| (D) organizations specifically named as agents of the
United States or exempted as instrumentalities of the United States
by federal statutes; and
(E) organizations having substantially all of the following
characteristics:
(i) they are funded by the United States;
(ii) they carry out a specific program of the United
States;
(iii) they are managed or controlled by officers of
the United States;
(iv) their officers are appointed by the United States;
(v) they perform commitments of the United States under
an international treaty; and
(vi) they are not organized for private profit;
(2) any incorporated agency or instrumentality of the
United States wholly owned by the United States or by a corporation
wholly owned by the United States. "Wholly owned" means total or 100%
ownership;
(3) federal credit unions organized under 12 United
States Code, §1768;
(4) the State of Texas, its unincorporated agencies
and instrumentalities; and
(5) any county, city, special district or other political
subdivision of the State of Texas, and any college or university created
or authorized by the State of Texas.
(d) Qualification requirements. To qualify for exempt
status under subsection (b) of this section, an organization must
satisfy all of the following requirements.
(1) An organization must be organized or formed solely
to conduct one or more exempt activities. The comptroller will consider
all documents necessary to prove the purpose for which an organization
is formed.
(2) An organization must devote its operations exclusively
to one or more exempt activities.
(3) An organization must dedicate its assets in perpetuity
to one or more exempt activities.
(4) No profit or gain may pass directly or indirectly
to any private shareholder or individual. All salaries or other benefits
furnished officers and employees must be commensurate with the services
actually rendered.
(e) How to obtain exempt status.
(1) Application. To apply for and obtain notification
of exemption from the comptroller, an organization must complete and
submit to the comptroller the appropriate application or its equivalent.
Applicants should refer to the Guidelines to Texas Tax Exemptions
(publication 96-1045) for assistance in completing the proper application
for any exemption sought.
(2) Documentation required. In addition to a properly
completed application, an organization must submit with the application
all documents requested by the application and comptroller publication
96-1045, Guidelines to Texas Tax Exemptions, all governing documents
as indicated by subparagraph (A) of this paragraph, and all IRS documents
indicated by subparagraph (B) of this paragraph.
(A) Governing documents. A copy of each of the organization's
governing documents must be submitted with the application as indicated
in clauses (i) - (iii) of this subparagraph.
(i) An unincorporated organization requesting an exemption
must include copies of its formation documents, such as bylaws, constitution,
articles of association, certificate of formation, or applicable trust
agreement, and any related amendments. If the exemption being sought
requires that the organization be a nonprofit, the governing documents
must state that the organization is a nonprofit.
(ii) A non-Texas corporation requesting an exemption
must include file-stamped copies of its formation documents and certificate
of existence from the home state of incorporation, and any related
amendments.
(iii) A non-Texas limited liability company requesting
an exemption must include file-stamped copies of its formation documents
and certificate of existence from the home state of formation, and
any related amendments.
(iv) Exception. An organization applying for exemption
based on its federal exempt status under IRC, §501(c)(3), (4),
(8), (10), or (19), is not required to submit file-stamped copies
of its governing documents and certificate of existence unless it
is a corporation or limited liability company chartered outside the
state of Texas.
(B) IRS documents. If an organization is applying for
exemption based on its federal exempt status under IRC, §501(c)(3),
(4), (8), (10), or (19), the organization must provide copies of all
pages of its IRS determination letter or group exemption ruling letter
and include any caveat or addendum that applies. If the original determination
letter or group exemption ruling letter is more than four years old,
the organization must also include a copy of a recent letter from
the IRS to confirm the exemption is still valid. A nonprofit organization
that claims exemption under a parent's exemption must provide a copy
of the parent organization's IRS group exemption ruling letter and
a letter from the parent organization that states the applicant nonprofit
organization is a subordinate covered by the parent organization's
group exemption.
(3) The comptroller may require an organization to
furnish additional information to further clarify the organization's
overall purpose and activities to establish the claimed exemption.
For example, the comptroller may request a written statement that
details the nature of the activities conducted, or to be conducted,
financial information, and documentation that shows all services the
organization performs.
(4) After a review of the material, the comptroller
will inform an organization in writing if it qualifies for exemption.
(5) The comptroller or an authorized representative
of the comptroller may audit the records of an organization at any
time during regular business hours to verify the validity of the organization's
exempt status.
(f) Revocations, withdrawals, or loss of exemptions.
(1) Except as provided in paragraph (2) of this subsection,
if at any time the comptroller has reason to believe that an exempt
organization no longer qualifies for exemption, a comptroller's representative
will notify the organization that its exempt status is under review.
A comptroller's representative may request additional information
that is necessary to ascertain the continued validity of the organization's
exempt status. An organization must immediately notify the comptroller
in writing of a revocation, withdrawal, or loss of exemption when
the organization no longer qualifies for exemption. If the comptroller
determines that an organization is no longer entitled to its exemption,
then the comptroller will notify the organization. The date of the
notification letter is the effective date of the revocation. All subsequent
purchases by the organization are subject to tax.
(2) For nonprofit organizations that are granted an
exemption under Tax Code, §151.310(a)(2), the revocation, withdrawal,
or loss of the federal income tax exemption automatically terminates
the sales tax exemption, effective on the date on which the IRS serves
formal written notice of the revocation on the nonprofit organization
or the date on which the IRS notifies the comptroller, whichever is
earlier. All subsequent purchases by the organization are subject
to tax.
(A) The effective date of a revocation for a nonprofit
organization that was granted an exemption as a recognized subordinate
is the date on which the organization ceased to be recognized as a
subordinate under the federal group exemption. All subsequent purchases
by the organization are subject to tax.
(B) The organization must notify the comptroller in
writing of the revocation, withdrawal, or loss of exemption immediately
upon receiving notice from the IRS of such revocation, withdrawal,
or loss.
(C) Under a federal/state exchange agreement, the IRS
may notify the comptroller when an organization no longer qualifies
for federal exemption.
(3) An organization that loses its exempt status must
immediately notify its suppliers that its purchases are subject to
tax. Failure to so notify a supplier is a violation of the sales tax
law.
(4) After revocation, the organization may re-apply
for exempt status under other provisions of this section.
(g) Purchases by an exempt organization; refund claims;
and credits. See §3.287 of this title (relating to Exemption
Certificates).
(1) The purchase, lease, or rental of a taxable item
that relates to the purpose of an exempt organization listed in subsection
(b)(1), (2), (3), (5), (10), (11) or (12) of this section is exempt
from tax when the organization or an authorized agent of the organization
pays for the item and provides the vendor with an exemption certificate
in the form prescribed by the comptroller.
Cont'd... |
