House committee clears bill to exempt nonprofit animal adoption fees from sales tax

The House Revenue and Taxation Committee voted unanimously Tuesday to send House Bill 263 to the House floor with a “do pass” recommendation. The bill would clarify that adoption and rehoming fees charged by nonprofit animal rescues are not subject to sales tax.

Sponsor Representative Charlie Shepherd, R-District 7, told the committee he was compelled to bring the bill after constituents complained rescues were being taxed “for essentially rescuing animals and bringing them back to health and then finding good homes for them.” The panel heard in-person testimony from volunteers and an attorney who said the fees are reimbursements for medical care and other rescue costs, not taxable sales of tangible personal property.

“These are not sales, this is community service,” Sharon Helmandala, president of Take Me Home Dog Rescue, told the committee. Helmandala described her organization as a 501(c)(3) nonprofit that takes dogs from high-kill shelters, provides medical care and rehabilitation, and places animals with adoptive families.

Jenny Carlisle, a director with Freedom Bound Hounds, told lawmakers her group has saved more than 1,100 dogs since 2020 and said taxing adoption fees would force higher adoption costs and result in fewer animals saved. “Your vote in support of bill 2 63 means directly saving dogs that would otherwise not be saved,” Carlisle said.

Catherine White, who also identified herself with Freedom Bound Hounds, described the rescue’s costs — sterilization, vaccinations, microchipping, health certificates and often extensive medical treatment — and said most rescues operate at a loss on adult dog adoptions. “Charging sales tax on the adoption fee doesn’t mean a higher cost to the adopter. It simply means less money available for us to continue saving animals,” she said.

Ken McClure, a Boise lawyer who volunteered to help draft the legislation, told the committee the Idaho Tax Commission recently began audit activity and has assessed or is assessing deficiencies against several nonprofits by treating adoption fees as sales. McClure said he drafted the bill language to avoid a purely prospective exemption that could leave rescues exposed to retroactive tax assessments. “A litigation solution, if a court were to agree with this, would say it never was taxable; the legislative solution also says it never was taxable,” McClure said.

During questioning Representative Birch asked whether the bill would entitle people who already paid tax to refunds. Shepherd said determining refunds would be a legal question for the Tax Commission; McClure said if anyone has paid, the language would open the door to refunds and that the fiscal note accounts for any such exposure.

Representative Cheatham asked whether municipal animal shelters — which are not 501(c)(3) nonprofits — are covered; McClure said he was not aware cities were collecting sales tax on rescues and that city operations are not currently included in the draft.

The committee had difficulty producing a fiscal estimate because, Shepherd said, the Tax Commission only recently started collecting tax on adoption fees; McClure said the commission could pursue back taxes under the sales tax act with no statute of limitations for nonfilers, although he did not expect lengthy historical liability in practice.

A motion to send House Bill 263 to the floor with a due-pass recommendation was made and carried without recorded opposition. Representative Shirts moved the motion; the committee voice vote was recorded as “aye” and the motion carried. Representative Shepherd will be the floor sponsor.

Votes at a glance

- Motion: Send House Bill 263 to the floor with a due-pass recommendation. Mover: Representative Shirts. Outcome: Passed (voice vote; no recorded nay).