Minnesota

Multi-State Compliance Matrix

Updates

What You’ll Learn

If you’re a nonprofit in Minnesota, or you’re a nonprofit considering fundraising or other activities in Minnesota, you must understand the requirements that Minnesota has established for nonprofits operating in the state.  

How can you become familiar with these laws? Where should you start?  

Start here. This state profile includes the basic requirements nonprofits must consider. Reading the profile and implementing appropriate compliance measures will help you prepare your organization for success in Minnesota.

Getting to Know the State Nonprofit Corporation Law

Background

*Important primarily for nonprofits incorporated in Minnesota

He wasn’t a complete human being at all. He was a tiny bit of one, unnaturally developed; something in a bottle, an organ kept alive in a laboratory. I thought he was a sort of primitive savage, but he was something absolutely modern and up-to-date that only this ghastly age could produce. A tiny bit of a man pretending he was the whole.

- Brideshead Revisited, Evelyn Waugh

When reading a novel, we get to know a fictional character by the author’s description. The author tells us about the character’s appearance, purpose, actions, mannerisms, and values.  

Nonprofit corporations are something like fictional characters.  

We learn how a nonprofit will look and act and make decisions not by reading a novel, but by reading the state law (called the nonprofit corporation act) and the rules the nonprofit makes for itself (called the bylaws and articles of incorporation). The law and the organization’s own rules tell us the organization’s name, purpose, way of acting, and method of making decisions.  

To get to know your own nonprofit, be sure to review the sections below.

State Nonprofit Corporation Law

Corporate Governance

Conflict Transactions: Minn. Stat. § 317A.255; Need to review the basic best practices for conflicted transactions? See Bylaws Module 14: Conflicts of Interest.  

Director Standards of Conduct: Minn. Stat. § 317A.251; Need a refresher on the role of directors? See Bylaws Module 6: Directors.

Members: Eligibility and Statutory Powers: Minn. Stat. § 317A.401; Not sure what a “member” is? Need to review the basics? See Bylaws Module 5: Members.

Indemnification: Minn. Stat. § 317A.521; Not sure what “indemnification” is? Need to review the basics? See Bylaws Module 8: Indemnification.

For Religious Nonprofits

Nonprofit Religious Corporation Act: Minnesota’s nonprofit corporation law acknowledges the ability of nonprofit corporations to incorporate for religious purposes but does not include specific provisions to protect religious nonprofits’ right to self-government in internal affairs or an option to incorporate expressly as a nonprofit religious corporation. Minn. Stat. § 317A.909; Minn. Stat. § 315; Confused about what it means to be a religious nonprofit corporation? See our whitepaper “Why a Religious Corporation?

Reliance on Religious Guidance in Governance: Minnesota permits a director to, in the fulfillment of the director’s fiduciary duties, rely on the opinion of individuals who can reasonably be assumed to have expertise on a certain matter, but does not expressly allow a director to rely on guidance from religious figures within his or her faith tradition. Minn. Stat. § 317A.251(2)

Understanding Religious Liberty in this State

Case Study

*Important for all nonprofits doing business in Minnesota, whether incorporated in Minnesota or elsewhere

The religious education and formation of students is the very reason for the existence of most private religious schools, and therefore the selection and supervision of the teachers upon whom the schools rely to do this work lie at the core of their mission. Judicial review of the way in which religious schools discharge those responsibilities would undermine the independence of religious institutions in a way that the First Amendment does not tolerate.

- Our Lady of Guadalupe School v. Morrisey-Berru, 140 S. Ct. 2049 (2020).  

Sometimes, the state or local government (like the city or county) makes laws that could conflict with your organization’s free exercise of religion or its sincerely-held religious beliefs.

For example, a law might require employers not to make faith-based distinctions between job candidates. If your organization’s mission is to pass on the teachings of your faith, you will need to make faith-based distinctions in evaluating candidates because their faith commitments will impact their abilities to partner in your mission and witness the faith to your program participants.

So, what do you need to do? Be aware of the laws listed below. If any of the laws impact your organization—for example, if you are an employer or a facility open to the public—learn more about how you can protect yourself by reviewing Napa Legal’s religious liberty resources. Talk to an attorney if you have specific concerns.

Religious Liberty Protections

State Religious Freedom Restoration Act: Minnesota has not enacted a RFRA and has enacted nondiscrimination laws that conflict with the beliefs of many religious organizations. See State v. Hershberger, 462 N.W.2d 393 (Minn. 1990). Not sure what a “religious freedom restoration act” is? Click here to learn the fundamentals.

State Constitutional Protection of Free Exercise: The Minnesota Constitution has been interpreted by the Minnesota supreme court to provide stronger protections for religious free exercise or worship than the federal First Amendment. Minn. Const. Article I, § 16

State Blaine Amendment: The Minnesota Constitution contains a Blaine Amendment that broadly restricts faith-based organizations’ freedom to participate in public benefit programs on the same terms as similarly situated secular institutions. Current U.S. Supreme Court precedent has rendered this language ineffective, but it could become effective in the future if Court precedent changes. Minn. Const., Article I, § 16; Article XIII, § 2; Not sure what a Blaine Amendment is? Review the basics here.

Other Relevant State Laws and Regulations

Minnesota currently has a statewide public accommodation law, linked below. Be sure you also understand whether any local public accommodation regulations apply to your organization.  

Religious Freedom and Public Accommodation Laws: Minnesota’s nondiscrimination laws generally restrict religious freedom for religious organizations that offer public programming and facilities but provide accommodations or exemptions for the vast majority of religious organizations. Minn. Stat. § 363A.11(1); Minn. Stat. § 363A.26; Not sure what a public accommodation law is or what it means for your organization’s religious liberty? Learn the basics in this article which discusses the issue in the context of the case Fulton v. City of Philadelphia.

Protections for Religious Exercise in State of Emergency: Minnesota law has no explicit constitutional or statutory protections for religious exercise during a time of emergency, but such legislation has been introduced.

Key Employment Laws and Regulations

In addition to tracking with the protected classes in the federal anti-discrimination employment law, Title VII of the Civil Rights Act of 1964, Minnesota prohibits employers from discriminating on the basis of creed, marital status, status with regard to public assistance, familial status, membership or activity in a local commission, disability, sexual orientation, or age. An employer is any person who has one or more employees. No religious exemptions apply to this requirement. Local governments may also have employment-related regulations. An attorney can help you understand what requirements apply to your organization.  

Religious Freedom for Faith-Based Employers: Minn. Stat. § 363A.08; Need to review the basics on religious freedom and employment matters? Walk through a self-audit of best practices here.

Religious Freedom for Employees: Not Present

Conducting Activities or Programs in this State

Understanding the Business Registration Requirement

*Important primarily for nonprofits doing business in Minnesota but incorporated elsewhere

If you are fundraising or conducting activities in Minnesota, you must consider whether you need to register as a foreign nonprofit corporation. The state law requires entities that “transact business in [the] state” to register. An attorney can help you decide whether you need to register based on the type and volume of activities you have in this state.  

Business Registration Statute

Fundraising and Charitable Registration in This State

How to Know (And What to D0) If You're Fundraising In This State

*Important for both Minnesota and Foreign Nonprofits

Not sure what “charitable registration” is? Need to review the basics? Read this article for a refresher.

Minnesota generally requires organizations to register prior to soliciting donations. However, the registration requirement has a narrow religious exemption for organizations that are exempt from filing the IRS Form 990. Religious organizations must apply to receive the exemption—it is not automatic.

Minnesota has a broad definition of what constitutes solicitation and does not specify what minimum activity level triggers registration requirements.

Minnesota does not specifically define the threshold solicitation which triggers exempt status. State law does, however, provide a “de minimis” exemption for organizations which are (1) volunteer-run organizations; (2) receive contributions of less than $25,000; and (3) do not use a professional fundraiser. The statute states that the $25,000 maximum refers to total contributions from all sources, not just Minnesota-source donations.

If You're Fundraising In Multiple States, Make Sure You Understand the URS

In Minnesota, organizations which are required to register have the option of registering through the Unified Registration Statement, which is a standardized charitable registration accepted in many states. See also Minnesota’s supplement to the Unified Registration Statement.

Evaluate Whether You'll Need a Registered Agent

If you are fundraising in Minnesota, you must consider completing a foreign not for profit registration and designating a registered agent in state. The person on the registration statement as having custody of books and records will be subject to service if there is no registered agent. Minn. Stat. § 309.56. See Minn. Stat. § 309.56.

Follow the Rules About Communicating with the Public

Minnesota requires organizations to include specific statements whenever the organizations is requesting donations (also called “charitable solicitation”). Below is sample language to use with charitable solicitations in this state:

This solicitation is made on behalf of *ORG* located in *CITY*, *STATE*. Contributions to *ORG* *ARE/ARE NOT* tax-deductible. Contributions will be used in support of *ORG*’s religious mission to *PURPOSE*, such as *ACTIVITIES*.

Charitable Registration Statute

Charitable Registration Exemption Statute

Annual Report Requirement

Minn. Stat. §§ 309.53

Audit Requirements: As a condition of maintaining authorization to fundraise in the state, Minnesota requires the submission of audited financials from organizations with annual contributions of $750,000 or more. Minn. Stat. § 309.53(3)

Get Acquainted with State and Local Taxes and Exemptions

State and Local Taxes

*Important for all nonprofits doing business in Minnesota, whether incorporated in Minnesota or elsewhere

In Minnesota, organizations which have received federal income tax exemption are also exempt from the state income tax. However, to receive this exemption, organizations must apply. The exemption is not automatic. Organizations can apply by submitting a Business Activity Questionnaire for determination. Note that, although an organization may be generally exempt from state income tax, if it has unrelated business taxable income (UBTI) that is subject to federal taxation, that UBTI may be subject to state income tax.

It is also important to consider whether your organization might be eligible for sales and use tax or property tax exemption. In this state, federal § 501(c)(3) status does not automatically provide an exemption from sales, use and property taxes. More information about the sales and use tax exemptions and applications is available on the Minnesota Department of Revenue website and in Minnesota administrative rules. An accountant or attorney can provide answers to specific questions regarding your organization’s eligibility for exemption.

Corporate Income Tax Statute

Minnesota imposes a statewide corporate income tax but automatically exempts organizations with federal 501(c)(3) exempt status. Minn. Stat. § 290.05(2)

Corporate Franchise Tax Statute

Not applicable; see Minnesota Department of Revenue website for more information about eligible entities (C corporations)

Minnesota Corporate Gross Receipts Tax: Not applicable; see Minnesota Department of Revenue website for more information.

What You Need to Know About Sales Tax

Minnesota Sales and Use Tax: Minnesota imposes a sales and use tax on religious organizations’ sales and only provides limited exemptions for certain items. Minnesota imposes a sales and use tax on religious organizations’ purchases but provides broad and comprehensive, entity-based tax exemption for 501(c)(3) religious organizations’ purchases upon application. Minn. Stat. § 297A.70(4); must file Form ST16

Minnesota Tax Treatment of Unrelated Business Income: Minn. Stat. § 290.05(3)(b)

Minnesota Property Tax: Minnesota imposes property tax but, upon application, generally provides an exemption to religious organizations for property used for religious and/or charitable purposes. Minn. Stat. § 272.01  

Minnesota Property Tax Exemptions: Minn. Stat. § 272.02

State-Specific Special Requirements

Miscellaneous

Legal Disclaimer

This resource contains general educational information related to legal concepts, but this information does not constitute legal advice. Anyone seeking legal advice is strongly encouraged to consult with a licensed attorney regarding any of the matters discussed herein. Although licensed attorneys work with Napa Legal, Napa Legal is not a law firm and does not undertake legal representation on behalf of any clients. Further, no licensed attorney working with or on behalf of Napa Legal agrees to undertake legal representation on behalf of any client unless the terms of such representation are set forth in a separate, written representation agreement.

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**Please note that the following state profiles are forthcoming and will be published soon:Hawaii and Washington