WILLMAR -- A December 2007 ruling by the Minnesota Supreme Court could threaten the financial viability of nonprofit organizations around the state, including the Willmar Meals on Wheels program.
Charlie Oakes, director of West Central Industries, said it's possible the local nonprofit organization may have to pay $100,000 a year in property and sales tax because the Supreme Court has tightened the definition of how a nonprofit can charge for services and still retain its tax-exempt status. West Central Industries operates the local Meals on Wheels program.
Oakes said the Supreme Court's decision means that if a nonprofit organization does not provide its services for free or at a considerably reduced rate, the organization cannot be considered a charitable organization.
That could allow county assessors to start charging some nonprofit organizations -- except churches -- property taxes. Once the nonprofit status is lost, those organizations would also have to pay sales tax.
Paying $100,000 a year in taxes would be difficult for an organization "that's run on a break-even basis," Oakes said. If West Central Industries stopped providing Meals on Wheels, 110 local elderly residents may not have access to hot meals delivered to their homes.
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"That's a lot of moms and dads and aunts and uncles that are depending on us to provide meals," Oakes said.
During a report Tuesday to the Kandiyohi County Board of Commissioners, Oakes said 60 percent of the meals that West Central Industries provides are subsidized, but 40 percent of the clients pay for their meals.
The meals program would have to be discontinued so that the organization could retain its nonprofit status, or the price of the meals would have to be raised "substantially," Oakes said. Once a meal delivery program is stopped, the federal government requires a five-year waiting period for it to be offered again in a community.
Oakes said legislation is being drafted to broaden the tax-exempt definition so that the state's nonprofit organizations, and those they serve, are not negatively affected.
Since many nonprofit organizations provide services to government agencies, like county family service programs, the price governments pay to provide those services will increase if the Supreme Court ruling puts those nonprofits out of business, he said.
