                                 CODE OF VIRGINIA

EXEMPTIONS FOR NONPROFIT ENTITIES (§ 58.1-609.11)

A. For purposes of this section, &#8220;nonprofit organization&#8221; or
&#8220;nonprofit entity&#8221; means an entity that meets the requirements of
subsection D. &#8220;Nonprofit organization&#8221; or &#8220;nonprofit
entity&#8221; includes a single member limited liability company whose sole
member is a nonprofit organization.

B. Any nonprofit organization that holds a valid certificate of exemption from
the Department of Taxation, or any nonprofit church that holds a valid
self-executing certificate of exemption, that exempts it from collecting or
paying state and local retail sales or use taxes as of June 30, 2003, pursuant
to &#xA7; 58.1-609.4, 58.1-609.7, 58.1-609.8, 58.1-609.9, or 58.1-609.10, as
such sections are in effect on June 30, 2003, shall remain exempt from the
collection or payment of such taxes under the same terms and conditions as
provided under such sections as such sections existed on June 30, 2003, until:
(i) July 1, 2007, for such entities that were exempt under &#xA7; 58.1-609.4;
(ii) July 1, 2008, for such entities that were exempt under &#xA7; 58.1-609.7;
(iii) July 1, 2004, for the first one-half of such entities that were exempt
under &#xA7; 58.1-609.8, except churches, which will remain exempt under the
same criteria and procedures in effect for churches on June 30, 2003; (iv) July
1, 2005, for the second one-half of such entities that were exempt under &#xA7;
58.1-609.8; and (v) July 1, 2006, for such entities that were exempt under
&#xA7; 58.1-609.9 or under &#xA7; 58.1-609.10. At the end of the applicable
period of such exemptions, to maintain or renew an exemption for the period of
time set forth in subsection G, each entity must follow the procedures set forth
in subsection C and meet the criteria set forth in subsection D. Provided,
however, that any entity that was exempt from collecting sales and use tax shall
continue to be exempt from such collection, and any entity that was exempt from
paying sales and use tax for the purchase of services, as of June 30, 2003,
shall continue to be exempt from such payment, provided that it follows the
other procedures set forth in subsection C and meets the criteria set forth in
subsection D. Provided further, however, that an educational institution doing
business in the Commonwealth which provides a face-to-face educational
experience in American government and was exempt pursuant to subdivision 4 of
&#xA7; 58.1-609.4 from paying sales and use tax for the purchase of services, as
of June 30, 2003, shall continue to be exempt from such payment, provided that
it follows the other procedures set forth in subsection C and meets the criteria
set forth in subsection D.

C. 1. On and after July 1, 2004, in addition to the organizations described in
subsection B, and except as restricted in subdivision 2, the tax imposed by this
chapter or pursuant to the authority granted in §§ 58.1-605 and 58.1-606 shall
not apply to purchases of tangible personal property for use or consumption by
any nonprofit entity that, pursuant to this section, (i) files an appropriate
application with the Department of Taxation, (ii) meets the applicable criteria,
and (iii) is issued a certificate of exemption from the Department of Taxation
for the period of time covered by the certificate.

   2. If the entity that is exempt under this section is exempt from federal
   income tax under &#xA7; 501(c)(19) of the Internal Revenue Code, or has annual
   gross receipts of less than $5,000 and is organized for at least one of the
   purposes set forth in &#xA7; 501(c)(19) of the Internal Revenue Code, then the
   exemption under this section for such entity shall not apply to purchases of
   tangible personal property that are used primarily (i) for social and
   recreational activities for members or (ii) for providing insurance benefits
   to members or members&#8217; dependents.

D. To qualify for the exemption under subsection C, a nonprofit entity must meet
the applicable criteria under this subsection as follows:

   1. a. The entity is exempt from federal income taxation (i) under &#xA7;
   501(c)(3) of the Internal Revenue Code; (ii) under &#xA7; 501(c)(4) of the
   Internal Revenue Code and is organized for a charitable purpose; or (iii)
   under &#xA7; 501(c)(19) of the Internal Revenue Code; or
   				b. The entity has annual gross receipts of less than $5,000, and the
   entity is organized for at least one of the purposes set forth in &#xA7;
   501(c)(3) of the Internal Revenue Code, one of the charitable purposes set
   forth in &#xA7; 501(c)(4) of the Internal Revenue Code, or one of the purposes
   set forth in &#xA7; 501(c)(19) of the Internal Revenue Code; and

   2. The entity is in compliance with all applicable state solicitation laws
   and, where applicable, provides appropriate verification of such compliance;
   and

   3. The entity&#8217;s annual general administrative costs, including salaries
   and fundraising, relative to its annual gross revenue, under generally
   accepted accounting principles, is not greater than 40 percent; and

   4. If the entity&#8217;s gross annual revenue was at least $750,000 in the
   previous year, then the entity must provide a financial review performed by an
   independent certified public accountant. However, for any entity with gross
   annual revenue of at least $1.5 million in the previous year, the Department
   may require that the entity provide a financial audit performed by an
   independent certified public accountant. If the Department specifically
   requires an entity with gross annual revenue of at least $1.5 million in the
   previous year to provide a financial audit performed by an independent
   certified public accountant, then the entity shall provide such audit in order
   to qualify for the exemption under this section, which audit shall be in lieu
   of the financial review; and

   5. If the entity filed a federal 990 or 990 EZ tax form, or the successor
   forms to such forms, with the Internal Revenue Service, then it must provide a
   copy of such form to the Department of Taxation; and

   6. If the entity did not file a federal 990 or 990 EZ tax form, or the
   successor forms to such forms, with the Internal Revenue Service, then the
   entity must provide the following information:
   				a. A list of the Board of Directors or other responsible agents of the
   entity, composed of at least two individuals, with names and addresses where
   the individuals physically can be found; and
   				b. The location where the financial records of the entity are available
   for public inspection.

E. On and after July 1, 2004, in addition to the criteria set forth in
subsection D, the Department of Taxation shall ask each entity for the total
taxable purchases made in the preceding year, unless such records are not
available through no fault of the entity. If the records are not available
through no fault of the entity, then the entity must provide such information to
the Department the following year. No information provided pursuant to this
subsection (except the failure to provide available information) shall be a
basis for the Department of Taxation to refuse to exempt an entity.

F. Any entity that is determined under subsections C, D, and E by the Department
of Taxation to be exempt from paying sales and use tax shall also be exempt from
collecting sales and use tax, at its election, if (i) the entity is within the
same class of organization of any entity that was exempt from collecting sales
and use tax on June 30, 2003, or (ii) the entity is organized exclusively to
foster, sponsor, and promote physical education, athletic programs, and contests
for youths in the Commonwealth.

G. The duration of each exemption granted by the Department of Taxation shall be
no less than five years and no greater than seven years. During the period of
such exemption, the failure of an exempt entity to maintain compliance with the
applicable criteria set forth in subsection D shall constitute grounds for
revocation of the exemption by the Department. At the end of the period of such
exemption, to maintain or renew the exemption, each entity must provide the
Department of Taxation the same information as required upon initial exemption
and meet the same criteria.

H. For purposes of this section, the Department of Taxation and the Department
of Agriculture and Consumer Services shall be allowed to share information when
necessary to supplement the information required.

HISTORY: 2003, cc. 757, 758; 2004, cc. 515, 536; 2005, cc. 42, 89; 2007, cc.
698, 704, 709; 2009, cc. 24, 106, 526; 2016, c. 487; 2019, c. 20; 2024, c. 287.