The Spring Lake Park Lions Club paid more in taxes than it was able to give away in fiscal year 2016. After expenses, the club turned over 80 percent of its net receipts to the state.
The Spring Lake Park Lions gave $156,175 to various charities in fiscal year 2016, but the group paid more than double that amount in taxes and fees: $438,654.
The Lions aren’t an anomaly, and Allied Charities of Minnesota is going to bat at the Legislature for 1,200 organizations that hold gambling licenses across the state.
We didn’t join these organizations to be tax collectors for the state, and that’s what’s happening,” said Allen Lund, executive director of Allied Charities of Minnesota.
Charitable gambling generated $1.5 billion in fiscal year 2016, and $1.3 billion were returned in prizes. After prizes were paid out, the Minnesota Gambling Control Board’s annual report shows organizations statewide spent 50 percent of remaining dollars on expenses, 28 percent on charitable contributions and 22 percent on state taxes.
Since 2012, organizations have paid as much as a 36 percent tax on pull tabs, tip boards and electronic link bingo, which accounts for 94 percent of gambling revenue, according to Lund. Other games, such as bingo, raffles and paddlewheels, are taxed at 8.5 percent.
Changes were made five years ago to help finance the construction of U.S. Bank Stadium. Each year, the first $37 million collected in taxes from charitable gambling goes into the general fund, and the balance goes toward the stadium. Last year, $60.6 million was collected in taxes, so just under $24 million was transferred to the stadium reserve account.
Lund calls the stadium “the elephant in the room.”
The Minnesota Department of Revenue certainly does not want to lose dollars earmarked for the stadium.
Paul Cummings, tax policy manager for the department, testified before lawmakers last month, urging them to consider costs of proposed legislation carefully.
Half of the licensed gambling organizations are allowed to make lawful contributions to themselves, Cummings said.
“The impact of this type of transfer on the remaining tax base is unknown, but it could be much larger than $26 million,” he said.
A bill in both the Minnesota House and Senate would exempt donations from being taxed by the state, which would save nonprofits across the states millions of dollars.
“There is no one else that we can find in the state, whether it’s a business or an individual, that does not receive some kind of tax benefit from donating money,” Lund said. “If Minnesota businesses were taxed like we’re taxed, there would be no Minnesota businesses. They would have all left.”
A bill authored by Rep. Bob Dettmer, R-Forest Lake, co-authored by local Rep. Connie Bernardy, DFL-New Brighton, and many others, has moved through House Commerce and Taxes committees for possible inclusion in an omnibus tax bill.
“Charitable gambling provides an opportunity for local charitable organizations, religious institutions and other charities to invest in their communities,” Bernardy said. “Homegrown investments help our communities and neighbors thrive.”
The Senate Taxes Committee was set to hear a similar bill authored by Sen. Carla Nelson, R-Rochester, March 8.
Sen. Jerry Newton, DFL-Coon Rapids, has signed on as a co-author to a similar bill, authored chiefly by Sen. Eric Pratt, R-Prior Lake.
“Every month we get an exuberant amount of requests that sometimes we have to say no to,” said Amanda Jackson, gambling manager for the Spring Lake Park Lions.
If legislation made charitable contributions tax exempt, “then we wouldn’t have to say no to some of these good causes,” she said.
Other Spring Lake Park organizations with gambling licenses are Minnesota Youth Athletic Services, which donated $220,683 in fiscal year 2016 and paid $268,504 in taxes, and the Kraus-Hartig VFW, which donated $2,323 and paid $25,530 in taxes in fiscal year 2016.