Defining a nonprofit

Nonprofits are exempt from federal income taxes, but they are not always exempted from property taxes. Under a proposed bill, they could have to meet more requirements to continue that exemption.

After a year of deliberation, criteria for HF872, sponsored by Rep. Paul Marquart (DFL-Dilworth), would provide clarification for eligibility for property tax exemption for institutions of public charity. On its 24th draft, Marquart said, “This has been a very deliberative process.”

He said no consistency was found for how assessors are assessing nonprofits. “Some assessors are using the North Star standards and some are just saying, ‘I know a nonprofit when I see one.’” The bill would create the uniformity on defining a nonprofit, and would also give the security that if a nonprofit meets the bill’s criteria, it would be exempt from property tax, Marquart said.

“Nonprofits and assessors need clarity,” said Marcia Avner, public policy director with the Minnesota Council of Nonprofits. “One-size-fits-all doesn’t work.”

“I think the bill gets to what we’re concerned about,” said Tom May, Hennepin County assessor. “We wanted a clear definition of what we need to do and think the language in bill does that.”

John Hagen, assistant director for the property tax division of the Department of Revenue, said the department is recommending an administrative group be appointed to make determinations on more complex issues. “It would be a built-in safety net for issues that arise,” he said.

The bill was laid over for possible division report inclusion. A companion, SF751, sponsored by Sen. Tarryl Clark (DFL-St. Cloud), awaits action by the Senate Taxes Committee.