The Tax Simplification and Reduction Act, passed this year by the General Assembly, has local non-profit organizations a bit stymied.
The new law, which will take effect on Jan. 1, barring any intervention by Gov. Pat McCrory, will require non-profit entities to begin charging both state and local sales taxes.
The law will tax non-profits that offer:
• A live performance or other live event of any kind.
• A motion picture or film.
• A museum, a cultural site, a garden, an exhibit, a show or similar attraction or a guided tour at any of these attractions.
The new law will mandate county non-profits charge a 4.75 percent state tax and a 2.25 percent local tax, resulting in an effective seven-percent tax rate. It will allow a twice-a-year exemption for non-profits holding festivals or other fund raisers, but taxes will be required for other events, and will be required for all memberships and admission to events.
“I hope this new law does not impact the other non-profits in a negative way by keeping visitors/guests from participating in an event,” said Myra D Cook, president of the Yadkin Valley Chamber of Commerce
Even though 7 percent total tax might be a great amount, Cook stated that depending on the membership or admission amount, she doesn’t think the tax will deter people from attending events they really want to see.
Leighanne Martin Wright, executive director of the Foothills Arts Council, she said the arts council rarely charges admission for its events.
“All of the exhibit openings, our two large festivals — KidsFest in July and the Open Air Art Market in December, and our other events in the Art in the Garden series are funded through grants and donations. So for the arts council, this law will have little impact as we operate currently,” said Wright.
“The Foothills Theatre community theater group, an associate member of the arts council, does charge admission to its performances held at the high school in the summer, the winter dessert theater and in the arts council garden. The admission is used to help cover the cost for play royalties, materials for sets, directors’ fees and musician fees. The theater budget could not absorb this type of tax so unfortunately admission prices will have to be increased to cover the cost,” stated Wright.
The Elkin Valley Fiddlers is another associate member of the arts council. Wright said that group will also have to consider this new law when charging admission to its events.
The chairman of the Elkin Valley Trails Association, Dr. Bill Blackley, stated that EVTA has not structured its fund raising style to fall within the law, but he feels he’s not out of the woods on the matter.
Blackley feared for charities that also organize major sporting events like golf tournaments or organized races like Elkin’s recent Insane Terrain run. Such tournament entry tickets would become taxable.
“Those golf outings keep the lights on for many non-profits. The Insane Terrain race helps build trails. We have miles of trails to build,” said Blackley.
“I think this is extremely worrisome to many non-profits and speaks volumes of the political climate we’re in,” said Blackley. “For some reason people voting for these laws are forgetting that non-profits are out there helping poor people. That means they’re going to be the winners, but we will see lots of losers.”
How your legislators voted:
According to the Mount Airy News, Rep. Sarah Stevens, R-90, said she voted for the tax reform bill.
“I voted for it because you don’t get to pick and choose the part you vote for,” she said.
Stevens said she didn’t realize the new regulations would raise the ire of area non-profits.
“I would like to see what they’re looking for,” she said. “They’ve received an exemption that a lot of other businesses and organizations don’t. We’re simply trying to equalize it out among everyone, and are looking for loopholes in the tax code to close so everyone is paying their fair share of taxes.
“No non-profit, or citizen for that matter, wants to pay taxes.”
She said she is certainly willing to listen to the concerns of the non-profit sector.
“I’d be happy to hear how they’re saying it’s hurting them and see if we can do something, but then again that goes back to complicating the tax code.
“This is a sales tax like everyone else has to pay.”
Sen. Shirley Randleman, R-30, also voted for the measure, saying in the end it will put more money into the pockets of North Carolina families.
“In the first three years alone, this plan will put $1 billion back into the pockets of North Carolina families,” she said. “That in itself will encourage job growth.”
She said she didn’t have a definitive answer to why state agencies were exempted from the taxes.
“I cannot tell you why the drafters of this legislation chose not to tax those state agencies,” she told the Mount Airy News.
Reach Anthony Gonzalez at 835-1513 or firstname.lastname@example.org