Qualifying Health Care Organization

There are two types of qualifying health care organizations that are eligible for exemptions under certain tax classifications. The two organizations include:

1. An organization dedicated to providing educational, therapeutic, rehabilitative, and family medical education training for blind and visually impaired children and children with multiple disabilities from the time of birth to age 21.
2. An organization that solely provides health and medical related educational and charitable services.

Both types of qualifying health care organizations are organizations that:

• Are qualified as a nonprofit organization under section 501(c) Internal Revenue Code rules.
• Uses, saves, or invests at least eighty percent of its gross receipts only for health and medical related educational and charitable services.
• Uses all monies it receives from all sources each year are only for health and medical related educational and charitable services, as documented by financial audits.

Qualifying Health Care Organizations

This application procedure applies to an organization that solely provides health and medical related educational and charitable services.

How to Apply:

These organizations should electronically submit the following information for review to the Department:

• Fully completed Health Care Exemption Application:
  • Complete all sections of the form, including the list of locations for Appendix A of the Exemption Letter.
  • Submit the application electronically via email to [email protected] along with each of the supporting pieces of documentation mentioned below.
• Copy of any current license(s) issued to the organization by the Arizona Department of Health Services (ADHS).
• Copy of the organization’s I.R.C. § 501 C determination letter.
  • NOTE: The name on the determination letter must match the name of the organization seeking the Exemption Letter and the name on the license issued by the Arizona Department of Health Services. (The organization may provide proof that it is operating as a subordinate organization under a group exemption if the names do not match.)
• A financial audit prepared by an independent certified public accountant for the year(s) previous to the year that the exemption is sought. The audit should substantiate that eighty percent (80%) of all monies collected from all sources were used, saved or invested solely for health and medical related educational and charitable services. See TPP 15-1 for more information on the 80% requirement. Most organizations will include in their audit the following statements: Statement of Financial Position, Statement of Activities, Statement of Cash Flows and Statement of Functional Expenses. At a minimum, the Department requires these statements. Failure to supply these statements may cause a delay in your review.

The organization must electronically submit their application to the Department and fully answer any eligibility questions required by the Department for the purpose of the application. If the Department approves the application, the ensuing Exemption Letter is valid until the organization is no longer qualified for the Exemption Letter.

If an organization does not submit the required documentation, the Department will request further information within thirty (30) business days of receipt of the Exemption Letter request. An Exemption Letter will not be issued until all required documents are received by the Department. If the required documents do not substantiate that the organization is eligible for an Exemption Letter, a denial will be issued that may be appealed. See TPP 15-1 for Appeal of Agency Decision. All applications must be sent via email, mailed applications will not be accepted.

Upon approval, the organization will be given an Exemption Letter exempting the organization as a customer for the business classifications below. The organization may only use and are limited for use by the organization solely to provide health and medical related educational and charitable services.

NOTE: Only those locations used by the qualifying organization to provide educational or charitable services that are health and medical related are exempt under the Utilities classification in A.R.S. § 42- 5063(C)(3)(b).

Documentation for the Vendor
To qualify for exempt transactions, the qualified organization should give the vendor the Exemption Letter along with a properly completed Arizona Form 5000HC for each location(s) attesting that the tangible personal property purchased or leased by that location will be used solely in providing educational or charitable services that are health and medical related. Please see TPP 15-1 for more detail.

Continuing Qualification
Please note, once an organization receives the required Exemption Letter with a date of January 2024 or thereafter, that Exemption Letter will remain valid until the organization no longer qualifies for the Exemption Letter. See A.R.S. § 42-5009(S)(1). At the beginning of each year, subsequent to the initial certification - an organization should review any statutorily relevant information to determine if they still qualify to use their Exemption Letter. Examples of an organization losing their qualification to use the Exemption Letter includes:

• An organization losing their ADHS Licensure, 
• An organization losing their I.R.C. 501(c)(3) nonprofit status, and/or
• An organization failing to use 80% of all monies used, saved or invested solely for health and medical related educational and charitable services.

NOTE: If the organization no longer qualifies for the Exemption Letter, it is their responsibility to:

• notify the Department and any vendors they have supplied it to that they no longer qualify for the exemption, and
• discontinue using the Exemption Letter.

Regardless of the organization’s notification to the Department and its own vendors, if they no longer qualify for the Exemption Letter – yet continue to utilize it – then they are liable in an amount equal to any tax, penalty, and interest from the date they no longer qualify, that the seller would have been required to pay if the seller had not been given the Exemption Letter by the organization.

Applicable Deductions for Qualifying Health Care Organizations that Provide Educational or Charitable Services that are Health and Medical Related

Qualifying Health Care Organizations that provide educational, therapeutic, rehabilitative, and family medical education training for blind and visually impaired children

This application procedure applies to an organization that provides educational, therapeutic, rehabilitative, and family medical education training for blind and visually impaired children and children with multiple disabilities from the time of birth to age 21.

How to Apply:

These organizations should electronically submit the following information for review to the Department:

• Fully completed Health Care Exemption Application:
  • Complete all sections of the form, including the list of locations for Appendix A of the Exemption Letter.
  • Submit the application electronically via email to [email protected] along with each of the supporting pieces of documentation mentioned below.
• Copy of any current license(s) issued to the organization by the Arizona Department of Health Services (ADHS).
• Copy of the organization’s I.R.C. § 501 C determination letter.
  • NOTE: The name on the determination letter must match the name of the organization seeking the Exemption Letter and the name on the license issued by the ADHS. (The organization may provide proof that it is operating as a subordinate organization under a group exemption if the names do not match.)
• A financial audit prepared by an independent certified public accountant for the year(s) previous to the year that the exemption is sought. The audit should substantiate that eighty percent (80%) of all monies collected from all sources were used, saved or invested solely for health and medical related educational and charitable services. See  TPP 15-1 pg. 8 and 9 for more information on the eighty percent requirement. Most organizations will include in their audit the following statements: Statement of Financial Position, Statement of Activities, Statement of Cash Flows and Statement of Functional Expenses. At a minimum, the Department requires these statements. Failure to supply these statements may cause a delay in the application review.
• The organization must also provide documentation showing that the organization is dedicated to providing educational, therapeutic, rehabilitative, and family medical education training for the blind, visually impaired and multi-disabled children from the time of birth to age twenty-one.

The organization must submit their electronic application to the Department and fully answer any eligibility questions required by the Department for the purpose of the application. If the Department approves the application, the ensuing Exemption Letter is valid until the organization is no longer qualified for the Exemption Letter. 

If an organization does not submit the required documentation, the Department will request further information within thirty (30) business days of receipt of the Exemption Letter request. An Exemption Letter will not be issued until all required documents are received by the Department. If the required documents do not substantiate that the organization is eligible for an Exemption Letter, a denial will be issued that may be appealed. See TPP 15-1 for Appeal of Agency Decision. All applications must be sent via email. Mailed applications will not be accepted.

Upon approval, the organization will be given an Exemption Letter exempting the organization as a customer for the business classifications below and are not limited for use by the organization solely to provide health and medical related educational and charitable services.

Documentation for the Vendor
To qualify for exempt transactions, the qualified organization should give the vendor the Exemption Letter along with a properly completed Arizona Form 5000HC for each location(s) attesting that the tangible personal property is used by the qualified organization. Please see TPP 15-1 for more detail.

Continuing Qualification
Please note, once an organization receives the required Exemption Letter with a date of January 2024 or thereafter, that Exemption Letter will remain valid until the organization no longer qualifies for the Exemption Letter. See A.R.S. § 42-5009(S)(1). At the beginning of each year, subsequent to the initial certification - an organization should review any statutorily relevant information to determine if they still qualify to use their Exemption Letter. Examples of an organization losing their qualification to use the Exemption Letter includes:

• An organization losing their ADHS Licensure, 
• An organization losing their I.R.C. 501(c)(3) nonprofit status, and/or
• An organization failing to use 80% of all monies used, saved or invested solely for health and medical related educational and charitable services.

NOTE: If the organization no longer qualifies for the Exemption Letter, it is their responsibility to:

• notify the Department and any vendors they have supplied it to that they no longer qualify for the exemption, and 
• discontinue using the Exemption Letter.

Regardless of the organization’s notification to the Department and its own vendors, if they no longer qualify for the Exemption Letter – yet continue to utilize it – then they are liable in an amount equal to any tax, penalty, and interest from the date they no longer qualify, that the seller would have been required to pay if the seller had not been given the Exemption Letter by the organization.

Applicable Deductions for Qualifying Health Care Organizations that Provide Training for the Blind and Visually Impaired Children and Children with Multiple Disabilities from the Time of Birth to Age Twenty-One