Relating To Nonprofit Organizations.
The bill, if enacted, would provide significant relief to the nonprofit sector by removing the general excise tax from fundraising income. This change would permit nonprofits to retain more of their fundraising revenues, which are crucial for sustaining their programs and services that benefit the community. Additionally, the legislation aims to reduce the administrative complexities and ambiguities that nonprofits currently face in accounting for income, fostering a more straightforward understanding of their tax obligations.
S.B. No. 950, introduced in the Thirty-Second Legislature of Hawaii, seeks to amend the state's general excise tax law to better align it with federal income tax regulations concerning nonprofit organizations. The primary aim is to exempt from state general excise tax the fundraising income generated by tax-exempt nonprofit organizations. This exemption is intended to alleviate financial burdens placed on nonprofits that engage in fundraising activities, which are currently subjected to taxes despite the income being used for charitable purposes. Notably, state law has historically treated fundraising income as taxable, unlike federal provisions that exempt such income from federal taxation.
Opposition to the bill may stem from concerns regarding the state’s tax revenue implications, particularly how much revenue could be lost if fundraising incomes are exempted. Furthermore, there may be debates surrounding the fairness of tax treatment between nonprofit and for-profit entities and whether specific activities conducted by nonprofits should benefit from such tax exemptions. Stakeholders could also discuss the balance between providing financial support for essential services while ensuring that nonprofit organizations maintain accountability and transparency in their fundraising efforts.