Should A Non-Profit Collect Business Taxes?

March 16, 2016

Investigative Reports

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By RON AIKEN

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Bill allows non-profit to help set, collect business tax fees

If H.5109, introduced Tuesday,  passes, a publicly funded private non-profit with no governmental authority can collect business taxes and share sensitive individual tax data across town and county borders statewide.

The Municipal Association of South Carolina (MASC) is a publicly funded private non-profit lobbyist principal that has spent $212,403 this fiscal year alone pushing the legislature to broaden the scope of its powers.  Yesterday, thanks to H.5109, they may be able to do just that. A key provision of the legislation, sponsored by out-going Rep. Kenny Bingham, R-Lexington, would allow MASC to establish a Standardized Business License Class Schedule.

In effect, that change would allow a private non-profit to set the classification rates used in taxation on private businesses using only, according to the bill, “the business classification codes of the latest North American Industry Classification System.” The same authority also would extend to South Carolina Association of Counties.

The North American Industry Classification System only determines the size of a business. As for generating a rate, the bill involves a formula of past, projected and “estimated probable” income. Municipalities also can add “additional reasonable sub-classifications.”

MASC is funded from fees paid by municipalities across South Carolina – 270 in all, according to MASC’s website. The idea of a private group setting classifications that affect tax rates alarms anti-tax proponents.

“Any time you have an un-elected body getting involved in taxation in any form, it’s bad,” said Talbert Black, state coordinator for SC Campaign for Liberty. “Citizens should have direct accountability for who is setting the rates..”

Black isn’t the only one who disagrees with the bill.

“We are opposed to this bill (H.5109) and had no idea we were going to be included in it,” said Josh Rhodes of the S.C. Association of Counties. “We don’t believe you can mandate a city or county to do business with a private entity — even us.”

Under current law, businesses pay their respective license fees to the county or municipality to which they are subject. Under H.5109 all businesses must renew their business license and pay their license taxes through a portal controlled by the Municipal Association and counties and towns must use a standard license application created by MASC.

A final piece of the proposed legislation would allow towns and counties to share sensitive tax information among local governments. The bill allows “the sharing of data between public officials or employees, or their agents, in the performance of their duties,” it reads. Widening the exposure of one’s personal tax information is not the direction some want to see government go.

“Why would the City of Columbia need to see my tax records when I live in Lexington?,” Black said. “They obviously have a reason they want to do that. Personal information should always remain on a need-to-know basis only.”

H.5109 is MASC’s answer to H.4967, which the municipal association opposes. H.4967, which has 35 House sponsors to H.5109’s one, gives sole business license tax collection authority to the Department of Revenue – the state’s official tax-collecting agency. The Department of Revenue would then receive the revenue and redistribute it to the appropriate municipalities after taking an administrative fee.

It also prohibits the sharing of sensitive tax information by requiring that all tax return information used to calculate fees “only may be submitted to the department.”

“Taxes should be collected by the agency charged with tax collection,” Black said. “That’s as simple as it gets, and anything else that removes accountability is not in the best interest of the taxpayers.”

Reach Aiken at 803-200-8809. Email him at ron@thenerve.org. Follow him on Twitter @RonAiken and @TheNerveSC. To receive email updates as stories hit, click the button at the top right hand of the page.