Minnesota AG Seeks Private Inurement and Excess Benefit Data from Nonprofit Hospitals

I have often posted about the Minnesota AG's charity's section.  I can only speak anecdotally, but that office seems to be an outlier in terms of state monitoring of the nonprofit sector within its jurisdiction.  And except for the blatant fraud cases, the AG's office seems to have a cordial and collaborative relationship with nonprofits operating in the Land of 10,000 Lakes.  It is not unusual to find settlements or other accommodations designed more to fix than punish.  It must be that "Minnesota nice" thing.

Super firm, Lathrop GPM, recently put out a client advisory regarding the AG's request for information from tax exempt hospitals in Minnesota.  Here is a bit from the advisory:

Recently, the Minnesota Attorney General’s Office sent requests for information to many nonprofit health care providers and other nonprofit organizations regarding conflict-of-interest transactions.  The requests focus on a section of the organization’s annual Form 990 that discloses transactions between the organization and the organization’s “interested” or “disqualified” persons (such as its officers, directors, key employees, their family members, and businesses in which they own more than a 35% interest).  The AG’s office and other regulators, including the IRS, want to ensure that these interested-party transactions are on fair market value terms or better for the nonprofit organization (or other regulated entity).

You can read one such [redacted] letter here.  It looks as though the AG's office has undertaken a comprehensive review of "interested transactions" within Minnesota's tax exempt hospital sector.  Somebody or some group of people have been assigned to closely scrutinize 990s and then ask questions.  I guess I'm impressed that Minnesota's nonprofit and tax exempt attorneys are even this interested.  We mostly think of state AGs as completely oblivious to the sector until something really bad happens. Like graft and corruption in the NRA or something like that.  Minnesota has one of the more active AG offices when it comes to nonprofits.  

darryll k. jones