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Tax Reform Update

From our friends at Arts North Carolina:

A Tax Reform package passed both the House and the Senate today. The package ensures that arts nonprofits continue to receive sales tax refunds; the cap on refunds is $45,000.

The package also includes full tax credit for charitable donations from people who itemize. It does not include a deduction for individuals who do not itemize.

The sales tax expansion applies to admission charges by organizations that sponsor an “entertainment activity”. An admission charge includes a charge for a single ticket, a multi-occasion ticket, a seasonal pass, an annual pass, and a cover charge.

Admission charges to the following entertainment activities are subject to tax.

a. A live performance or other live event of any kind.
b. A motion picture or film.
c. A museum, a cultural site, a garden, an exhibit, a show, or a similar attraction or a guided tour at any of these attractions.

However, specific exemptions to the sales tax policy include festivals, fairs, and state attractions.

Arts North Carolina believes there is opportunity to adjust the language to include arts nonprofit organizations in the exemption list. We can try to expand the listing that includes festivals and fairs to include arts organizations or identify state attractions to include arts nonprofit organizations.

We have an example from Raleigh to illustrate the need to simplify the policy, which was an overarching goal of tax reform:

Artsplosure—an amazing “festival” presenter that includes Raleigh’s First Night as one of their programs. A paid ticket is required to attend some concerts at venues throughout downtown Raleigh. Our interpretation believes this organization would not be required to collect a sales tax on their admissions.

Pinecone—an amazing presenter of concerts in various venues throughout the Triangle. The Tax Reform package would require Pinecone to collect sales tax.

Yet, it is entirely believable that both entities could book the same musical group. Why should one organization be subject to sale tax and the other not?

Our strategy is to work with our Legislature champions to find a solution to the arts nonprofit sales tax expansion, and we began that work today. The relationships that so many of you have cultivated were exceedingly helpful to get the conversation started. We will keep you posted on any and all firm information.

Be on the lookout for the budget late this week.