Exemption from Sales and Use Taxes of Sales Made
To Charitable and Religious Organizations
To Charitable and Religious Organizations
I. Statement of Purpose
Sales to charitable and religious organizations are exempt from sales and use taxes under Conn. Gen. Stat. § 12-412(8). The term "charitable and religious organizations" is defined in Conn. Agencies Regs. § 12-426-15 to mean organizations that are established and operated exclusively for charitable, religious, scientific, educational, literary, historical and cemetery purposes. The purpose of this Policy Statement is to provide further guidance on the types of organizations that are considered to be charitable or religious organizations, to explain the procedure to be followed in applying for a tax exemption permit, and to answer commonly asked questions concerning the use of a tax exemption permit.
II. What is a Charitable Organization?
A "charitable organization" has been defined in Connecticut case law as an organization that (1) is established and operated exclusively for charitable purposes and (2) accomplishes these purposes by means of private donations.
The definition of charitable purposes "no longer is restricted to mere relief of the destitute or the giving of alms but comprehends activities, not in themselves self-supporting, which are intended to improve the physical, mental or moral condition of the recipients and make it less likely that they will become burdens on society and more likely that they will become useful citizens." Camp Isabella Freedman of Connecticut, Inc. v. Canaan, 147 Conn. 510 (1960).
Exclusively for Charitable Purposes
An organization that is established or operated more than to an insignificant extent for other than charitable purposes is considered not to be established and operated exclusively for charitable purposes. Institute of Living v. Hartford, 133 Conn. 258 (1946).
The second condition is that the organization be supported to a measurable extent by private donations. The organization must not be, or be intended to be, self-supporting. In other words, where an organization is supported by consideration received in exchange for services rendered, such organization would not qualify as charitable, even if the organization is a nonprofit organization.
III. Organizations that do not Qualify
Professional or Trade Organizations
An organization that is established and operated primarily as a professional or trade organization is not considered to be charitable because its organizational objective is to facilitate and promote the well-being of a restricted group of people, i.e., the members of a profession or trade. Although such an organization may also perform useful services to society or provide funding to charitable causes, such an organization is not established and operated exclusively for charitable purposes. Example include trade unions, service organizations, fraternal organizations and professional organizations.
For the same reasons discussed above, a political organization is not considered to be a charitable organization. Political organizations include political parties, organizations whose objective is the passage of certain legislation or the promotion of a particular person for elected office or the promotion of a particular political philosophy.
A foundation that is organized to raise funds for charitable organizations determined by the Internal Revenue Service to be section 501(c)(3) organizations is not necessarily a charitable organization. Only those foundations that raise funds for organizations that have been recognized as charitable under Connecticut law are treated as charitable organizations.
Other organizations that do not qualify include fraternities, sororities, alumni associations and veterans organizations.
IV. Application Procedure
In applying for an exemption permit, the organization must submit the following documents to the Department of Revenue Services:
1. Copy of the Articles of Incorporation or Association
The Department must determine whether an organization is established exclusively for charitable purposes. Therefore, in the case of a corporation, a copy (certified by the Secretary of the State) of the Articles of Incorporation must be submitted, in all other cases, a copy of the organizational documents, e.g., Articles of Association or By-Laws, must be submitted.
2. Copy of Determination Letter issued by Internal Revenue Service
The organization must submit a copy of the determination letter issued to it by the Internal Revenue Service, in which letter a determination was made that the organization is an organization described in section 501(c)(3) of the Internal Revenue Code. This letter is evidence that the organization is recognized as charitable for federal income tax purposes. The granting of this letter by the Internal Revenue Service, however, does not necessarily mean that the organization is charitable under Connecticut law. Still, the letter is evidence of the presence of certain characteristics required of a charitable organization by both Connecticut and federal law.
Certain organizations may be covered by a group ruling letter. Usually, they are subordinate organizations to a central organization that has obtained the group ruling from the Internal Revenue Service. Examples of organizations covered by a group ruling include parent-teacher associations and some churches with national governing bodies.
An organization covered by a group ruling need not apply to the Internal Revenue Service for its own determination letter, but may instead submit proof of its consent (by letter sent to its parent organization) to being covered by the group ruling and proof of the parent organization's notification to the Internal Revenue Service that the subordinate organization has consented to being covered by the group ruling.
In the case of cemetery organizations, all earlier references to an organization described in section 501(c)(3) of the Internal Revenue Code should be to section 501(c)(13) of the Internal Revenue Code. In the case of a volunteer fire department, all earlier references to an organization described in section 501(c)(3) of the Internal Revenue Code should be to either section 501(c)(3) or 501(c)(4) of the Internal Revenue Code.
3. Exemption from Connecticut Property Taxes
An organization must submit a letter from the town assessor in any town in which the organization owns real or personal property, which letter states that property owned by such organization is exempt from property tax under Conn. Gen. Stat. § 12-81(7).
"Real property" generally means land and buildings. "Personal property" means all property which is not real property, e.g. cars, computers, furniture, musical instruments, microphones, robes, and office equipment.
A qualifying organization can claim property tax exemption by filing a Form M-3 with the municipal assessor. If the organization owns no property whatsoever, an affidavit signed by the president of the organization stating that the organization owns no real or personal property must be submitted.
4. Financial Information
An organization must submit a financial statement identifying the organization's sources of income, amounts of income from each source, and the disposition of such income for each of the three years immediately preceding the year of application.
LSN 91-1 (NEW 2/91)