Qualifying Community Health Care Center

A.R.S. § 42-5001(9) defines a "qualifying community health center" as the following:

1. a) An entity that is recognized as nonprofit under section 501(c)(3) of the United States internal revenue code, that is a community-based, primary care clinic that has a community-based board of directors and that is either:
   1. (i) The sole provider of primary care in the community.
   2. (ii) A nonhospital affiliated clinic that is located in a federally designated medically underserved area in this state.
2. (b) Includes clinics that are being constructed as qualifying community health organizations.

See TPP 15-1 for detailed definitions of a Qualifying Community Health organization.

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 the organization’s current license issued by the Arizona Department of Health Services (ADHS).
  • NOTE: Only the locations on the ADHS license will be listed on the Exemption Letter. If qualifying as an organization located in a federally designated medically underserved area in this state, the address on the United States Department of Health and Human Services website will be used.
• 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.
  • Documentation substantiating that the organization is a community based, primary care clinic or a nonhospital affiliated clinic that is located in a federally designated medically underserved area within Arizona. See TPP 15-1.

The organization must submit their application electronically 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 Exemption Letter is limited to use by the organization for purchases of tangible personal property to be used by the community health organization.

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 community health organization. This is done under Section E of 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 an organization losing its qualification to use the Exemption Letter include:

• An organization losing its ADHS Licensure,
• An organization losing its I.R.C. 501(c)(3) nonprofit status,
• A organization failing to file the Form 990 or 990-EZ with the IRS, and/or
• An organization no longer being located in a federally designated medically underserved area. Be advised, these areas are determined by the Health Resources & Services Administration.

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 Community Health Care Center