Does a nonprofit endowment association that holds and invests funds for the sole benefit of a college qualify as an 'educational institution' under Kansas law?

Plain-English summary

A representative asked the Kansas Department of Revenue whether a particular nonprofit endowment association qualifies as an "educational institution" under Kansas law. The Department ruled that it does.

The organization. The requester described the entity (called the "Endowment Association") as a Kansas not-for-profit corporation whose purpose is "to receive and accept property to be administered exclusively for charitable purposes, primarily in, or for the benefit of the College." The IRS had recognized it as a Section 501(c)(3) organization exempt from federal income tax.

The statutory test. The Department pointed to the definition in K.S.A. 79-3602, "as amended by the 1998 Kansas Legislature," which defines "educational institution" to include "[n]onprofit endowment associations and foundations organized and operated exclusively to receive, hold, invest and administer moneys and property as a permanent fund for the support and sole benefit of an educational institution."

The conclusion. "Based solely on the information supplied," the Department's opinion was that the association "qualifies as an 'educational institution.'"

Why the label matters. Qualifying as an "educational institution" is the gateway to Kansas sales-tax treatment reserved for educational institutions. This ruling decides only that threshold question — that the endowment association fits the statutory definition; it does not walk through the mechanics of any particular purchase.

What this means for you

College and university endowments and foundations

A separate nonprofit endowment association or foundation can itself be an "educational institution" under K.S.A. 79-3602 if it is organized and operated exclusively to hold, invest, and administer funds as a permanent fund for the sole benefit of an educational institution. The Department confirmed that structure meets the statutory definition.

Being 501(c)(3) is described, but the statutory definition controls

The requester's federal 501(c)(3) status was part of the facts, but the Department's ruling turned on the specific K.S.A. 79-3602 language for endowment associations and foundations — not merely on federal tax-exempt status.

This resolves status, not every transaction

The letter answers whether the association qualifies as an educational institution. How the exemption applies to any specific purchase still depends on the ordinary Kansas rules for educational-institution transactions.

Common questions

Q: Can a college's endowment association be treated as an "educational institution" in Kansas?
A: Yes. Under K.S.A. 79-3602, the definition includes nonprofit endowment associations and foundations organized and operated exclusively to hold and administer a permanent fund for the sole benefit of an educational institution, and the Department ruled this association qualifies.

Q: Did the ruling rely on the organization's 501(c)(3) status?
A: The 501(c)(3) recognition was described in the facts, but the Department based its conclusion on the endowment-association language in the amended K.S.A. 79-3602 definition of "educational institution."

Q: Does this ruling spell out which purchases are exempt?
A: No. It decides only that the association qualifies as an educational institution; the specific tax treatment of individual transactions is governed by the general rules for educational institutions.

Citations and references

• K.S.A. 79-3602 (as amended by L. 1998, ch. 130, section 29) — defines "educational institution" to include "[n]onprofit endowment associations and foundations organized and operated exclusively to receive, hold, invest and administer moneys and property as a permanent fund for the support and sole benefit of an educational institution." The Department applied this definition to conclude the association qualifies.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1999-17

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

February 5, 1999

XXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXX

RE: XXXXXXXXXXXXX

Dear XXXXXXXXXXXXX:

The purpose of this letter is to respond to your letter dated January 13, 1999.

You represent the above captioned non-profit association and request an opinion from the Kansas Department of Revenue as to whether or not this entity qualifies as "educational institutions" pursuant to K.S.A. 79-3602 as amended by L. 1998, ch. 130, section 29.

You conveyed the following information regarding your client.

XXXXXXXXXXXXXXXXXXX (the "Endowment Association") is a not-for-profit corporation organized and existing under the laws of the State of Kansas. The purpose of the Endowment Association is to receive and accept property to be administered exclusively for charitable purposes, primarily in, or for the benefit of the College. The Internal Revenue Service has determined that the Endowment Association is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), and exempt from federal income taxation pursuant to Section 501(a) of the Code.

K.S.A. 79-3602, as amended by the 1998 Kansas Legislature, defines the term "educational institution." This term includes, "[n]onprofit endowment associations and foundations organized and operated exclusively to receive, hold, invest and administer moneys and property as a permanent fund for the support and sole benefit of an educational institution."

Based solely on the information supplied by you, it is the opinion of the Kansas Department of Revenue that the XXXXXXXXXXXXXXXXXXX qualifies as an "educational institution."

This private letter ruling is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to make an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this private letter ruling.

Sincerely,

Mark D. Ciardullo
Tax Specialist

Date Composed: 02/16/1999 Date Modified: 10/11/2001

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