Are the state’s charities in need of a tax cut?
Perhaps you’d say: Wait, charities are nonprofits and therefore not taxed. But those relying for funding on “charitable gaming” — such as pull tabs, tipboards and electronic bingo — do pay a significant portion of their proceeds to the state. In fact, they often pay more in taxes than what comes back to the charitable organization, according to testifiers before the House Taxes Committee on Thursday.
Sponsored by Rep. Kristin Bahner (DFL-Maple Grove), HF209 would reduce the tax rate for charitable gambling combined net receipts. The bill was laid over for possible inclusion in the omnibus tax bill.
“When the U.S. Bank Stadium – home of the Minnesota Vikings – deal was struck, it included the use of charitable gaming taxes to pay down the state’s portion of the stadium bonds,” Bahner said. “The growing popularity of e-pull tabs took off, bringing about something we did not imagine possible: Paying off our stadium debt early.
“Estimates put the savings to the state at $46 million, giving Minnesota a unique opportunity to do the right thing, the fiscally responsible thing, to pay it off early and free up the funds for other potential purposes. … This bill would allow more charities to keep their money on their mission.”
Under current law, an organization’s combined net receipts from charitable gambling are taxed at four different levels, ranging from 9% for the lowest level (under $87,500) to 36% of any amount over $157,500 (plus an additional fee of $23,625). Under the bill, those rates would be reduced to 7% at the low end and 31% at the top (with the fee reduced to $19,425).
“People know: Even if I don’t win tonight, I know that my dollars are going to go to people in need,” said Matt Toburen, executive director of the Aliveness Project. “Unfortunately, what Minnesotans don’t understand is that most of that dollar doesn’t really go back to the charities. We give more back to the state than we have to invest into our mission. And there’s no business in the state of Minnesota that pays that level of tax.”
A proposed amendment from Rep. Kristin Robbins (R-Maple Grove) would have reduced the combined net receipts tax rate to 5% for all levels. It was not adopted.
[MORE: View data on Minnesota’s lawful gambling tax receipts.]
The Revenue Department reported that 1,127 charitable organizations paid such taxes in fiscal year 2022. It estimates that the bill’s changes would reduce the General Fund and the stadium reserve by a total of $27.3 million in fiscal year 2024 and $31.3 million in fiscal year 2025.