Was the XYZ Foundation exempt from South Carolina admissions tax on its fundraising events as an exclusively charitable nonprofit?

Plain-English summary

South Carolina Private Letter Ruling 90-7 exempted the XYZ Foundation from the historical admissions tax because it was organized and operated exclusively for charitable purposes.

The Foundation sponsored sporting and other fundraising events and had contributed about $900,000 to charities from its 1987 creation through the end of 1989.

Its bylaws required nonprofit operation under IRC § 501(c)(3), prohibited private benefit and prohibited political campaign activity, limited its purposes to charitable activities, and directed remaining assets at dissolution to qualifying charities or government for public purposes. The IRS had also recognized the Foundation as federally tax-exempt under § 501(c)(3).

Those facts brought the Foundation within the historical exemption for admissions charged by an eleemosynary nonprofit organized exclusively for religious, charitable, scientific, or educational purposes.

The historical admissions tax

The statute defined admission as the right or privilege to enter or use a place or location and imposed a 4% tax on paid admissions to South Carolina places of amusement.

It then exempted admissions charged by qualifying nonprofit organizations organized exclusively for the listed purposes, subject to special statutory rules for certain higher-education athletic events, carnivals, circuses, community fairs, and member use of nonprofit facilities.

The PLR focused on whether XYZ Foundation met the charitable-organization requirement.

Evidence of exclusive charitable purpose

Organizational form

The bylaws made the Foundation an independent nonprofit incorporated under South Carolina nonprofit law and operating under IRC §§ 501(c)(3) and 509(a).

Activities

Its purposes included providing financial assistance to § 501(c)(3) organizations and sponsoring events to raise money for those charitable grants.

Private benefit and politics

No net earnings could benefit a private shareholder or individual. The bylaws also limited lobbying and prohibited participation in political campaigns.

Dissolution

After debts and expenses, remaining assets had to go to qualifying § 501(c)(3) organizations or to government for public purposes.

Federal determination

The IRS recognized the Foundation as exempt under IRC § 501(c)(3) in August 1989.

The holding and continuing condition

The Foundation qualified for the historical admissions-tax exemption.

But the Commission required it to report any change in:

• organizational structure;
• charitable purpose; or
• federal § 501(c)(3) status.

Such a change could cause the Foundation to lose the admissions-tax exemption.

What this means for you

Historical nonprofit events

The named Foundation's event admissions were exempt on the facts described in the PLR.

Nonprofit organizations

Federal § 501(c)(3) status supported the result, but the Commission also examined bylaws, actual charitable activity, private-benefit restrictions, political limits, and the dissolution clause.

Current event organizers

Do not assume every nonprofit event is exempt. Check current South Carolina admissions-tax law and any event-specific exceptions.

Common questions

Q: Was federal 501(c)(3) status the only fact that mattered?

A: No. The PLR also examined the Foundation's governing documents, operations, grants, and dissolution restrictions.

Q: Did fundraising events prevent exclusive charitable status?

A: No on these facts. The events raised funds for the Foundation's charitable grants.

Q: Could the exemption continue after the Foundation changed its purposes?

A: Not automatically. The ruling required notice of changes that could deny the exemption.

Q: Can another nonprofit rely on this PLR?

A: No. Its scope says it applies only to the requesting taxpayer's facts and has no precedential value.

Citations and references

• S.C. Code Ann. § 12-21-2410 — historical admissions-tax definitions
• S.C. Code Ann. § 12-21-2420(4) — historical charitable admissions exemption
• IRC § 501(c)(3) — federal charitable-organization status quoted in the ruling

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/PLR90-7.pdf

Original ruling text

SC PRIVATE LETTER RULING #90-7

TO:

XYZ Foundation

SUBJECT:

Exemption
(Admissions Tax)

REFERENCE:

S.C. Code Ann. Section 12-21-2410 (1976)
S.C. Code Ann. Section 12-21-2420 (1976, Supp. 1988)

AUTHORITY:

S.C. Code Ann. Section 12-3-170 (1976)
SC Revenue Procedure #87-3

SCOPE:

A Private Letter Ruling is a temporary document issued to a taxpayer,
upon request, and it applies only to the specific facts or circumstances
related in the request. Private Letter Rulings have no precedential value
and are not intended for general distribution.

Question:
Is the XYZ Foundation exempt from the admissions tax, pursuant to Code Section 12-212420(4)?
Facts:
The XYZ Foundation (formerly the XYZ Corporation) was issued its certificate of incorporation
by the Secretary of State in 1987.
The Foundation is the general sponsor for sporting and other fund raising events.
By the end of 1989, the Foundation will have contributed approximately $900,000 to charities
since its inception in 1987.
Discussion:
Code Section 12-21-2410 defines several terms found in the admissions tax code, and reads:
For the purpose of this article and unless otherwise required by the context:
(1) The word "admission" means the right or privilege to enter into or use a place
or location;
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(2) The word "place" means any definite enclosure or location; and
(3) The word "person" means individual, partnership, corporation, association, or
organization of any kind whatsoever.
Code Section 12-21-2420 imposes the admissions tax and reads, in part:
There shall be levied, assessed, collected and paid upon all paid admissions to all
places of amusement within this State a license tax of....four percent.... provided,
further, that no tax shall be charged or collected:

(4) On admissions charged by any eleemosynary and nonprofit corporation or
organization organized exclusively for religious, charitable, scientific, or
educational purposes; provided, that the license tax herein levied and assessed
shall be collected and paid upon all paid admissions to all athletic events of any
institution of learning above the high school level; provided, however, that
carnivals, circuses, and community fairs operated by eleemosynary or nonprofit
corporations or organizations organized exclusively for religious, chartiable,
scientific, or educational purposes shall not be exempt from the assessment and
collection of admissions tax on charges for admission for the use of or entrance to
rides, places of amusement, shows, exhibits, and other carnival facilities, but not
to include charges for general gate admissions except when the proceeds of any
such carnival, circus, or community fair are donated to a hospital; provided,
further, that no admission tax shall be charged or collected by reason of any
charge made to any member of a nonprofit organization or corporation for the use
of the facilities of the organization or corporation of which he is a member.

The tax imposed by this section shall be paid by the person or persons paying
such admission price and shall be collected and remitted to the South Carolina
Tax Commission by the person or persons collecting such admission price.
The issue is whether the Foundation qualifies for the exemption from the admissions tax for
"admissions charged by any eleemosynary and nonprofit corporation or organization organized
exclusively for religious, charitable, scientific or educational purposes".
The By-Laws of the Foundation read, in part:

ARTICLE III
ORGANIZATION
Section 1. The Foundation shall be a non-profit organization (i) established and
operating in accordance with the provisions of 26 U.S.C. Sections 501(c)(3) and

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509(a)(1), (2) or (3) and the regulations thereunder, and Section 12-7-330(3) of
the Code of Laws of South Carolina, 1976, as amended; and (ii) incorporated
under the South Carolina Non-Profit Corporation Act [Article 1, Chapter 31, Title
33, Code of Laws of South Carolina, 1976, as amended].
The Foundation shall be an independent and autonomous organization.

ARTICLE IV
PURPOSES
The purposes for which the Foundation is established and shall operate are as
follows:
Section 1. The Foundation is organized and shall be operated exclusively for
charitable purposes within the meaning of 26 U.S.C. Section 501(c)(3); provided,
however, no part of the net earnings thereof shall inure to the benefit of any
private shareholder or individual; provided further, no substantial part of the
activities of the Foundation shall consist of carrying on propaganda, or otherwise
attempting to influence legislation; provided further, the Foundation shall not
participate in or intervene in (including the publishing or distributing of
statements) any political campaign on behalf of a candidate for public office.
Notwithstanding any other provision of these By-Laws, the foundation shall not
carry on any other activities not permitted to be carried on by (i) an organization
described in 26 U.S.C. Sections 501(c)(3) and 509(a)(1), (2) or (3), or (ii) an
organization contributions to which are deductible under the provisions of 26
U.S.C. Sections 170(c)(2), 2055, 2106, 2522 or any other corresponding provision
of any future United States Internal Revenue Law.
Section 2. The Foundation is organized and shall operate exclusively for
charitable purposes, including but not limited to:
(a) Providing financial assistance to several different types of
organizations which are exempt from Federal income tax under Section
501(c)(3) of the Internal Revenue Code of 1954;
(b) Sponsoring or co-sponsoring activities/events in order to raise funds
for the foregoing purposes; and
(c) Engaging in any and all lawful activities necessary or incident to the
foregoing purposes, except as limited herein.
Furthermore, Article XIV of the By-Laws, entitled "Dissolution", provides that upon dissolution,
and after all debts and expenses have been paid, that "[a]ll remaining assets of the Foundation
shall be conveyed or distributed to such of one or more organizations...[that] qualifies as an
organization described in Sections 501(c)(3) and 170(c)(2) of the Internal Revenue Code...".
Assets may also be turned over to the Federal, State or local government for public purposes.

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Furthermore, in August of 1989, the Internal Revenue Service determined that the Foundation
was exempt from federal income tax under IRC Section 501(c)(3). Code Section 501(c)(3) of
the Internal Revenue Code exempts from federal income taxes:
Corporations, and any community chest, fund, or foundation, organized and
operated exclusively for religious, charitable, scientific, testing for public safety,
literary, or educational purposes, or to foster national or international amateur
sports competition (but only if no part of its activities involve the provision of
athletic facilities or equipment), or for the prevention of cruelty to children or
animals, no part of the net earnings of which inures to the benefit of any private
shareholder or individual, no substantial part of the activities of which is carrying
on propaganda, or otherwise attempting, to influence legislation, (except as
otherwise provided in subsection (h)), and which does not participate in, or
intervene in (including the publishing or distributing of statements), any political
campaign on behalf of (or in opposition to) any candidate for public office
(emphasis added).
In summary, the Foundation was granted an exemption from federal income taxes as a
corporation or foundation "organized and operated exclusively for ...charitable...purposes".
Conclusion
The XYZ Foundation is exempt from the admissions tax, pursuant to Code Section 12-212420(4).
However, the Foundation must inform the Commission of any changes in its organization,
purpose or federal 501(c)(3) status, as such may deny the Foundation an exemption from the
admissions tax.
SOUTH CAROLINA TAX COMMISSION

s/S. Hunter Howard, Jr.
S. Hunter Howard, Jr., Chairman

s/A. Crawford Clarkson, Jr.
A. Crawford Clarkson, Jr., Commissioner
Columbia, South Carolina
March 7,

1990

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