May 14, 2015 - WHEREAS, the City Business License Ordinance, as contained in ... and that do not receive income from the
ORDINANCE NO.: 2015-045 Amending the 1998 Code of Ordinances of the City of Columbia, South Carolina, Chapter 11, Licenses, Permits and Miscellaneous Business Regulations, Article II, Business and Professional Licenses, Section 11-32 Definitions to add Charitable organization and amend Charitable purpose; and Section 11-36 Deductions from gross income; exemptions; determination of classification (c) WHEREAS, the City Business License Ordinance, as contained in Article II, (“Business and Professional Licenses”) of Chapter 11 (“Licenses, Permits and Miscellaneous Business Regulations”) of the City Code, now provides for an exemption from the business license tax for certain organizations with a charitable purpose as defined in the Ordinance; and, WHEREAS, the Council believes that it is unfair and inequitable for such organizations to be exempt from the business license tax payable by other organizations if those exempt organizations use net proceeds for purposes that are not charitable or use net proceeds for the financial benefit of individuals or of other entities that are not themselves exempt from Federal income tax; and, WHEREAS, the Council further believes that it is unfair and inequitable for such organizations to receive income for merchandise or services without payment of business license taxes when forprofit businesses are subject to business license taxes for their income for such merchandise or services; and, WHEREAS, the Council has determined that it would be fair and equitable and in the interest of the citizens and the business license taxpayers to amend the Business License Ordinance to limit the exemption from business license tax to those organizations that have a Federal income tax exemption as a charitable organization, that devote all net proceeds of the operation of the organization to charitable purposes, that do not use net proceeds to financially benefit any individual or non-charitable entity, and that do not receive income from the sale of merchandise or services; NOW, THEREFORE, BE IT ORDAINED by the Mayor and Council this ____ day of _________, 2015, that the 1998 Code of Ordinances of the City of Columbia, South Carolina, Chapter 11, Licenses, Permits and Miscellaneous Business Regulations, Article II, Business and Professional Licenses, Section 11-32 Definitions is amended to add Charitable organization and amend Charitable purpose; and Section 11-36 Deductions from gross income; exemptions; determination of classification (c), is amended to read as follows: Sec. 11-32. Definitions. Charitable organization means an organization that is determined by the Internal Revenue Service to be exempt from Federal income taxes under 26 U.S.C. section 501(c) (3), (4), (6), (7), (8), (10) or (19). Charitable purpose means any purpose described in Section 501(c)(3) of the Internal Revenue Code, or any benevolent, philanthropic, patriotic, or eleemosynary purpose which does not result in personal gain to a sponsor, organizer, officer, director, trustee or person with ultimate control of the organization. A charitable organization shall be deemed a business subject to a license tax unless the entire net proceeds of its operation, after necessary expenses, are devoted to charitable purposes. Last revised: 5/14/2015 15051168
Compensation in any form to a sponsor, organizer, officer, director, trustee or person with ultimate control of the organization shall not be deemed a necessary expense of operation. Sec. 11-36. Deductions from gross income; exemptions; determination of classification. (a) No deductions from gross income shall be made by businesses subject to this article except for income from business done wholly outside of the city on which a license tax is paid to some other municipality or a county, or income which cannot be taxed pursuant to state law. The applicant for a license under this article shall have the burden to establish the right to a deduction by satisfactory records and proof. (b) No person shall be exempt from the requirements of this article by reason of the lack of an established place of business within the city, unless exempted by state or federal law. The license inspector shall determine the appropriate classification for each business. No person shall be exempt from this article by reason of the payment of any other tax, unless exempted by state law, and no person shall be relieved of the liability for the payment of any other tax by reason of the application of this article. (c) A Ccharitable organizations which have exemptions from state and federal income taxes shall be exempt from a the business license tax only in cases where the sponsors, organizers, directors, trustees, or persons who exercise ultimate control of the organization receive no part of the proceeds of operation, and all proceeds are devoted to charitable purposes as defined by this ordinance and by Section 501(c)(3) of the Internal Revenue Code. Payment of necessary costs of operation and wages to non-management employees will not disqualify a charitable organization from exemption. on its gross income unless it is deemed a business subject to a business license tax on all or part of its gross income as provided in this section. A charitable organization, or any for-profit affiliate of a charitable organization, that (1) reports income from for-profit activities, or unrelated business income, for Federal income tax purposes to the Internal Revenue Service, or (2) has a fixed physical location in the city and receives income from the sale within the city of merchandise or services, shall be deemed a business subject to a business license tax on its gross income from such for-profit activities, unrelated business income, and income from the sale within the city of merchandise or services. A sale of merchandise or services as described in this section shall not include: (1) donations without return consideration; (2) member or sponsor dues or attendance fees for members at meetings or conventions of the organization; (3) the wholesale sale of blood or blood products; (4)the sale of religious books, the proceeds from day care services provided by a religious organization, and the proceeds from catering services provided by a religious organization to its members; or (5) the occasional sale of merchandise by the organization as a special fundraising event of limited short-term duration. A charitable organization shall be deemed a business subject to a business license tax on its total gross income if (1) any net proceeds of operation, after necessary expenses of operation, inure to the benefit of any individual or any entity that is not itself exempt under 26 U.S.C. section 501(c), or (2) any net proceeds of operation, after necessary expenses of operation, are used for a purpose other than a charitable purpose as defined in this article. Payment of necessary costs of Last revised: 5/14/2015 15051168
operation and wages to non-management employees will not disqualify a charitable organization from exemption. Excess benefits or compensation in any form beyond fair market value to a sponsor, organizer, officer, director, trustee or person with ultimate control of the organization shall not be deemed a necessary cost or expense of operation. This Ordinance shall be effective with the 2016 business license tax year. Requested by: Councilmember Baddourah Approved by:
__________________________________ Mayor
________________________________ City Manager Approved as to form:
ATTEST:
_________________________________ Assistant City Attorney
___________________________________ City Clerk
Introduced: Final Reading:
Last revised: 5/14/2015 15051168
