Special Provisions Relating to Governmental, Indian Tribal, and Nonprofit Organizations



Governmental and Indian Tribal Organizations

Reference: Minnesota Law, 268.052 and 268.0525

Instrumentalities or political subdivisions of Minnesota and Indian tribal organizations that have employment in Minnesota are subject to unemployment insurance wage reporting. These employers are assigned reimbursing accounts unless they elect to pay tax. Charitable non-profit employers also have this option available to them.

An election to pay unemployment insurance tax:

  • Must be submitted using the Minnesota Employer Self-Service System by the last day of the calendar quarter prior to the calendar quarter in which the election is to take effect;
  • Is effective for a minimum of 24 months; and
  • Can be terminated after 24 months 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 before the end of the calendar quarter prior to the calendar quarter it is to take effect.

Nonprofit Organizationsnonprofit

Reference: Minnesota Law, 268.053 and 268.045

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. Submit quarterly wage detail reports.
  3. Make quarterly unemployment insurance tax payments unless they have elected to reimburse unemployment benefits.

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 Optionreimbursable

Nonprofit employers who are eligible for and have elected to reimburse the Minnesota UI Trust Fund rather than pay quarterly taxes:

  • Pay no quarterly unemployment insurance tax.
  • Must report employment information on a quarterly wage detail report.
  • Must reimburse (pay) the Minnesota Unemployment Insurance Trust Fund the full amount of unemployment benefits paid to former employees based on wages earned while in their employ, regardless of the reasons for separation from work.
  • Receive a Notice of Unemployment Benefits Paid and Reimbursable Bill quarterly listing benefits paid charges.  

Nonprofit employers who elect reimbursement also need to know:

  • 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. 
  • Even if an issue is raised, benefit charges must be paid by the date due otherwise interest will be assessed.
  • Benefits which are later found to be overpaid by the Department will be credited to the reimbursing employer's account.

Election to be a Reimbursing Employerelection

Elections must be submitted using the Minnesota Employer Self-Service System within 30 days from the date the employer is notified of coverage. Elections remain in effect for a minimum of 24 months .

Nonprofit employers that have paid quarterly unemployment insurance tax may change to the reimbursing method. The election:

  • Must be submitted using the Minnesota Employer Self-Service System by the last day of the calendar quarter prior to the calendar quarter in which the election is to take effect .
  • Remains in effect for at least 24 months.
  • Can be terminated after 24 months, if requested by the last day of the calendar quarter prior to the calendar quarter in which the new election is to take effect .

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 website at www.uimn.org by clicking Employers & Agents, Help and Support, then the UI Law link.

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