Charitable Reporting Conformity

Issue Overview

The Minnesota Charitable Solicitation Act requires nonprofit organizations that solicit funds in the state of Minnesota to file an annual report with the Attorney General. The Minnesota Charitable Solicitation Act is designed to make organizations that hold or solicit funds for charitable purposes accountable to the public for management of the funds. By making certain information available to the public, the law seeks to ensure that donors or prospective donors are well informed and protected from misrepresentation and fraud, and that funds held for public purposes are protected.

The Attorney General’s annual report collects information on compensation of the organization’s highest paid employees, among other financial data. The federal IRS Form 990 (which is a supporting document required to accompany the Minnesota annual report) also collects compensation data, although the two entities use different calculations to determine reportable compensation. While the IRS form requires wage reporting directly from the W2 (box 5), the state report requires a calculation of wages and benefits, creating a discrepancy in reporting method and a subsequent variation in data available to the public.

Both the Minnesota annual report and the IRS Form 990 are useful in providing transparency for the public and giving donors information they seek to make informed giving choices. But, reporting in two distinct ways results in an inconsistency of publicly available data. Maintaining discrepancies between state and federal reporting is a disservice to the public, and creates unnecessary administrative burden for nonprofit organizations.

Outcome

House File 786 was signed into law by Governor Dayton on May 18, 2011 and became effective on August 1, 2011. As a result of this bill nonprofit organizations will calculate and report compensation for Minnesota’s Annual Report to the Attorney General using the same method as is required for the federal IRS form 990. Specifically, the changes include: wages will be reported directly from the W2 form (box 5), with benefits and other compensation being reported on a separate line; and compensation will be reported above a $100,000 threshold.

MCN would like to thank the chief authors of the proposal, Representative Greg Davids and Senator Ted Daley for their sponsorship of MCN’s initiative to clarify and simplify nonprofit reporting of financial data at the state and federal levels. MCN also received additional support for this effort from the Charities Review Council, the Council on Foundations, and the Minnesota Society of CPAs.

For More Information

Contact Susie Brown (651-757-3060) or Jeannie Fox (651-757-3083).
 

 
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