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Minnesota Legislature: Non-profit groups benefit from bill

Rep. Paul Marquart of Dilworth tells a House committee about his bill to allow non-profit organizations to avoid paying property taxes. With him are Marcia Avner and Rinal Ray of the Minnesota Council of Nonprofits. Pioneer Photo/Don Davis

ST. PAUL -- Non-profit organizations, county assessors and the state have crafted a compromise that could allow charities to continue being exempt from property taxes.

If the bill heard for the first time Wednesday becomes law, more than 4,000 properties owned by 1,700 non-profit organizations could avoid paying property taxes. Those involved in the bill's draft met 13 times and rewrote the measure two dozen times - and came up with a bill that puts into law what most counties already do.

A late 2007 state Supreme Court ruling "sent shockwaves through the non-profits," Rep. Paul Marquart, DFL-Dilworth, said.

That is when the high court ruled that Under the Rainbow day care center in Red Wing must pay property tax.

The court ruled that a non-profit group needed to provide goods or services free or at a considerably reduced rate before it could avoid paying property taxes. Before the court ruling, that was one of several factors assessors considered before deciding whether a property was tax exempt.

Marquart's bill continues a version of that requirement, and includes other rules.

The representative, chairman of a House property tax committee, said the bill is needed because assessors in different counties make different decisions about what organization is a non-profit. In some cases, he said, assessors decide because they think "I know a non-profit when I see one."

"There is no consistency on how assessors were assessing non-profits," Marquart said.

Marcia Avner of the Minnesota Council of Nonprofits told committee members that the provision the high court made a requirement is tough for many non-profit groups to meet. While it requires free or reduced cost services, some non-profit organizations receive government payments under provisions that would not allow a group to fit the old provision.

Marquart's bill would allow government-funded non-profits to avoid paying property taxes if they meet other requirements.

Rep. Morrie Lanning, R-Moorhead, said that everyone concerned needs to understand that there always will be disputes about what constitutes a non-profit group.

"There still may be some disagreements down the road," he said.

However, the bill includes a committee made up of representatives from assessors, the state and non-profits that can make recommendations in gray cases.

The urgency to pass the bill has increased in recent months, Avner said, because the economy has reduced contributions non-profit groups receive. When the Supreme Court made its 2007 ruling, non-profit leaders said it would hinder their work by adding more expenses.

Ironically, the bill does not change Under the Rainbow's status. The Red Wing day care still would be required to pay property taxes, Avner said, because it does not offer free or greatly reduced-price services.

Don Davis works for Forum Communications Co., which owns the Bemidji Pioneer.