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Letter: Taxes being unfairly sought from nonprofit

By Gary G. Prins and Dennis Luitjens, Worthington

In Worthington, there is a race track located at the Nobles County Fairgrounds. This track was not in use and grew up in weeds. In the fall of 2003, there was a public meeting at the Elks Club with the help of Worthington Mayor Alan Oberloh to see if there was enough interest to start up a community race track. There was enough interest, and seven people volunteered to get the track operating for the 2004 season. With the help of Dave Von Holtum, the city’s attorney, they filed as a nonprofit corporation as Nobles County Speedway Inc. (Charter No. 7685452, Form 317A) with the federal and state governments on Jan. 27, 2004. Dave Von Holtum also set up the bylaws and board of directors for the seven people that volunteered. He also set up bonds for the 24 people of the community that invested $800 each, for a total of $19,200, to get cash flow to operate the track.

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The board ran the race track as a nonprofit. Board members were volunteers and never received any pay. All profits from the race track were invested back into the race track for improvements. The race board had three new volunteers every year and ran the race track as a nonprofit organization. In the eighth year, the state audited the books, and the board was informed we had to pay sales tax and that the state had issued us a sales tax number. We never had a sales tax number because we were a nonprofit. We never collected any sales tax money. The speedway did pay sales tax after it received its sales tax number in 2012.

Minnesota Sales Tax also went back three years and said we owed back sales taxes of $70,000. The volunteer board members got scared of the $70,000 tax debt and resigned from the board. Nobody would volunteer to replace them. The Fair Board, too, would not rent the track because of the $70,000 in back sales taxes.

Since nobody would volunteer to be on the board and the Fair Board wouldn’t rent the track, the Nobles County Speedway was dissolved. The assets were sold to pay the total sales tax for 2012, and the balance was divided up to the $800 investors. So who is at fault for the $70,000 sales tax?

Why did eight years go by until we were issued a tax number, and then forced to go back three years on back taxes when we didn’t even know about sales taxes on a nonprofit? The state has shut down a nonprofit, community race track. Now, the state is going after some of the volunteers who donated their eight years of service to the race track. The two volunteers are Gary G. Prins and Dennis Luitjens.

The Minnesota Sales Tax letter states that we are personal liability for the new tax of $80,525. How can the volunteers be responsible for the sales tax?

The volunteer board members ran the race track as a nonprofit. We did not do anything wrong. So why should we have to pay the tax bill when there shouldn’t be a sales tax on a nonprofit?

Something is wrong with our government when they go after people that volunteer to do community service.