Nonprofit organizations apply to the Internal Revenue Service to seek 501(c)(3) status. This federal determination allows nonprofits to collect tax-deductible donations and exempts them from corporate income tax liability. If an organization received a federal 501(c)(3) determination letter from the IRS, it is exempt from state corporate income tax liability as well. Nonprofits may also be exempt from property and sales tax in Minnesota. These exemptions are not automatically based on 501(c)(3) determination.
If an organization is applying for exemption for the first time, it must secure the application from and apply to its county assessor (or in some cases, a city assessor). Department of Revenue guidelines state that initial applications for exemption are due to the assessor in the district where the property is located on or before February 1 of the assessment year in which the exemption is first sought. An organization should check its county assessor’s website for more specific property tax exemption application requirements and deadlines.
Once a property is granted exemption, the nonprofit organization must participate in a three-year assessment review. The next reassessment years are 2025, 2028, 2031, and every third year thereafter. Once an organization receives a properly granted exemption, it will remain in effect unless there is a material change in facts.
Requirements for Organizations
Minnesota Statutes section 272.02, subdivision 7 states:
“Institutions of purely public charity that are exempt from federal income taxation under section 501(c)(3) of the Internal Revenue Code are exempt if they meet the requirements of this subdivision. In determining whether real property is exempt under this subdivision, the following factors must be considered:
- Whether the stated purpose of the organization is to be helpful to others without immediate expectation of material reward;
- 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;
- Whether a material 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;
- Whether the income received, including material gifts and donations, produces a profit to the charitable institution that is not distributed to private interests;
- 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
- Whether dividends, in form or substance, or assets upon dissolution, are not available to private interests.“