Exempts certain senior citizen organizations from paying sales and compensating use taxes

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 Federally and in New York is "Any corporation, Association, trust or community 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 organized 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 organization 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 activities 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 organizations, though seemingly educational to the seniors, is considered recreational 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 organizations 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

S.6200 of 2014 referred to Investigations and Government Operations; A.8391 of 2014 referred to Ways and Means.

Fiscal implications

Fiscal Note 3/25/15, Department of Taxation and Finance: "We estimate it would reduce State and local revenues by a minimal amount (less than $1 million) in SFY 2015-16. The State's share of this revenue reduction would be minimal (less than $1 million). During its first full year of implementation, SFY 2016-17, we estimate this legislation could reduce State and local revenues by more than $1 million as it would likely encourage additional senior groups to take advantage of the sales and use tax exemptions provided by this legislation."

Effective date

January 1, 2017.