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Denver City Council Votes to Clarify Sales Tax Exemption for Nonprofits

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Jun 8, 2017

As reported in the Denver Post on June 28, Denver City Council approved an ordinance to clarify the city's definition of charity for determining exemption from sales, use, lodger's, and employer occupational privilege tax. Mayor Michael Hancock expressed his support for the measure in a news release issued the next day. 

We support CB 17-0529 because Denver's previous definition of charitable corporation did not fully recognize the contributions made by all of Denver's nonprofits to the quality of life in our capital city. These nonprofits work just as hard to maintain public trust, raise funds transparently, and carry out their missions effectively and ethically. 

By aligning the definition of charity with federal law, CB 17-0529 reduces confusion about local 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. 

We encourage nonprofits to thank members of City Council for supporting CB 17-0529.

Contact your Members of City Council

Background 

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 previous definition, most nonprofits in the city did not qualify even though they also ensure a high quality of life and lessen the economic burdens of the city. Nonprofits who provide goods or services at no cost to residents in need were more likely to qualify

Implementation

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. Organizations with letters of exemption issued before December 31, 2017 will need to re-apply prior to December 31, 2022.

More detailed information, including when this change will specifically take effect for your nonprofit organization will be sent in the mail from the City and County of Denver Treasury Division. For questions, call 311.

Last year, 8 out of 10 Denver nonprofits responding to our year-end survey reported increased demand for services. Yet, 3 out of 10 indicated they would fall short of their revenue goals. Saving between $11 and $14 million per year on sales taxes would make a big difference in helping more than 2,000 organizations serve Denver, the metro area, and the state. -Mark Turner, Senior Director of Public Policy

 

Region: 
Front Range