In a Minnesota Supreme Court Decision of December 6, 2007 (Under the Rainbow Child Care vs. Goodhue County), the court changed the definition of a "public charity" by elevating the importance of one of the six basic criteria normally accepted as defining a charity. This, in effect, would limit the number of organizations that would qualify as a public charity and therefore be exempt from property taxes. In the decision, the court states that,
"An organization that does not provide goods or services free or at considerably reduced rates as a substantial, not just an incidental, part of its operations is not exempt from payment of real property taxes as an institution of purely public charity.
Payments made by a governmental entity for goods or services provided to one of
its citizens are not considered donations for purposes of determining whether the entity
providing the goods or services is exempt from payment of real property taxes as an
institution of purely public charity."
This decision could have far-reaching implications for non-profit service providers throughout the state. The state department of revenue has issued a notice that those not held exempt from property taxes automatically are not exempt from sales taxes.
