Committee advances bill to exempt nonprofit animal rescues from sales tax on adoption fees

The Senate Local Government and Taxation Committee voted to send House Bill 263 to the fourteenth order for possible amendment after testimony from rescue organizations and a tax volunteer who helped craft the bill.

Representative Charlie Shepherd, District 7, told the committee recent Tax Commission guidance treats adoption fees as the sale of tangible personal property and that HB 263 is intended to carve out nonprofit rescues. "This bill is only for nonprofits, that are not profiting on animal sales," Shepherd said. He urged the committee to advance the measure and invited questions and testimony.

Multiple rescue operators told the committee that adoption fees reimburse medical and care costs rather than generate profit. Mandy Stuhan, executive director of Horse and Halo Horse Rescue, said her group’s average cost to rehabilitate a horse is about $3,275 and that an average adoption fee is roughly $2,500; she warned a 6 percent tax could push potential adopters away. "Adoption fees exist to help cover these costs, not as a price tag, but as a reinvestment in the animal's future," Stuhan said.

Ken McClure, who said he volunteered to assist the rescues on the tax issue, described the bill’s retroactivity language as intended to prevent the Tax Commission from pursuing back taxes on small charities. "I tried to give these charities the same benefit they would have if they litigated and won, which is that they wouldn't have to pay tax going back," McClure said, and warned without the provision the commission could seek unpaid tax for many prior years.

Senators and testifiers raised a question about municipal shelters and joint‑powers shelters that are not 501(c)(3) organizations. McClure said he had not originally included municipalities in the draft and that expanding the exemption to cities could change the fiscal note; he said he could not predict how the Tax Commission would act with respect to municipalities.

Senator Anton moved that HB 263 be sent to the fourteenth order for possible amendment; Senator Den Hartog seconded and the motion carried by voice vote. Committee members indicated willingness to consider amendments in the fourteenth order to address municipal shelters and other technical clarifications.