Section 6. Objective

The objective of this part is to interpret, exemplify, implement and enforce the provisions of the Gross Receipts and Compensating Tax Act. [11/15/96; 3.2.239.6 NMAC - Rn, 3 NMAC 2.85.6, 6/14/01] 3.2.239.7 “FUNDRAISING EVENT” DEFINED: A. For the purposes of Section 7-9-85 NMSA 1978 and subject to the limitation set forth in Part 3.2.239 NMAC, a “fundraising event” is an activity undertaken by an organization for the purpose of acquiring funds that will be used in the conduct of the organization's exempt activities. A fundraising event must be open to the public and not limited to members of the organization. B. Example 1: A fraternal society operating under the lodge system, exempt from Federal income tax under Section 501(c)(10) of the Internal Revenue Code, conducts two fundraising events each calendar year to obtain the money necessary to purchase eyeglasses for underprivileged children. Each spring, they sell brooms to the general public. Each fall, they sell the services of their members to any person who wants assistance with house painting, gutter cleaning and similar household maintenance tasks. Both of these activities result in the organization receiving gross receipts and both qualify as fundraising events. C. The solicitation of donations in itself, not connected with the sale or transfer of property or the performance of any service, is not a fundraising event and is not subject to the provisions of Section 7-9-85 NMSA 1978. Any event in which both the receipt of donations and the sale of tangible personal property or the performance of any service occur is a fundraising event. D. Example 2: U, itself a 501(c)(3) organization, holds an annual fundraising drive for itself and thirty other 501(c) entities. U solicits the general population for donations but does not sell or transfer property to, nor perform services for, contributors. Each entity receives a fixed proportion of undesignated donations plus any donations designated for the entity occur is a fundraising event. D. Example 2: U, itself a 501(c)(3) organization, holds an annual fundraising drive for itself and thirty other 501(c) entities. U solicits the general population for donations but does not sell or transfer property to, nor perform services for, contributors. Each entity receives a fixed proportion of undesignated donations plus any donations designated for the entity. Ten of the entities are organizations qualifying for the deduction under Section 7-9-85 NMSA 1978. Because the fundraising activity consists solely of soliciting donations, none of the entities involved has conducted a fundraising event under Section 7-9-85 NMSA 1978. [3/16/95, 11/15/96; 3.2.239.7 NMAC - Rn, 3 NMAC 2.85.7 & A, 6/14/01] 3.2.239.8 CERTAIN ORGANIZATIONS NOT ELIGIBLE FOR DEDUCTION - “ORGANIZATION” DEFINED: A. No organization described in Section 501(c)(3) of the Internal Revenue Code may claim the deduction provided by Section 7-9-85 NMSA 1978 but the receipts of 501(c)(3) organizations, except for unrelated business income, are exempt from gross receipts tax under Section 7-9-29 NMSA 1978. B. As used in Part 3.2.239 NMAC, “organization” means: (1) any organization described in Section 501(c) of the Internal Revenue Code, other than 3.2.239 NMAC 2 organizations described in Section 501(c)(3); and (2) any officially recognized chapter, lodge or similar affiliate of an organization described in Paragraph (1) of Subsection B of Section 3.2.239.8 NMAC of this section.