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Clarify Sales Tax Exemption in Denver

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Jun 8, 2017

We support CB17-0529 because Denver's current standard for sales tax exemption does not fully recognize the contributions made by all of Denver's nonprofits to the quality of life in our capital city. These nonprofits also work hard to maintain public trust, comply with transparency requirements, and carry out their missions in an ethical manner. 

By aligning the definition of charity with federal law, CB 17-0529 reduces confusion about local sales tax exemption among nonprofits and retailers. We believe this change will strengthen the partnership between the city and nonprofits to deliver public services and encourage nonprofits to spend more money locally on goods and services. 

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CB 17-0529 would amend the definition of charitable corporation in the municipal code to mean "...any organization that has been exempted from federal income tax as a nonprofit organization in good standing under section 501(c)(3) [...] and that has applied for and received a valid letter of exemption from the Manager [of Finance]."  

At the state level, and in most home rule cities in Colorado, sales to charitable organizations in the conduct of their regular charitable activities are exempt from taxes. However, under Denver's current definition, most nonprofits in the city do not qualify. Nonprofits who give away goods or services to residents in need are covered but many other nonprofits, that otherwise help ensure a high quality of life and lessen the economic burdens of the city, do not qualify.

Impact on Nonprofits

This change would be phased in for applications for exemption as follows:

  1. Organizations with annual revenues of $5 million or less (Jan. 1 to Dec. 31, 2018)
  2. Organizations with annual revenues of $10 million or less (Jan. 1 to Dec. 21, 2019)
  3. Organizations with any revenue amount (Jan. 1, 2020 on)

Applications for exemption are valid for five years from the date of issuance.  Letters of exemption issued before December 31, 2017 will expire at midnight December 31, 2022.

When fully implemented, this change would save between $11 and $14 million per year in total for approximately 2,000 nonprofit organizations in the city. 

Last year, 8 out of 10 Denver nonprofits responding to our year-end survey reported increased demand for services. Yet, 1 out of 3 indicated they would fall short of their revenue goals. Saving $11 to $14 million per year on sales taxes would make a big difference in helping these organizations serve Denver, the metro area, and the state. -Mark Turner, Senior Director of Public Policy





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