What conditions did SC Revenue Ruling 91-5 require for a civic or fraternal organization's event to qualify for the admissions-tax exemption?

Plain-English summary

South Carolina Revenue Ruling 91-5 set out seven cumulative conditions for a civic or fraternal organization's event to qualify for the historical admissions-tax exemption.

The exemption was event-specific. A qualifying organization's general nonprofit status did not automatically exempt every ball game, carnival, play, or other admission-charging event.

The seven conditions

The ruling required:

1. The event had to be sponsored and operated exclusively by a nonprofit organized exclusively for civic or fraternal purposes.
2. The event's net proceeds had to be donated to a nonprofit operated exclusively for charitable purposes.
3. The event and its charges could not be among those specifically taxed under Section 12-21-2420(4).
4. Each event's net proceeds had to be accounted for separately from the organization's other events.
5. The net proceeds had to be donated within a reasonable time based on the circumstances.
6. The sponsoring and operating organization could not receive a percentage of gross proceeds or a fixed sum for allowing its name to promote the event.
7. Qualification had to be determined separately for every event.

The organization also had to maintain adequate records proving that the recipient of the proceeds was operated exclusively for charitable purposes.

What counted as a charitable purpose

The ruling interpreted charitable purpose broadly to include objectives benefiting the community, such as:

• relief of poverty;
• advancement of education;
• advancement of religion;
• protection of health;
• governmental and municipal purposes; and
• other purposes beneficial to the community.

It said regulations and rulings under Internal Revenue Code Section 501(c)(3) could provide guidance. Status still had to be decided case by case.

Timing and accounting

Subsection (11) required net proceeds to be “immediately” donated. The ruling interpreted that word as within a reasonable period based on the event's facts and circumstances, recognizing that event accounting can vary from a simple carnival to a major concert or sporting event.

“Net proceeds” meant gross admission proceeds remaining after necessary event expenses. Separate event accounting was therefore essential to prove both the amount and later donation.

What this means for you

Civic and fraternal organizations

The organization itself, the recipient charity, the event type, the financial arrangement, the timing, and the records all mattered. No single status label created the exemption.

Nonprofit event planners

An arrangement paying the sponsoring organization a share of gross proceeds or a fixed name-use fee disqualified the event under this ruling.

Accountants and treasurers

Keep separate books for each event and evidence of the recipient's exclusively charitable purpose and the date and amount donated.

Current events

Confirm current law before claiming an exemption. RR 91-5 interpreted the statute as it existed in 1991.

Common questions

Q: Did nonprofit civic or fraternal status automatically exempt all events?

A: No. The ruling required a separate determination for each event.

Q: Could proceeds go to an educational, religious, or health organization?

A: Yes, if the recipient was operated exclusively for charitable purposes under the ruling's broad definition.

Q: How quickly did net proceeds have to be donated?

A: Within a reasonable time based on the facts and circumstances.

Q: Could the sponsor receive a fee for use of its name?

A: No. A percentage of gross proceeds or a fixed sum for name use disqualified the event.

Q: What records were required?

A: Separate event accounting and adequate proof that the recipient was operated exclusively for charitable purposes.

Citations and references

• S.C. Code Ann. § 12-21-2420(4) — historical nonprofit admissions-tax rules and specifically taxed events
• S.C. Code Ann. § 12-21-2420(11) — historical civic and fraternal charitable-event exemption
• Internal Revenue Code § 501(c)(3) regulations and rulings — charitable-purpose guidance cited by the ruling
• Hay v. South Carolina Tax Commission, 273 S.C. 269, 255 S.E.2d 837 (1979)
• Fennell v. South Carolina Tax Commission, 233 S.C. 43, 103 S.E.2d 424 (1958)
• Etiwan Fertilizer Co. v. South Carolina Tax Commission, 217 S.C. 484, 60 S.E.2d 682 (1950)

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR91-5.pdf

Original ruling text

SC REVENUE RULING #91-5

SUBJECT:

Admissions Tax Exemption for Civic or Fraternal Organizations
(Admissions Tax)

TAX MANAGER:

John P. McCormack

EFFECTIVE DATE:

March 20, 1991

SUPERSEDES:

All previous documents and any oral directives in conflict herewith.

REFERENCE:

S.C. Code Section 12-21-2420 (1976, Supp. 1989)

AUTHORITY:

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

SCOPE:

A Revenue Ruling is the Commission's official interpretation of how
tax law is to be applied to a specific set of facts. A Revenue Ruling is
public information and remains a permanent document until
superseded by a Regulation or is rescinded by a subsequent Revenue
Ruling.

Question:
What requirements must a civic or fraternal organization comply with in order to exempt an
event from the admissions tax under Code Section 12-21-2420(11)?
Facts:
From time to time, a civic or fraternal organization will sponsor and operate an event, such as a
ball game, carnival or play, in which an admissions fee is charged. The proceeds from the event
are then donated to nonprofit organizations such as educational institutions, children's homes,
hospitals, and those raising money to cure various diseases.
Discussion:
Code Section 12-21-2420 imposes the State admissions tax on paid admissions to all places of
amusement within the State. In order to answer the question at hand, we must review two
exemptions found in this section. This section exempts from the tax:

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(4) ... admissions charged by an 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, charitable, 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 admissions 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.

(11) ... admissions to events other than those events enumerated in item (4) of this
section, sponsored and operated exclusively by eleemosynary, nonprofit corporations or
organizations organized exclusively for religious, charitable, scientific, civic, fraternal,
or educational purposes when the net proceeds derived from admissions to the events
shall be immediately donated to an organization operated exclusively for charitable
purposes. The term "net proceeds" shall mean the portion of the gross admissions
proceeds remaining after necessary expenses of the event have been paid. This item
shall not apply to an event in which the above organizations receive a percentage of
gross proceeds or a stated fixed sum for the use of its name in promoting the event.
In summary, certain religious, charitable, scientific and educational organizations are exempt
from the tax on all events operated by them pursuant to Code Section 12-21-2420(4), unless the
event is specifically taxed by that section (i.e. certain athletic events, carnival rides).
This exemption does not specify as to how the money is to be used. Code Section 12-212420(11) exempts events sponsored and operated by these same organizations, plus civic and
fraternal organizations, providing the net proceeds of each event is immediately donated to a
charitable organization. In addition, those events and charges specifically taxed under exemption
number (4) are not exempt under exemption number (11).
Now we must determine what is meant by the phrase "donated to an organization operated
exclusively for charitable purposes" under exemption number (11). More specifically, was the
exemption intended to include events in which the net proceeds are donated to religious,
scientific and educational organizations.
"The different parts of a statute reflect light upon each other, and statutory provisions are
regarded as in pari materia where they are parts of the same act. Hence, a statute should be
construed in its entirety, and as a whole." 73 Am Jurs.2d Statutes Section 191.

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"Where is it possible to do so, it is the duty of the courts, in the construction of statutes to
harmonize and reconcile laws, and to adopt that construction of a statutory provision which
harmonizes and reconciles it with other statutory provisions." 73 Am Jurs.2d Statutes Section
254.
In reviewing the statute as a whole, the "charitable" organization, to which the net proceeds of an
event are donated under exemption (11), must include a broad base of charitable organizations
such as those operated exclusively for religious, scientific, and educational purposes. It would be
unreasonable to disallow civic and fraternal organizations the exemption under number (11) if
they donated the net proceeds to religious, scientific or educational organizations. Such
organizations would clearly be exempt under exemption number (4) if they, and not the civic or
fraternal organization, had sponsored and operated the event.
It is accepted practice in South Carolina to resort to the dictionary to determine the literal
meaning o words used in statutes. For cases where this has been done, see Hay v. South
Carolina Tax Commission, 273 SC 269, 255 SE 2d 837 (1979); Fennell v. South Carolina Tax
Commission, 233 S.C. 43, 103 SE2d 424 (1958); Etiwan Fertilizer Co. v. South Carolina Tax
Commission, 217 SC 484, 60 SE2d 682 (1950).
Black's Law Dictionary, Fifth Edition, defines, in part, the term "charitable purpose" as follows:
"Charitable purpose" for purpose of tax exemption has as its common element the
accomplishment of objectives which are beneficial to community or area, and usually
recognized charitable purposes, not otherwise limited by statute, are generally classified
as: relief of poverty; advancement of education; advancement of religion; protection of
health; governmental and municipal purposes; and other varied purposes the
accomplishment of which is beneficial to community.
This definition is similar to the definition of "charitable purpose" found in the applicable
regulations and rulings of the Internal Revenue Service with respect to IRC Section 501(c)(3).
These regulations and rulings should, therefore, provide some guidance in determining whether
or not the proceeds are being "donated to an organization operated exclusively for charitable
purposes."
Further review of exemption (11) indicates that the net proceeds derived from admissions must
be immediately donated to an organization operated exclusively for charitable purposes. What is
meant by "immediately"?
Courts throughout the country have given a variety of meanings to the word "immediately",
ranging from "without delay", "forthwith" to "as soon as practicable" and "within a reasonable
time". In considering the type of events used to raise money for charitable purposes, from a
simple carnival to a large concert or sporting event with celebrities or professional athletes, the
Commission defines the word "immediately" for purposes of exemption number (11) to mean
"within a reasonable period of time depending on the circumstances and facts of the situation".
We must also consider the term "net proceeds", which the exemption defines as "the portion of
the gross admissions proceeds remaining after necessary expenses of the event have been paid".

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Therefore, the statute requires that each event must be accounted for separately, and the net
proceeds of that particular event must be accounted for and distributed to a charitable
organization within a reasonable period of time depending on the circumstances and facts of the
situation.
Finally, the statute states that the exemption "shall not apply to an event in which the ...
[organization sponsoring and operating the event] receive[s] a percentage of gross proceeds or a
stated fixed sum for the use of its name in promoting the event."
Conclusion:
The requirements that a civic or fraternal organization must comply with in order to exempt an
event from the admissions tax under Code Section 12-21-2420(11) are:
(1) The event must be sponsored and operated exclusively by a nonprofit organization
organized exclusively for civic or fraternal purposes. (This must be determined on a
case by case basis.)
(2) The net proceeds of the event must be donated to a nonprofit organization operated
exclusively for charitable purposes, which include the "accomplishment of objectives
which are beneficial to [the] community or area, ... [and] are generally classified as:
relief of poverty; advancement of education; advancement of religion; protection of
health; governmental and municipal purposes; and other varied purposes the
accomplishment of which is beneficial to [the] community." (This must be determined
on a case by case basis; however, the applicable regulations and rulings of the Internal
Revenue Service with respect to IRC Section 501(c)(3) should provide some guidance.)
(3) The events and charges must not be one specifically taxed under Code Section 1221-2420(4). Such events and charges are also subject to the tax under Code Section 1221-2420(11).
(4) The net proceeds of each event sponsored and operated by a qualifying organization
must be accounted for separately from any other event of the organization.
(5) The net proceeds of the event must be donated within a reasonable period of time
depending on the circumstances and facts of the situation.
(6) The organization sponsoring and operating the event must not receive a percentage
of the gross proceeds or a stated fixed sum for the use of its name in promoting the
event.
(7) The exemption must be determined for each event. The statute does not provide a
blanket exemption for civic and fraternal organizations since it must be determined on
an event by event basis whether or not the organization receiving the net proceeds is
organized exclusively for charitable purposes.

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Note:

Any event or charge which is subject to the tax under subsections (4) & (11) of Code
Section 12-21-2420 may be exempt pursuant to one of the other exemptions found in
the section.
The civic or fraternal organization sponsoring and operating the event must maintain
adequate records to prove that the organization receiving the net proceeds is organized
exclusively for charitable purposes.

SOUTH CAROLINA TAX COMMISSION
s/S. Hunter Howard, Jr.
S. Hunter Howard, Jr., Chairman
s/A. Crawford Clarkson, Jr.
A. Crawford Clarkson, Jr., Commissioner
s/T. R. McConnell
T. R. McConnell, Commissioner

Columbia, South Carolina
March 20
, 1991

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