthermore, the recreational trips taken by senior citizen organiza-
tions, though seemingly educational to the seniors, is considered recre-
ational to the Court. The Federal law on the other hand is able to grant
tax exempt status to senior citizen organizations if not by 501(c)(3),
but by 501(c)(7) as a social club. New York Tax Law has no such
provision. By specifically identifying Senior Citizen Organizations as
tax-exempt in New York Tax Law, it shall be clear cut that these organ-
izations may be educational and/or social in nature. This status would
help these organizations to save money that would normally go towards
the payment of sales tax, for the operation of their organizations. Such
monetary relief to our senior citizen organizations would go a long way
into ensuring that these organizations thrive for the benefit of New
York's senior population.
 
LEGISLATIVE HISTORY:
A.8391/S.6200 of 2014
 
FISCAL IMPLICATIONS:
To be determined, but expected to be minimal.
 
EFFECTIVE DATE:
January 1, 2017
STATE OF NEW YORK
________________________________________________________________________
3271--A
2015-2016 Regular Sessions
IN ASSEMBLY
January 22, 2015
___________
Introduced by M. of A. McDONALD, MOSLEY, CRESPO, RAIA, STECK, LAWRENCE
-- Multi-Sponsored by -- M. of A. HOOPER, PERRY, RAMOS -- read once
and referred to the Committee on Ways and Means -- recommitted to the
Committee on Ways and Means in accordance with Assembly Rule 3, sec. 2
-- committee discharged, bill amended, ordered reprinted as amended
and recommitted to said committee
AN ACT to amend the tax law, in relation to exempting certain senior
citizen organizations from paying sales and compensating use taxes
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Subdivision (a) of section 1116 of the tax law, as amended
2 by chapter 530 of the laws of 1976, paragraph 4 as amended by chapter
3 270 of the laws of 2001, paragraph 5 as amended by chapter 366 of the
4 laws of 1983, subparagraph (B) of paragraph 5 as amended by chapter 418
5 of the laws of 2004, subparagraph (C) of paragraph 5 as amended by chap-
6 ter 296 of the laws of 2006, paragraph 7 as added by chapter 903 of the
7 laws of 1980, paragraph 8 as added by chapter 888 of the laws of 1983,
8 paragraph 9 as amended by chapter 591 of the laws of 2005, is amended to
9 read as follows:
10 (a) Except as otherwise provided in this section, any sale or amuse-
11 ment charge by or to any of the following or any use or occupancy by any
12 of the following shall not be subject to the sales and compensating use
13 taxes imposed under this article:
14 (1) The state of New York, or any of its agencies, instrumentalities,
15 public corporations (including a public corporation created pursuant to
16 agreement or compact with another state or Canada) or political subdivi-
17 sions where it is the purchaser, user or consumer, or where it is a
18 vendor of services or property of a kind not ordinarily sold by private
19 persons[;].
20 (2) The United States of America, and any of its agencies and instru-
21 mentalities, insofar as it is immune from taxation where it is the
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD02571-03-6
A. 3271--A 2
1 purchaser, user or consumer, or where it sells services or property of a
2 kind not ordinarily sold by private persons[;].
3 (3) The United Nations or any international organization of which the
4 United States of America is a member where it is the purchaser, user or
5 consumer, or where it sells services or property of a kind not ordinar-
6 ily sold by private persons[;].
7 (4) Any corporation, association, trust, or community chest, fund,
8 foundation, or limited liability company, organized and operated exclu-
9 sively for religious, charitable, scientific, testing for public safety,
10 literary or educational purposes, or to foster national or international
11 amateur sports competition (but only if no part of its activities
12 involve the provision of athletic facilities or equipment), or for the
13 prevention of cruelty to children or animals, no part of the net earn-
14 ings of which inures to the benefit of any private shareholder or indi-
15 vidual, no substantial part of the activities of which is carrying on
16 propaganda, or otherwise attempting to influence legislation, (except as
17 otherwise provided in subsection (h) of section five hundred one of the
18 United States internal revenue code of nineteen hundred fifty-four, as
19 amended), and which does not participate in, or intervene in (including
20 the publishing or distributing of statements), any political campaign on
21 behalf of any candidate for public office[;].
22 (5) A post or organization of past or present members of the armed
23 forces of the United States, or an auxiliary unit or society of, or a
24 trust or foundation for, any such post or organization:
25 (A) organized in this state,
26 (B) at least seventy-five percent of the members of which are past or
27 present members of the armed forces of the United States as defined in
28 section thirteen-a of the general construction law and substantially all
29 of the other members of which are individuals who are cadets or are
30 spouses, widows, widowers, ancestors, or lineal descendants of past or
31 present members of the armed forces of the United States or of cadets,
32 and
33 (C) no part of the net earnings of which inures to the benefit of any
34 private shareholder or individual.
35 (6) The following Indian nations or tribes residing in New York state:
36 Cayuga, Oneida, Onondaga, Poospatuck, Saint Regis Mohawk, Seneca, Shin-
37 necock, Tonawanda and Tuscarora, where it is the purchaser, user or
38 consumer.
39 (7) A not-for-profit corporation operating as a health maintenance
40 organization subject to the provisions of article forty-four of the
41 public health law.
42 (8) Cooperative and foreign corporations doing business in this state
43 pursuant to the rural electric cooperative law.
44 (9) A credit union, as defined in subdivision nine of section two of
45 the banking law, where it is the purchaser, user, or consumer, or where
46 it is a vendor of services or property of a kind not ordinarily sold by
47 private persons.
48 (10) Senior citizen organizations organized pursuant to section
49 501(c)(3) or section 501(c)(7) of the Internal Revenue Code (26 U.S.C.
50 §501) which limit membership to members age fifty and older, and which
51 are organized for pleasure, social, educational, recreational and/or
52 other non-profit purposes, provided:
53 (A) no part of the net earnings of which inure to the benefit of any
54 private shareholder or individual;
55 (B) no substantial part of the activities of which is carrying on
56 propaganda, or otherwise attempting to influence legislation, (except as
A. 3271--A 3
1 otherwise provided in subsection (h) of section five hundred one of the
2 United States internal revenue code of nineteen hundred fifty-four, as
3 amended), and which does not participate in, or intervene in (including
4 the publishing or distributing of statements), any political campaign on
5 behalf of any candidate for public office; and
6 (C) the exemption applies only to purchases that are made by the
7 organization itself and not for purchases by any of its members individ-
8 ually.
9 § 2. Subdivision (g) of section 1116 of the tax law, as amended by
10 chapter 3 of the laws of 2004, is amended to read as follows:
11 (g) For purposes of [paragraph] paragraphs five and ten of subdivision
12 (a) of this section, duly authorized representatives of any such post or
13 organization, while acting on behalf of such post or organization, shall
14 not be subject to the tax imposed under subdivision (e) of section elev-
15 en hundred five or the unit fee imposed by section eleven hundred four
16 of this article, provided that such representatives provide an exempt
17 organization certificate from such post or organization certifying that
18 such representative is acting on its behalf.
19 § 3. The commissioner of taxation and finance is authorized and
20 directed to develop and place into effect all rules and regulations, and
21 take all other measures necessary, to implement the provisions of this
22 act on or before its effective date, including, but not limited to
23 making all necessary changes to the "Application for an Exempt Organiza-
24 tion Certificate" (Form ST-119.2) and any other forms utilized by tax-
25 exempt entities.
26 § 4. This act shall take effect January 1, 2017.