Current through Register Vol. 42, No. 11, August 30, 2024
(1)
(a) An organization is not exempt from tax
merely because it is not organized and operated for profit. It must establish
its exemption by filing an affidavit showing the character of the organization,
the purpose for which it was organized, its actual activities, the sources of
its income and the disposition of such income, whether or not any of its income
is credited to surplus or may inure to the benefit of any private shareholder
or individual, and in general all facts relating to its operations which affect
its right to exemption. To the affidavit shall be attached a copy of the
articles of incorporation, declaration of trust, or other instrument of similar
import, setting forth the permitted powers or activities of the organization,
the by-laws or other code or rules, and the latest financial statement showing
the assets, liabilities, receipts, and disbursements of the
organization.
(b) In addition to
the information specifically called for in the preceding subparagraph, the
Department may require additional information necessary for a proper
determination of entitlement to an exemption pursuant to Section
40-18-32,
Code of Ala. 1975.
(c) The status of a corporation claiming
exemption under Section
40-18-32,
Code of Ala. 1975, will be determined by the
Department on the basis of the facts in each individual case, and the taxpayer
will be notified of the findings of the Department. The exemption statute will
be strictly construed, and an organization not qualifying under a specific
subsection of Section
40-18-32,
Code of Ala. 1975, will be held to be subject to
tax.
(d) If an organization is
exempt under both federal and state law, approved federal forms establishing
exemption for federal income tax purposes will be acceptable as proof of
exemption for state income tax purposes.
(2) Subject to revocation as a result of
changes in the law, rules, or other good cause, an organization that has once
established its exemption may rely upon this determination and need not
re-establish its exemption so long as there are no substantial changes in the
organization's character, purposes, or methods of operation.
(3) This exemption does not extend to
unrelated business taxable income of an exempt organization.
(4) An organization is organized exclusively
for one or more exempt purposes only if its articles of organization:
(a) limit the purposes of such organization
to one or more exempt purposes; and
(b) do not expressly empower the organization
to engage, otherwise than as an insubstantial part of its activities, in
activities which in themselves are not in furtherance of one or more exempt
purposes.
(5) An
organization will be regarded as "operated exclusively" for one or more exempt
purpose only if it engages primarily in activities which accomplish one or more
of such exempt purposes specified in Section
40-18-32,
Code of Ala. 1975; and no more than an insubstantial
part of its activities is not in furtherance of an exempt purpose.
(6) The Federal Internal Revenue Code
contains provisions similar to those in Section
40-18-32,
Code of Ala. 1975 and this rule. Decisions and
interpretations of the federal courts and agencies will be given due weight in
interpreting Section
40-18-32,
Code of Ala. 1975 and this rule.
Authors: Fred H. Pritchard, John H. Burgess,
Matt Tidwell, Holly Coon
Statutory Authority:
Code of Ala.
1975, §
40-18-32.
