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David Grabitske

David Grabitske is the manager of outreach services at the Minnesota Historical Society in St. Paul, Minnesota.

A recent article on MinnPost and last year’s Rainbow Ruling both deal with taxes and nonprofits. Thankfully neither have involved local historical organizations, yet. Scott Russell writes about “Expanded definitiion of fundraisers is puzzling nonprofits” on MinnPost. Russell details how the Minnesota Department of Revenue is treating art classes provided by the White Bear Lake Art Center as fundraisers rather than as programming designed to further its mission. The Rainbow Ruling from the Minnesota Supreme Court on December 6, 2007, disallowed property tax exemption for a nonprofit daycare. Both resulted in back taxes due. As America’s service-based economy is stressed by rising costs for everything, government servants seem to be caught between a rock and a hard place. On the one hand, citizens are reluctant to have taxes raised since they face similar rising costs. Yet, government needs to function well, but cannot without additional resources. Russell touches on the way public servants are solving government’s need for addtional money when he writes, “the state is trying to collect more taxes through existing laws rather than to pass new laws and new taxes.”

Have you experienced anything of a similar nature? What are some measures that nonprofit historical organizations might use to ensure they do not become targets for expanded taxation?

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2 Responses to Finding Taxes

  1. Mary Warner says:

    David – I think this discussion needs to be tied to the discussion about the value of our brand and the idea that nonprofits are supposed to act more like businesses. The IRS and MN Department of Revenue are looking for ways to tax nonprofits and if we start acting more like businesses, that’s going to give these taxation entities all the more reason to go after us. If we have too much taxable income, then we may lose our nonprofit status.

    While I believe nonprofits should act in professional ways, I think we need to be very careful about taking our cues completely from the for-profit sector.

    Reply

  2. To me, the White Bear Lake Art Center case is almost more troubling than the Rainbow case. OF COURSE we provide educational opportunities to our public–it’s part of the educational mission. However, Rainbow is telling us that these classes (like all of our services) should be provided free or at significantly reduced costs. I don’t think we should lose money on a class or program, especially if our fundraising is not sufficient to allow us to provide these programs otherwise.

    The one takeaway I see from this, for now, is that all of our programs for which we charge had better be directly mission-related. If we were planning any experimental programs that push the mission envelope a little bit, now would not be a good time to pilot them.

    I’d also be interested in knowing if this is happening in other states (state tax law varies a great deal, as we have seen with property tax cases in other states).

    Reply

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