Rehabilitation Programs For Mentally or Physically Disabled Persons

A program that provides rehabilitation organizations for mentally or physically disabled persons is one that has qualified under section 501(c)(3) of the United States Internal Revenue Code and that engages in and uses such property exclusively in programs for mentally or physically disabled persons if the programs are exclusively for training, job placement, rehabilitation or testing. See TPP 15-1 for more information.

How to Apply:
This application procedure applies to an organization that provides rehabilitation programs for mentally or physically disabled persons.

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.
• Documentation should be provided to substantiate and describe the organization’s programs for training, job placement, rehabilitation, or testing of mentally or physically disabled persons. The documentation can be a brochure of the services the organization provides to the patrons the organization serves.
• A current list of locations that are used exclusively for training, job placement, or rehabilitation organizations or testing for mentally or physically disabled persons.
• Copy of the organization’s current license(s) issued 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 don’t match.)
• Copy of the organization’s most recently filed IRS Form 990 or 990-EZ, including all schedules.
• A written statement attesting that the items purchased or leased will be used exclusively for training, job placement or rehabilitation organizations or testing for mentally or physically disabled persons.

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 limited for use by the organization for purchases or rentals of tangible personal property to be used exclusively for training, job placement, or rehabilitation organizations or testing for mentally or physically disabled persons.

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 organization directly and exclusively in organizations for training, job placement, rehabilitation, or testing for mentally or physically disabled persons. This is done under Section E of the Form 5000HC. Please see TPP 15-1 for more detail.

Continuing Qualification Review

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 a 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 file the Form 990 or 990-EZ with the IRS.

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 Rehabilitation Programs For Mentally or Physically Disabled Persons