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Denver Gives Non-Profits a Tax Break

Denver City Council last night unanimously approved the city’s plan to save the non-profit community between $11-14 million per year through a simple fix to the tax code.

The change will closely align the definition of charitable corporation with how the federal and Colorado state governments treat 501(c)3 organizations so that local nonprofits are no longer subject to Denver’s sales, use, lodger’s and employer occupational privilege tax.

“Denver places great value in our non-profit community which helps to create and strengthen the amazing fabric of our city,” Mayor Hancock said. “In a time when too many Denver families are struggling to make ends meet, there is no more critical partner than our charitable sector. This small action will have major returns for our people and I thank City Council for their thoughtful vote.”

“This change to the city’s tax code will allow nonprofits to redirect funds they have historically been paying on sales, use, and other city taxes toward the vital services they provide to the Denver community,” said Denver Chief Financial Officer Brendan Hanlon.

Approximately 2,000 Denver 501 (c)3 organizations are projected to be impacted by this change, which will be phased in beginning July 1, 2017 and concluded by January 1st, 2020, to allow the city’s budget to adjust to the reduction in tax revenue more gradually. Nonprofit organizations will have to reapply every five years to remain exempt from sales, use, lodger’s and employer occupational privilege taxes.

“By aligning the definition of charity with federal law, the proposed tax code change reduces confusion about local sales tax exemption and recognizes the contributions made by all of Denver’s nonprofits to the quality of life in our capital city. We believe this change will strengthen the partnership between the city and nonprofits to deliver important services to the residents of Denver,” said Mark Turner, Senior Director of Public Policy at the Colorado Nonprofit Association.

Three other approved ordinances will update Denver’s tax code to repeal the tax imposed on taxicab operators, originally enacted in 1953; provide an exemption for water on industrial and manufacturing properties, which are currently subject to sales and use tax; and adopt the "standardized definitions" created in coordination with the Colorado Municipal League to give home rule municipalities uniform definitions that reflect changes to technology. 

“All of the ordinance changes are intended to streamline the city’s processes, and attempt to simplify and reduce the administrative burden on entities doing business with the city,” CFO Hanlon stated.