Policy Letter; Nonprofit Organizations, Sales Tax Exemption, Your Letter, 8/26/93
Topic Code: N101Nonprofit Organization (ST) Document Reference:
Policy letter; Nonprofit Organizations, Sales Tax Exemption, Your Letter, 8/26/93
Since Susan Voss is no longer with the Department of Revenue and Finance, your letter to her has been given to me for reply. My name is Darwin Clupper; like Susan Voss, I am a technical tax specialist and my particular area of concentration is Iowa sales and use tax law. You ask if purchases of goods and taxable services by Marengo Housing Corporation (Corporation) are exempt from Iowa tax. I have examined the provision of Division IV of chapter 422 of the Iowa Code which pertains to exemptions from sales tax. I have concluded that the only possible bases for exemption would be in the contention that the Corporation is an "instrumentality of government" (the purchases of which are exempt from tax under § 422.45(5) of the Code) or the Corporation must provide the following facilities: Residential care facilities and intermediate care facilities for the mentally retarded and residential care facilities for the mentally ill licensed by the department of inspections and appeals under chapter 135C. [Nonprofit corporations which provide this are exempt from tax under § 422.45(22) "a" of the Code.]
Your corporation would be considered an "instrumentality of government" only if some governmental body exercises a substantial amount of control over the Corporation. For an explanation of this see the court cases of Carter v. Coosa Valley Youth Services, 378 S.2d 1145 (Ala. Civ. App. 1979; Vincent v. United States, 315 F.2d 1296 (8th Cr. 1975) and Fifth District Republican Committee v. Michigan Employment Security Comm, 172 N.W.2d 825 (C.A. Mich. 1969).I can see no evidence of federal government control of your corporation to the point that the Corporation could be called an instrumentality of the federal government. Merely providing funds for operation, is not, without more, enough to indicate control to the point that an instrumentality is created. Nor does the fact that the Corporation abides by what would appear to be general laws or regulations regarding fair housing be enough to conclude that the Corporation is controlled by the federal government to the point that it is a federal instrumentality. Finally, it does not appear from your letter that the corporate facilities are licensed under chapter 135C of the Iowa Code. In summary, neither §§ 422.45(5) nor 422.45(22) of the Code would appear to exempt the Corporation from payment of sales tax on its purchases. In closing, I must offer my usual warning. The opinions I have expressed in this letter are informal only. Because of this, the department is not bound by those opinions but could take a position contrary to them in the future. Sincerely, Darwin Clupper Tax Specialist, Policy Section Technical Services Division