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Committee advances bill to protect Colorado nonprofits from federal 501(c)(3) volatility
Summary
Senate Bill 9 would create a state presumption that organizations with an IRS nonprofit determination retain state sales-and-use tax exemptions even if the federal designation is revoked; the committee voted to move the bill to the Committee of the Whole after testimony from a broad set of nonprofit stakeholders.
Senate Bill 9, introduced by Senator Linstead and co-sponsored by Senator Snyder, would clarify Colorado’s state tax code so that organizations with a federal IRS determination letter are presumptively treated as charitable for state sales-and-use tax purposes even if their federal status is later revoked. The Senate Finance Committee heard broad support from nonprofit groups and legal counsel and advanced the bill to the Committee of the Whole with a favorable recommendation.
Senator Linstead said the bill decouples Colorado’s nonprofit tax treatment from federal actions to preserve services delivered by charities. "This protects Colorado’s nonprofits from federal volatility," the sponsor said, describing the intent to maintain audits, transparency and accountability at the state level while insulating nonprofits from politically driven federal actions.
Supporters who testified included Aubrey Wilde (Colorado Coalition for the Homeless), Jack Murphy (Colorado Nonprofit Association), Naomi Yamaha (Denver Foundation), Tom Downey (private counsel with experience in regulatory affairs) and Evie Hudak (Colorado PTA). Witnesses described real-world consequences when federal funding or IRS determinations change, including disruptions to grant eligibility and operations. Jack Murphy and Tom Downey emphasized that the statutory language currently echoes federal definitions and that an explicit state presumption would prevent an unintended loss of state exemptions in the event of federal revocation for reasons unrelated to malfeasance.
Minority Leader Simpson questioned the bill’s necessity, noting his reading of current statute suggested no coupling to 501(c)(3) status; counsel and witnesses replied that identical language in state and federal code has produced legal uncertainty in some cases and that the bill would remove ambiguity. Sponsors said the Department of Revenue would retain authority to investigate and decertify organizations when there is evidence of malfeasance or improper filing.
Senator Snyder moved SB9 to the Committee of the Whole with a favorable recommendation after closing remarks. The roll call returned unanimous 'aye' votes and the bill will move forward for further consideration in the full Senate process.
