Bill gives tax-exempt
status to nonprofits’
thrift stores

By Crystal Kua

Thrift shops operated by the Salvation Army and Goodwill Industries of Hawaii would get a real-property tax break under a bill passed by a City Council committee yesterday.

City & County of Honolulu

"Without this bill, nonprofits such as Goodwill and the Salvation Army will be forced to curtail and possibly eliminate the valuable social services they provide to certain segments of our population," city Budget Director Ivan Lui-Kwan told the Budget Committee.

The thrift shops operated by these nonprofit organizations, which primarily sell donated goods, would be subject to property taxes because they are considered a commercial activity, city officials said. They would generate a combined $200,000 in tax revenue a year.

Lui-Kwan said the city has not collected these taxes, but will do so starting in the current fiscal year (fiscal 2003).

The measure would alleviate the tax burden on Goodwill and the Salvation Army because the thrift shop revenues directly support their work to help the disadvantaged.

The bill, which would take effect July 1, 2004, allows for an exemption if a shop is operated by any nonprofit that sells goods, 90 percent or more of the goods sold have been donated, and all the net revenues are used to provide job training and employment services or substance abuse rehabilitation services.

Representatives of both organizations came before the committee to describe the work they do and why the exemption is needed.

"This is a really important issue to Goodwill and to our retail stores and the people that we serve," Goodwill President and Chief Executive Officer Laura Robertson testified.

Robertson said Goodwill stores are used as a training ground for people with disabilities, people on public assistance and at risk youth.

"So many of the things that we're doing with the donated merchandise and sales that are made in our stores are actually work training. It is job training to train folks to get jobs. So in that sense it's different than a retail store," Robertson said.

Salvation Army Capt. Anthony Markiewicz said revenues from the thrift shop go directly toward the organization's adult drug rehabilitation facility.

Gary Kurokawa, administrator for the Real Property Tax Division, said the reason these two organizations are to be taxed is because those are the only two his office knows about. He also said the law requires all commercial activities -- even those done by nonprofits -- to be assessed.

"We don't have the necessary resources to find out if there are any kind of thrift shops operating in schools, churches or any other nonprofits," he said. "We really don't know how much of the nonprofits do have thrift shops."

City & County of Honolulu

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