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Minnesota Tax Exemptions For Non-Profit Corporations

 

STEPS TO APPLYING FOR TAX EXEMPTIONS IN MINNESOTA

What tax exemptions can my Minnesota non-profit corporation take advantage of?

Nonprofit corporations in Minnesota may be eligible for three state tax exemptions: income tax, sales tax, and property tax.

How does my non-profit corporation apply for exemption on income tax?

Like in many other states, Minnesota relies upon the determination of the Internal Revenue Service. If the IRS has granted you 501c3 status, then you are automatically exempt from paying state income tax in Minnesota. However, there is no way to apply independently for the exemption without the Federal 501c3 status. For more information on applying to the IRS for federal tax exemption, please click on our page below.

How can my non-profit corporation apply for sales tax exemption in Minnesota?

Prior to applying for the state sales tax exemption, you once again must have been deemed tax exempt by the IRS. Once you’ve received their determination letter, you can apply for sales tax exemption on the purchases your MN nonprofit corporation makes by submitting Form ST16, along with a copy of your IRS determination letter, your articles of incorporation, and an income and expense statement for the most recent fiscal year to the Minnesota Department of Revenue (see contact information below).

How does my non-profit corporation apply for the property tax exemption in Minnesota?

Property tax exemption in Minnesota is determined by the local city/county government in which your nonprofit either leases or owns property. Unlike the MN sales tax and corporate tax exemptions, however, the MN nonprofit needs more than federal tax exemption to qualify; the local assessor will consider if the nonprofit corporation meets six additional factors:

  1. Whether the stated purpose of the organization is to be helpful to others without immediate expectation of material reward;
  2. Whether the institution of public charity is supported by material donations, gifts, or government grants for services to the public in whole or in part;
  3. Whether a considerable number of recipients of the charity receive benefits or services at reduced or no cost, or whether the organization provides services to the public that alleviate burdens or responsibilities that would otherwise be borne by the government;
  4. Whether the income received, including material gifts and donations, produces a profit to the charitable institution that is not distributed to private interests;
  5. Whether the beneficiaries of the charity are restricted or unrestricted, and, if restricted, whether the class of persons to whom the charity is made available is one having a reasonable relationship to the charitable objectives; and
  6. Whether dividends, in form or substance, or assets upon dissolution, are not available to private interests.

If your MN nonprofit organization meets those conditions, you can apply for the property tax exemption, contact your local tax assessor and request an application for tax exemption. To complete the application, you will likely need to attach the following:

  • Articles of Incorporation.
  • Federal IRS 501c3 determination letter.
  • Your organization’s most recent Form 990.
  • Financial statements.
  • Annual fundraising reports (where applicable).
  • Payment policies for services (where applicable).
  • Scholarship announcements (where applicable).
  • Annual Report or program reports that describe free and reduced cost services.

Are there any additional fees for applying to Minnesota for tax exemptions?

There are no application fees required to apply for any of Minnesota’s state tax exemptions. But you will need plenty of time to assemble all the required paperwork.

For more tax exemption information:

Minnesota Department of Revenue
Mail Station 6330
St. Paul, MN 55146-6330
Phone: (651) 296-6181
Website: www.taxes.state.mn.us/

For more information on applying for federal tax exemption:

Applying for 501c3 Status

This comprehensive guide to obtaining and maintaining 501c3 status from the IRS includes information on how to prepare your nonprofit to apply for 501c3 status, as well as information about the forms and fees required by the IRS.

This guide overviews and includes the special tax-exempt language a 501c3 nonprofit organization must include as part of its articles of incorporation. 

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