Special Provisions Relating to Governmental, Indian Tribal and Nonprofit Organizations

Governmental and Indian Tribal Organizations
Reference: Minnesota Law, 268.052 (2008) and 268.0525 (2008)

Any instrumentality or political subdivision of Minnesota and any Indian tribal organization that has employment in Minnesota is subject to unemployment insurance tax. These employers are assigned reimbursing accounts unless they elect to pay tax.

An election to pay unemployment insurance tax:

• Must be submitted using the Minnesota Employer Self-Service System by January 31 of the year in which it is to take effect,
• Is effective for a minimum of two calendar years, and
• Can be terminated after the second calendar year if the organization has been assigned the base tax rate and has no pending benefits paid charges.

NOTE: A request to terminate an election to pay unemployment insurance tax must be submitted to the UI Program by December 1 of the year before it is to take effect.

Nonprofit Organizations
Reference: Minnesota Law, 268.053 (2008) and 268.045 (2008)

Nonprofit employers, including: religious, charitable, educational, or other organizations described in Section 501(c)(3) of the Internal Revenue Code that are exempt from income tax under Section 501(a) of the Code, pay quarterly unemployment insurance tax unless they elect to reimburse benefits.

NOTE: Federal tax exempt status does not relieve nonprofit employers from liability for other taxes, including state unemployment insurance tax.

Nonprofit organizations must:

1. Register with the Minnesota Unemployment Insurance (UI) Program as soon as possible after an employee is paid covered wages for services performed in Minnesota.
2. Make quarterly unemployment insurance tax payments unless they have elected to reimburse unemployment benefits.
3. Submit quarterly wage detail reports.

The following types of nonprofit employment are not required to pay unemployment insurance tax or reimburse benefits.

• Employment for a church or convention or association of churches, or an organization operated primarily for religious purposes that is operated, supervised, controlled, or principally supported by a church or convention or association of churches described in United States Code, title 26, section 501(c)(3) of the federal Internal Revenue Code and exempt from income tax under section 501(a); and
• Employment of a duly ordained or licensed minister of a church in the exercise of a ministry or by a member of a religious order in the exercise of duties required by the order, for Minnesota or a political subdivision or an organization described in United States Code, title 26, section 501(c)(3) of the federal Internal Revenue Code and exempt from income tax under section 501(a).

Reimbursable Account Option
Certain nonprofit employers may choose the reimbursement method of reporting. Reimbursing employers:

• Pay no quarterly unemployment insurance tax,
• Must report employment information on a quarterly wage detail report,
• Pay into the Minnesota Unemployment Insurance Trust Fund an amount equal to the amount of unemployment benefits paid to former employees, and
• Are charged for unemployment benefit payments regardless of the reasons for separation from work.

NOTE: Overpayments caused by applicant error, applicant fraud, or UI Program error do not have to be reimbursed.

Employers who choose the reimbursement method reimburse the full amount of unemployment benefits paid to former employees based on wages earned while in their employ. No quarterly unemployment insurance tax is paid. A Notice of Unemployment Benefits Paid and Reimbursable Bill is mailed quarterly to reimbursing employers listing benefits paid charges.

Payment is due at the end of the month following the month in which a bill is mailed. Past due payments are subject to the same interest and collection procedures that apply to past due accounts for taxpaying employers. Interest accrues at a rate of 1.5 percent per month. If an issue is raised and a benefit charge is not paid by the date due, interest is assessed.

Election to be a Reimbursing Employer
Elections:

1. Must be submitted using the Minnesota Employer Self-Service System within 30 days from the date the employer is notified of coverage, and
2. Remain in effect for a minimum of two calendar years.

Nonprofit employers that have paid quarterly unemployment insurance tax may change to the reimbursing method if the total taxes and voluntary payments, during and after the experience rating period, equal or exceed the unemployment benefits used to compute the assigned tax rate. The election:

1. Must be submitted using the Minnesota Employer Self-Service System by December 1 to take effect the following year,
2. Remains in effect for at least two calendar years, and
3. Can be terminated after the second calendar year, if requested by December 1 of the second year, or any subsequent year.

      

This handbook is based on current UI legislation; statements are intended for general information and do not have the effect of law. The Minnesota Unemployment Insurance Law - MN Statutes 268.001 to 268.23 and Administrative Rules 3310 and 3315 - can be accessed through our Web site at www.uimn.org; by clicking on the UI Law link.