IV. Laws that Govern Charitable Trusts
I. Introduction II. Laws that Govern Charitable Organizations III. Laws that Govern Professional Fundraisers IV. Laws that Govern Charitable Trusts V. Minnesota-Organized Nonprofits and Charitable Gambling VI. When Nonprofits Must Provide Notice to the Attorney General VII. Uniform Prudent Management of Institutional Funds Act Appendix
The Minnesota Supervision of Charitable Trusts and Trustees Act (“Charitable Trust Act”), Minn. Stat. §§ 501B.33-.45, requires charitable trusts to register and file annual reports with the Attorney General’s Office if they fall within the scope of the law. All documents charitable trusts file with the Attorney General’s Office are public.(54) Independent of any need to register, the Charitable Trust Act imposes on trustees certain fiduciary duties to properly manage, administer, and use property held for charitable purposes, a violation of which constitutes a breach of trust.
Definition of a Charitable Trust
Under the Charitable Trust Act, a “charitable trust” is created upon the manifestation of an intent that property be used for a charitable purpose, and subjects a person or group of persons to equitable duties to deal with the property for a charitable purpose.(55) A “charitable purpose” means an actual or purported charitable, philanthropic, religious, social service, educational, or other public use or purpose.(56) Minnesota law further expressly states that the term “property” for the purposes of the Charitable Trust Act includes money derived from fees for services.(57)
Simply providing money or property to an organization whose purpose is charitable usually establishes a charitable trust under Minnesota law; this remains true even if the word “trust” is not used by the donor, or the transaction is styled as a gift.(58) This principle encompasses charitable bequests in wills or similar instruments.(59) An organization indicating that it intends to hold property for a charitable purpose—for example, by so stating in its articles of organization—also creates a charitable trust.(60)
Registration of Charitable Trusts and Exemptions From Registering
Registration of Charitable Trusts
Unless exempt, a charitable trust must register with the Attorney General’s Office if it has gross assets of $25,000 or more at any time during the year.(61) A charitable trust must register within three months of receiving gross assets worth $25,000 or more. A charitable trust must also include with its Initial Registration Form a copy of its articles of incorporation—or the instrument that created the charitable trust, if different—including any amendments. A charitable trust must also pay a $25 fee when initially registering.(62)
Exemptions from Registration
The Charitable Trust Act excludes certain charitable trusts from its registration requirements.(63) Charitable trusts that claim they are exempt from registering should still be aware of two important points:
- Charitable trusts claiming to be exempt from registration must still file a Charitable Trust Exemption Form with the Attorney General’s Office.
- Parts of the Charitable Trust Act imposing fiduciary duties on charitable trustees to properly manage, administer, and use property held for charitable purposes apply to all charitable trustees, regardless of whether or not the charitable trust is required to register.(64)
The following charitable trusts are exempt from registering with the Attorney General’s Office under the Charitable Trust Act: (65)
- Charitable trusts that properly register with the Attorney General’s Office under the Charitable Solicitation Act, Minn. Stat. §§ 309.50-.61;
- Charitable trusts administered by the United States or its political subdivisions; and
- Charitable trusts that are religious associations under Minnesota Statutes chapters 315 or 317A, or that are organized and operated for exclusively religious purposes and are administered by such an association.
There are several other exemptions from registration, but they are complicated in nature because they are tied to certain federal and Minnesota tax law provisions, or are conditioned on the nature of the beneficiary or the type of instrument creating the trust. Parties should review section 501B.36 for more detail on these other exemptions.
Charitable Trust Annual Filing Requirements
Registered charitable trusts must file an annual report with the Attorney General’s Office for each year that they had gross assets of $25,000 or more at any time during the year. (66) A charitable trust must include with its annual report a copy of its federal tax or information return filed with the IRS (i.e., Form 990, 990-EZ, or 990-PF), including all schedules and amendments. If the charitable trust does not file a return with the IRS—or only files Form 990-N— it must file a balance sheet and a statement of income and expense for its most recent accounting year. (67) An organization that files its federal return with the Attorney General’s Office is not required to file the same information with the Minnesota Department of Revenue. (68) A charitable trust must also pay a $25 filing fee with its annual report. (69)
A charitable trust’s annual report is due on or before the fifteenth day of the fifth month after the close of the trust’s taxable year.(70) For example, if a charitable trust’s taxable year end is December 31, its annual report is due on May 15. Charitable trusts may request an extension to the due date to file their annual report of up to six months.(71) The easiest way to request an extension is electronically through the Attorney General’s Office’s webpage, "Request an Extension of a Filing Deadline." Charitable trusts may also request an extension by mail. An Appendix is attached to this publication reflecting the due dates for annual reports for common taxable year-end dates.
Breach of Trust
The failure of a trustee to timely register a charitable trust with the Attorney General’s Office, to file a complete and accurate annual report, or administer and manage property held for charitable purposes in accordance with the law and consistent with fiduciary obligations, constitutes a breach of trust.(72)
Soliciting Charity v. Charitable Trust
The Charitable Trust Act is broader than the Charitable Solicitation Act because it applies to the mere holding of assets, regardless of how they were acquired. Soliciting nonprofits request contributions from donors, subjecting those nonprofits to the Charitable Solicitation Act. Soliciting nonprofits also hold donations in trust for their intended charitable purpose, which subjects to them the Charitable Trust Act. A nonprofit is therefore often both a “charitable organization” under the Charitable Solicitation Act, and a “charitable trust” under the Charitable Trust Act.