HB 755 — Nonprofit Sales Tax Exemption (summary)
Status / Basic info
- Bill number: HB 755
- Title: Nonprofit Sales Tax Exemption
- Introduced: November 12, 2024
- Current status (per materials): Passed 1st reading (April 7, 2025)
- Subject areas: Commerce, Taxation, Nonprofit tax exemptions, Hospitals, Public services, Retailing
Purpose
- To create a broad sales-and-use tax exemption for certain nonprofit entities by adding a new exemption (G.S. 105‑164.13(52a)) and related administrative provisions, and to repeal a related provision (G.S. 105‑164.14(b)). The exemption covers tangible personal property, digital property, and services used in carrying on the work of eligible nonprofits.
Key provisions
- New exemption (G.S. 105‑164.13(52a)):
- Exempts tangible personal property, digital property, and services used by eligible nonprofit entities in carrying out their work, provided the entity is not owned or controlled by the State.
- Categories specifically listed as eligible include:
- Not‑for‑profit hospitals (including certain public hospital authorities)
- 501(c)(3) organizations except those classified in NTEE major groups: (i) Community Improvement & Capacity Building, (ii) Public & Societal Benefit, or (iii) Mutual & Membership Benefit
- Volunteer fire departments and volunteer EMS squads meeting specified accountability conditions
- Single‑member LLCs disregarded for tax purposes whose sole owner is a qualifying 501(c)(3) and that otherwise would qualify
- Qualified retirement facilities whose property is excluded from property tax under G.S. 105‑278.6A
- University‑affiliated nonprofit organizations that procure/design/construct/provide facilities for UNC constituent institutions
- Over‑the‑counter drugs purchased for hospital use (as described)
- Indirect purchases made by real‑property contractors (items that become part of a building) are covered: contractors fulfilling a contract with an exempt entity may treat those purchases as exempt if proper exemption documentation is provided.
- Exclusion list: the exemption does not apply to purchases of electricity, telecommunications, ancillary services, piped natural gas, video programming, prepaid meal plans, aviation gasoline/jet fuel, spirituous liquor, nor to taxes indirectly paid via reimbursement to an authorized person for taxable items.
- Per‑entity annual cap: aggregate annual exemption amount for an entity is limited to $31,700,000 in tax for a fiscal year.
Administrative / compliance rules:
- Creates G.S. 105‑164.29C requiring nonprofits to apply to the Department of Revenue for a sales tax exemption number (application form, authorized signer).
- Liability: if items bought using the exemption number are not used by the nonprofit, the entity must pay the tax due plus interest (self‑correcting liability).
- Real‑property contractors who pay local sales/use taxes on behalf of an exempt entity must provide the entity a signed statement documenting purchases and usage; receipts must be attached when purchased in‑state.
Local tax interaction:
- Amends G.S. 105‑467(b) to apply State exemptions/refund rules to local sales and use taxes and establishes an aggregate annual local refund/exemption cap of $13,300,000 tied to this provision for the State fiscal year.
Who would be affected
- Primary beneficiaries: qualifying nonprofit organizations (as enumerated), not‑for‑profit hospitals, qualifying volunteer public safety organizations, qualifying university‑affiliated nonprofits, and certain single‑member nonprofit LLCs.
- Secondary parties: real‑property contractors, retailers (issuers of exemption certificates), the Department of Revenue (administration and issuance of exemption numbers), and local governments (because of refund/exemption interactions and revenue effects).
- Potentially excluded: organizations in the listed NTEE categories (Community Improvement & Capacity Building; Public & Societal Benefit; Mutual & Membership Benefit) would not be eligible under the 501(c)(3) prong.
Implementation, timeline, and fiscal notes
- The bill repeals G.S. 105‑164.14(b) and adds the new statutory sections noted above. It requires the Department of Revenue to assign exemption numbers and administer the program.
- Fiscal impact specifics are not provided here; however, the bill includes explicit caps ($31.7 million per entity annual exemption cap and $13.3 million aggregate annual local refund/exemption cap) that limit exposure and are intended to constrain revenue loss.
- Next legislative steps (if still pending): committee consideration, additional readings, and enactment. Administrative procedures (forms, exemption number issuance) would follow statutory enactment.
Notable details
- The exemption expressly covers digital property and services as well as tangible personal property.
- Real‑property contractor purchases that become part of exempt nonprofit facilities are treated as exempt when the contractor documents the exemption properly.
- The bill creates an affirmative application/registration regime (exemption number) rather than an automatic status based solely on federal tax exemption.
