December 23, 2021 Recent state law developments for tax-exempt organizations Recent state tax developments affecting tax-exempt organizations highlight the importance of regularly monitoring these developments. Louisiana — offers exempt organizations grants for providing COVID-19 relief Louisiana published a News Release stating that as of August 16, 2021, the state has allowed charities, faith-based entities, and small businesses to apply for grants up to $25,000 through the Louisiana and Small Business Assistance Program to support COVID-19 response and relief. Grant funds must be used to provide aid to communities affected by COVID-19, with priority consideration going to organizations that provide food, employment, and educational assistance programs. Hawaii — state Supreme Court allows attorney general access to certain records belonging to environmental charity The Hawaii Supreme Court held in In re Investigation of KAHEAthat the state attorney general may subpoena bank records showing how an IRC Section 501(c)(3) environmental organization spent its money, but was not entitled to records showing sources of donations flowing into the organization. At issue was whether the environmental organization had financed certain protests opposing industrial development. Georgia — Tax Tribunal holds nonprofit hospital management corporation entitled to Quality Jobs Tax Credit The Georgia Tax Tribunal granted summary judgment for the taxpayer in Floyd Healthcare Management Inc. v. Crittenden, holding that a Georgia-based IRC Section 501(c)(3) hospital management corporation is eligible to claim the Georgia Quality Jobs Tax Credit, which applies to "new quality jobs" that do not produce unrelated business income. Therefore, the tax-exempt entity was entitled to claim the Quality Jobs Tax Credit for tax years 2014–2016, despite not having filed state income tax returns for those years. Texas — explains criteria nonprofits must meet to make tax-free purchases In an October 2021 publication, the Texas Comptroller of Public Accounts explained the various exemptions from sales and use tax available to nonprofit and tax-exempt organizations making purchases in the state. The Comptroller notes that while federal and Texas government entities "are automatically exempt from applicable taxes," private nonprofits "must apply for exemption with the Comptroller's office and receive exempt status before making tax-free purchases." The publication includes a chart to help taxpayers determine which tax exemptions might apply to their organizations. Georgia — amends rule for qualified education and rural hospital credits The Georgia Department of Revenue recently issued amended rules addressing administration of the state's: (1) Qualified Education Expense Credit; (2) Qualified Rural Hospital Organization Expense Tax Credit; and (3) Qualified Education Donation Tax Credit. These new rules reflect legislation signed into law in 2021 — H.B. 149, allowing S corporations and partnerships to make specified elections for tax years starting on or after January 1, 2022, and S.B. 66, in part allowing a nonprofit corporation incorporated by the Georgia Foundation for Public Education to receive private donations to be used for grants to public schools. Implications These recent developments demonstrate state efforts to respond to COVID-19 and remind tax-exempt organizations of state tax benefits available to them. Tax-exempt organizations should continue to monitor state tax law developments through legislation, state court rulings, and regulatory guidance, as new requirements, legal challenges, and funding updates will likely continue in response to economic revitalization. Please contact your Ernst & Young LLP professional for further information. ———————————————
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