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by Amy Sieckmann
The first inkling Terrell Guthrie, director of the Alabama 4-H Center
in Columbiana, had that his camp was in trouble was when a state revenue
auditor showed up at his door and asked to go through his books.
“We couldn’t believe it. He said we needed to start charging a lodging
tax to everyone who came to camp,” said Guthrie. As the tax collector
got up to leave, he added, “By the way, you owe $50,000 in back taxes,
too,” Guthrie recalled.
In the fall of 1994, Alabama’s camps, whose previous worries were mainly
attracting campers and repairing canoes, faced a new threat. The state
was facing some tough economic times and a dispute between a business
conference center and a nearby camp had drawn the attention of the state’s
revenue department.
To resolve the dispute, the State of Alabama decided to start asking
camps to charge campers a forty-year-old lodging tax that had never been
applied to them before. The state’s camp directors, who already had formed
a statewide association years earlier, decided to oppose the tax. They
had to do it soon to stop the state from charging camps back taxes for
all the years and all the campers they had served in the last half-century.
It was a policy decision that could put many camps out of business, camp
directors feared.
The situation began when managers at a business retreat and conference
center near Birmingham got upset when a nearby church camp began soliciting
business groups to have retreats and meetings at the camp. The camp was
struggling financially and decided to attract some business customers
by advertising it had lower rates than area conference centers that charged
a lodging tax.
Alabama’s Lodging Tax Law
According to a 1955 state law, the for-profit conference center had to
charge its guests the lodging tax. The law was unclear about camps charging
the tax. The conference center subsequently complained to the state revenue
department, which saw an old tax law as a means to bring in a few extra
dollars. That was when the Association of Alabama Camps (AAC) decided
to get involved.
Association of Alabama Camps
The camp association was originally formed in the late 1970s when camp
directors approached the state health department about developing regulations
for camps in Alabama. Before that time, Alabama camps had no inspection
or licensing program of any kind. After the licensing program was developed,
however, the association never made the trip back to the Alabama Statehouse
or even found it necessary to unite camp directors under a common cause.
The ninety-four-member organization was surprised when Guthrie, a member,
told them about the state’s decision to begin interpreting a 1955 lodging
tax law as a means to make camps pay the 4 percent state lodging tax plus
the 7 percent Shelby County tax. The law had been applied to hotels and
motels to collect a tax from transients, vacationers, and travelers, who
stay overnight in Alabama. The money was used principally to promote travel
and tourism in the state.
But questions arose since the revenue department regulations contained
two provisions that applied to camps. One said privately operated summer
camps maintained primarily for recreational purposes and made available
to the public for a fee were subject to the tax. However, the law also
said nonprofit summer camps “with attendance restricted to selected classes
of persons” and primarily concerned with the development of good health
and good character were not subject to the tax.
Guthrie’s camp was in the same county as the church camp and the business
conference center, and the state revenue department told the two camps
to start collecting the tax. In addition, the church camp directors were
informed that they owed $100,000 in back taxes. Both camps were nonprofit
camps, but let business groups and for-profit organizations use their
facilities to host meetings and corporate functions, Guthrie explained.
He figured it was the end for the 4-H Center, “I just asked him (the auditor)
if he had his cuffs with him.”
Allen McBride, who is a director at Camp Mac in Talladega County, was
president of the association at the time. McBride said if a new law was
not passed, nothing would stop similar audits at other camps. Smaller
camps, he added, would likely go out of business if they were forced to
pay anywhere from six to forty years worth of back taxes. “The AAC Executive
Committee met, and we decided to heed the words of Benjamin Franklin:
‘We must all hang together or, most assuredly, we shall all hang separately.’”
The association hired Birmingham attorney Bruce Ely, one of the chief
tax lobbyists in Alabama as well as a former camper and the parent of
two sons who attended camp in Alabama. Getting Ely’s help was, as Guthrie
put it, “absolutely necessary, because we didn’t know anything about the
state’s tax code.”
The Solution
The solution, Ely said, would be to show legislators that taxing campers
was never the intention of the Transient Occupancy Tax and that it should
be clarified to specifically exclude camps. “The problem was our law was
fairly broad and could have been read to include camps,” Ely said. “It
was almost funny, though. The auditors were calling our kids transients.”
The key, Ely said, was that camp association members worked together and
moved fast to nip the problem in the bud.
Ely and camp association members contacted their state legislators, especially
those on camp boards and those who had been campers or had children in
camps. Getting legislators, the lieutenant governor, and the governor
on the bandwagon was not difficult, Ely said, once the camp directors
explained the consequences of the law in the right light — putting camps
that nurtured children out of business.
“We just had to explain to them that we were trying to do something positive
for children and so instead of putting the burden on us, they should be
helping us,” Guthrie said. And, no legislator wants to be known as the
one who taxes children, McBride said. “Camps have a lot more influence
than they might realize. It’s hard to find someone who is opposed to kids
and camps. Big corporations would pay millions for the kind of public
image camps enjoy just for doing what camps do.”
Former State Senator Dell Hill was one of the key sponsors of the legislation.
“It was almost a loophole the state was trying to apply to camps here,”
Hill said. “So it was just a matter of getting with the other legislators
and staying on top of it. Legislators can have thirty or forty pieces
of legislation a session they are working on. But this was a needed piece
of legislation. You just have to keep it in front of them.”
Overcoming Obstacles
One hurdle to overcome occurred when several travel and tourism interest
groups opposed the bill fearing it would hurt the Alabama Bureau of Travel
and Tourism’s budget. “This bill is a Pandora’s box and will open the
door for anyone to claim the exemption for a group or a facility,” a county
tourism official wrote to his legislator.
The main obstacle, McBride and Ely said, was defining a camp so hotels
and motels could not find a loophole of their own to get out of collecting
what most people considered a legitimate tax.
“You wouldn’t want the Hilton to put up a sign reading “Camp Hilton”
and then not collect lodging tax,” said McBride.
Key Changes
In the end, the camping association made two key changes — satisfying
the tourism industry and camps. Camps were defined as facilities operated
primarily for the benefit of children, students, or members of nonprofit
organizations. As long as a nonprofit camp derived more than 50 percent
of its total annual gross receipts from serving children, full-time students,
and other non-profit organizations, the camp would not have to collect
the tax from any of those groups. Any business groups served by a nonprofit
camp must pay the lodging tax. But if a nonprofit camp derives more than
50 percent of its annual income from serving for-profit groups, it must
charge all of its guests the tax — including children, students, and nonprofit
organizations.
Moreover, for-profit camps must receive 100 percent of their annual income
from children, full-time students, and nonprofit groups in order to exempt
their campers and guests from paying the tax. “That allowed camp directors
to decide if their campers would have to pay the tax based on what groups
they elected to serve.” McBride said. The bill drew bipartisan support
from all branches of government and was passed unanimously.
A Glitch Resolved
The situation appeared to be resolved after the bill was signed into
law, but a glitch popped up the following summer: What about taxes at
camp stores, camp food service facilities, and on other items camps buy
and sell?
So Ely and association members sat down to go through any possible gray
areas in the tax laws that might come up in the future, McBride said.
They decided not to go back to the legislature and ask for additional
laws to address these issues, but rather work with the Alabama Department
of Revenue to craft regulations to clarify which taxes applied to camps
and how those taxes would be calculated and collected. At that point,
however, collecting more money from campers was the last thing on the
Department of Revenue’s mind, according to McBride.
“What really worked in AAC’s favor was that the association had just
finished pushing through the new legislation, and the Department of Revenue
had taken some pretty hard licks in the news media. They really didn’t
want to stir up the camp community and the legislators again. It was better
for everyone to handle these other questions before another problem arose,”
he said. “They were not going to let camps get away with anything, nor
did we want to, but they were quite cooperative. As long as it seemed
fair, they were happy.
“We wanted it to be just. We expected to pay all taxes we owed and no
taxes we didn’t owe,” McBride said. “We tried to look at the tax issues
that might affect camps and address those in advance so camps would have
guidelines. Some of it was as simple as allowing camps the option of electing
to pay sales tax on food at the time of purchase, or paying the tax when
the meal is served.”
In particular, the association focused on the state’s amusement tax and
sales tax on meals, souvenirs, and snacks. Alabama has a 7 to 9 percent
amusement tax and a 7 to 9 percent sales tax, varying by county. Had lodging
taxes and these other taxes been charged to campers, it would have added
up to about $33 per week for the average camper at an average Alabama
camp, according to a report Ely published to help camps calculate how
taxes could apply to them. A camp serving 100 campers a week for just
ten weeks in the summer could have owed an additional $33,000 (or more)
annually in taxes.
Keeping Watch
Since the events of the mid-90s, the association has been keeping watch
on issues affecting camps and camping in the state and has worked to maintain
close ties to legislators. In fact, they have recently contracted a governmental
affairs representative to monitor proposed legislation and regulations
in the state capital, as well as represent the camp community in Montgomery.
Moreover, McBride, legislators, and other camp directors see what Alabama
camps did as an example of what camps in other states might consider following.
Camps have to be aware of their state’s laws and what is going on in their
state capitol, McBride said. National camp groups such as the American
Camping Association, CCI/USA, Scouting organizations, and other youth-serving
organizations perform essential and invaluable functions, but when it
comes to state and local issues, local camps must take responsibility.
Additionally, the National Federation of Independent Business (NFIB)
is the largest advocacy organization representing small and independent
businesses in Washington, D.C. “The NFIB’s influence and reach has provided
invaluable assistance and representation to Alabama’s camps on both state
and federal levels,” said McBride.
McBride advocates every state forming a statewide camping organization,
because “all camps in a state have to do business under the laws and regulations
of that state . . . camps need to support each other regardless of what
type of camp they are or what clientele they serve.”
Yet Guthrie has another reason why camps in other states should pay attention
to what happened in Alabama. “We were under the assumption that we had
gotten every permit we needed to, but it never occurred to us that we
would have to pay a lodging tax. We were shocked,” Guthrie said. “Other
camps need to take a hard look at their state’s tax codes. If it isn’t
clear that camps are exempt from the taxes you’ve assumed they are, you
had better get busy.”
Originally published in the 2003 March/April
issue of Camping Magazine. |
