This document summarizes those tax reform proposals in the
Governor’s tax plan that have a direct impact on nonprofits. An overview of the Governor’s total tax
reform plan is available from the Minnesota Budget Project at
www.mncn.org/bp/gov0203.htm.
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Current Law
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Governor’s
Original Reform Proposal
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Governor’s
Revised Proposal
(updated to February 2001 Forecast)
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Nonprofits meeting the definition of “purely public
charity” are exempt from the property tax.
(Schools, places of worship, and hospitals are also exempt, but
through a different provision).
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Cities would have the option to levy a “local option
public safety fee” on nonprofits that are exempt from the property tax as
public charities (schools, hospitals, and religious sanctuaries would not be
affected). This service fee would be
calculated by the following formula: property value X 1.5% class rate X the
city tax rate X the percentage of the city’s expenditures that go for public
safety.
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No change from current law – no local option public
safety service fee.
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Nonprofits must collect the sales tax on those goods and
services they sell if those goods and services are taxable. Exemptions to this rule include ticket
sales to arts events, memberships at YMCAs, YWCAs, and Jewish Community
Centers.
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Eliminate
special exemptions from the sales tax ticket sales to arts events,
memberships at YMCAs, YWCAs, and JCCs.
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No change from current law – keep existing exemptions.
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Fundraising
sales by nonprofits are generally not taxable, unless the selling takes place
more than 24 days during a year.
Certain fundraising sales by youth and senior groups (that do not fall
under the nonprofit fundraising guidelines) are exempt as long as the gross
annual receipts are under $10,000. If
over $10,000, sales tax is due on the entire amount raised.
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Tax
fundraising sales by nonprofits or youth and senior groups if the gross
annual receipts are over $25,000.
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For youth and senior groups, the first $10,000 of annual
gross receipts on fundraising is exempt from the sales tax. No change from current law for nonprofit
fundraising.
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501(c)3 nonprofits that are religious, charitable, or
educational organizations may apply for an exemption from paying the sales
tax on services.
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Eliminate the current application process for sales tax
exemption certificates and extend exemption to all 501(c)3 organizations.
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No change from current law.
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Nonprofits who are exempt from paying sales tax on
purchases must still pay the sales tax on meals, lodging, motor vehicles
(with the exclusion of certain larger vehicles), construction materials, and
gambling equipment.
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Eliminate payments of sales tax on all purchases by exempt entities.
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No change from current law.
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