Allied Charities of Minnesota

Tax Relief Update

07 Feb 2019 16:03 | Allen Lund (Administrator)

Members,

Today our tax bills SF437 (Sen. B. Anderson), SF845 (Sen. Relph), SF414 (Sen. Eichorn), SF219 (Sen. Nelson), SF549 (Sen. Ruud), SF371 (Sen. Koran), SF578 (Sen. Draheim) were heard in the Senate Tax Committee. All bills were held over for possible inclusion in an Omnibus Tax bill. That is the best that we could have hoped for. At the end of this message were my prepared comments.

These seven chief authors (along with their respective co-authors) stood up for YOU today. They stood up for the charities in their district and the rest of us throughout the entire state. It is not universally agreed upon that your organization needs relief. These Senators stuck their necks out for YOU. YOU need to thank them. If one of these Senators represent YOU, YOU really need to thank them.

A large thanks to Tax Chair Senator Chamberlain as well. He is calling attention to our problem. He is showing us what a leader does, taking on issues that need fixing when not everyone agrees it is a problem or needs fixing.

There were four charities that came to testify. More would have come, but the weather was not conducive to travel. An American Legion, a VFW, a youth group and a group that works with individuals with disabilities all told their stories.

The Senators on the tax committee listened when I talked, but they really listened when those folks talked. Those are the stories that hit home. Senator Ruud had similar examples from charities in her district that outlined their particular situations and those were quite impactful as well.

Letting your legislators know how the taxes that you are paying is impacting your ability to serve your community is as easy as: Dear Senator Limmer/Representative Bahner, Al Lund, member of the Osseo Lions and a constituent of yours. Due to charitable gaming, in FY2107 we were able to donate $106,000 to our missions/community and paid $131,000 in taxes and fees to the state. In FY2018 we were able to donate $132,000 to our missions/community and paid $150,000 in taxes and fees to the state. I think that this is wrong, we should not be paying more in taxes and fees than we have for our communities and missions. We need your help to get it fixed. Please let me know if you are willing to be part of the solution or you have any questions of me. Regards, Al

This is the kind of information that the legislators need to know in order to be prepared to stand up and be counted as supporting us.

Defenders of the current tax policy are still playing the same old saws: It’s your expenses, especially your wages (this was supposed to be all volunteer labor after all) and only 10% of you pay the high taxes. Ignore the FACT that 340 of us (30% of us) are upside down, paying more to the state than we have for our communities/missions. Ignore the FACT that 60% of us pay at least three times what a for profit business in Minnesota pays. Ignore the FACT that since 2013 our ability to serve on a per dollar wagered basis has declined by 30%. Ignore the FACT that we pay up to SEVEN times what a for profit business in Minnesota pays. If nothing is done this year to deliver relief, next fiscal year we will be sending the state in excess of $100,000,000. Say that our loud, ONE HUNDRED MILLION DOLLARS.

No news on a House Tax Committee hearing, but requests have been made.

Regards,

Al

Allied Charities of Minnesota (501c6 trade association representing licensed gaming charities) comments:

SF219 & SF414 would exempt donations from the combined receipts gambling tax.

SF371 would reduce the combined receipt tax rates for licensed gaming charities from the current 9/18/27/36% to 6/12/18/24%. 

SF437 & SF845 would eliminate the sales tax on paper games and the electronic revenue share. Chapter 297E (our tax chapter) .02 Subd 1 says: The taxes imposed by this subdivision is in lieu of the tax imposed by section 297A.62 (sales tax imposed). Sales tax takes 3+ million from our mission dollars that is an expense, not part of gambling taxes/fees.

SF549 would reduce the combined receipt tax rates from the current 9/18/27/36% to 4.5/9/13.5%. Paper bingo, raffles and paddlewheels would be reduced from the current 8.5% to 4.25%.

SF578 would reduce the combined receipt tax rates from the current 9/18/27/36% to 6/12/18/27%.

 

It has been reported that charitable gaming will remit over $95 million in gambling taxes/fees to the state in FY2019. That is more than double the $40 million of just six years ago. Without change and even a modest growth rate of 6% we will break the 9 digit barrier and remit more than $100,000,000 to the state in gambling taxes and fees in FY2020.

 

Since FY2017, as a group, licensed gaming charities pay more to the state in taxes/fees than they have for their communities and missions. The proposed changes would help to ensure that charities do not pay more to the state than they have for their communities and missions.

 

In the 2012 stadium legislation, we believe that the intent was for gaming charities to continue to pay $36.9 million into the general fund and pay the annual stadium bond payments of $31 million.

 

If the FY2019 projection of charities remitting $95 million comes to fruition (our business in on track for a 15% increase in FY2019, a seventh year of double digit increases) we will be sending the state $27 million more than is needed for the general fund and stadium bonds.

 

Since FY2013 our ability to serve our communities and missions has dropped from 5 cents per dollar wagered to 3.5 cents per dollar wagered in FY2018, a 30% decline. If that decline is not reversed, at some point charities will not continue carrying a gambling license.

Local needs are growing at an alarming rate. Local charities can respond to local needs faster and more economically.

 

Licensed gaming charities are allowed no deductions of any kind prior to determining our tax liability.

We pay taxes on our expenses. We have been told that if we were allowed to deduct our expenses we would just grow our expenses.

We pay taxes on our donations. We have been told that if we were allowed to deduct our donations we would just grow our donations!

Our effective tax rate can be as high as 72%, over seven times higher than the current state tax on businesses of 9.8%. 

Per the FY2018 Gambling Control Board Organization Annual Report, 340 charities (30% of us) pay more to the state than we have for our communities and missions.

495 charities (43% of us) pay at least 40% to the state of what remains after paying expenses.

687 charities (60% of us) pay at least 30% to the state of what remains after paying expenses.

Groups such as Jackpot, FanDuel and Draft Kings ply their trade in Minnesota. They add no socially redeeming value to Minnesota. If they pay any state tax at all, they pay the 9.8% business rate.

While we are not the only group that does good deeds in Minnesota, we are the only one that I am aware of that pays for the privilege of doing so.

ACM supports all of the efforts to increase the amount of funds remaining in our local communities. Thank you for your time. We ask for your support of these bills.


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