Bradbury Township

Mille Lacs News

RECEIVED JAN 23, 2007

MINNESOTA  REVENUE

January 23, 2007

Marty Schmidt

Crow Wing County Assessor

326 Laurel Street

Brainerd, Minnesota 56401

Dear Marty:

Your letter to John Hagen has been assigned to me for reply. In your letter, you asked us for and opinion on whether Mille Lacs Academy would be exempt if they moved their operation to Brainerd. In addition, you also forwarded a copy of a large volume of information provided to you by Nexus Diversified Community Services. This information included:

     *     A partial copy of the completed application for exemption;

     *     A copy of certificate of incorporation for Nexus Diversified Community Services, 

             Inc. from the Minnesota Secretary of State;

     *     A copy of the Articles of Incorporation for Nexus Diversified Community

             Services, Inc.;

     *      A copy of the letter from the IRS granting Nexus Diversified Community     

             Services,  Inc., exemption from Federal income tax under section 501(c)(3);

     *     Copies of Federal form 990 filed by Nexus Diversified Community Services, Inc.    

             for years 2004, 2003, and 2002;

     *     A copy of the Articles of Amendment and Restated Articles of Incorporation for

             Nexus Adult Program, Inc.;

     *     A copy of the Amended Restated Bylaws of Nexus;

     *     A copy of an advisory letter from the IRS restating that Nexus, Inc. is exempt

             from  Federal income tax as a 501(c)(3) organization;

     *     Copies of Federal form 990 filed by Nexus, Inc. for years 2004, 2003, and 2002;

             and

     *     Additional explanations provided by Nexus Diversified Community Services, Inc.

As part of my review of these documents, I have consulted with our legal staff. Based on the information provided, it is our opinion that this facility would be taxable due to the fact that it has not been clearly established that the Brainerd facility is supported by significant public donations, nor has it been clearly established that the facility is providing a service at a cost that is less than market. There is no clear evidence that either Nexus Diversified Community Services, Inc., or Nexus, Inc., are providing a charity.

For example, on the 2004 Form 990 for Nexus Diversified Community Service, Inc. there is only one contributor listed, which is Nexus who contributed $348,193. In addition, on the 2003 Form 990 for Nexus Diversified Community Services, Inc., the only contributor listed is a couple from Illinois who donated a building, presumably located in Illinois, to Nexus Diversified Community Services, Inc. On the 2004 Form 990 for Nexus, the only contributor identified is Nexus              

                                                                                                                               (Continued)

Diversified Community Service, Inc. who contributed in excess of $1 million. In the additional narrative information supplied, Nexus, themselves, admit that in the past they "have attempted to solicit contribution and gifts from the general public and due to the type of juveniles that we treat we were not very successful." They further state that "in fact the cost of the fund drives were more that (sic) the donations received." Therefore, we are unable to find a reasonable basis to conclude that any donations made are from the public or are intended for use at the Brainerd facility.

The narrative information also states that "...in Minnesota our charges are sent by the county board in which the treatment program is located (host county)." Nexus charges the residents of its treatment programs for the services it provides. The fees that are paid by the county or by other private pay residents are fees for a service. There is no clear evidence that indicates that the services provided are charity care.

Pleases be aware that this opinion is only advisory in nature. You, as the county assessor, must make the final decision as to whether the facility qualifies for exemption. If the taxpayer disagrees with you decision, they may file in Minnesota Tax Court.

Sincerely,

STEPHANIE NYHUS, SAMA

Principal Appraiser

Information and Education Section

Property Tax Division

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