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277596 WHITE - CITY CLERK �r��` �� - CANARY - DEPARTMENT � COUtIC1I !'�/ • 'vai BLUE - MAYOR GITY OF SAINT � AUL File NO. Counc ' Re o ' Presented By Leonard W. Levine � Referred To Committee: Date Out of Committee By Date WHEREAS, the Internal Revenue Service has issued Revenue Ruling 81-58 that appears to remove the exemption from -Federal taxation on earnings of Police and Fire Relief Associations; and WHEREAS, the effect of this ruling could result in more than doubling the City's annual contribution to the pension fund; and WHEREAS, the effect of this ruling could result in double taxation and a tremendous burden on all taxpayers in the City of St. Paul ; so, therefore, be it RESOLVED, that the City Council of the City of St. Paul urges United States Senators Rudy Boschwitz and David Durenberger, and Congressman Bruce Vento to work closely with our Police and Fire Relief Associations to obtain a one-year extension of the effective date of the Revenue Ruling; and be it FURTHER RESOLVED, that the City Council of the City of St. Paul supports the immediate passage of federal legislation providing a tax exemption for Police and Fire Relief Associations similar to the exemption that exists for Teachers Retirement Fund Associations under I.R.C. 501 (c) (11 ) , making it retroactive, if necessary. COU[VCILMEIV Requestgd by Department of: Yeas Nays Hunt Levine In Favor Maddox � Showalter - __ Against BY — Tedesco Wilson QCT 2 O 198� Form Approved by City Attorney Adopted by Council: Date _ Certified Ya • Cou cil S etar BY sy Approved b : a r: Date OCT 2 � �95� Approved by Mayor for Submission to Council By - — BY - PUBLISHED 0 C T 3� 198} .:«.y. -�.. ." 1`✓/�.w'Z�q. F �`•, CITY OF SAINT PAUL ��t. . :'�� OFFICE OF THE CITY COIINCZL 'Y2kuF'N••,• C14R7\YA:.d•�� . �A1R�44qQiio�f . . __ J f .!' ✓� LEONARD W. LEVINE Conncilman M E M 0 R A N D U M To: City Council Members From: Councilman Len Levine Date: October 15, 1981 I will be sponsoring the attached resolution on Tuesday, October 20, 1981 . ` - - - - °--°-- �- I am enclosing a background sheet on this matter which should answer any questions you might have. � There will be representatives of both the Police and Fire Relief Associations in attendance a� the Council meeting on that morning. If you have any questions, please call me. . Encl . CITY HALL SEVENTH FLOOR SAINT PAUL, MINNFSOTA 55102 512l298-4473 �� . �'�,�.�r-��<° , � � PROQLEM "'� ��'` Police and Fire Relief Associations have apparently lost their exemption from federal income tax under section 501 (c)(4) of the In�ernal Revenue Code. The Internal Revenue in Rev. Ruling 81-58, has held that nonprofit police officer associations, which are primarily engaged in providing retirement benefits to members and death benefits to the beneficiaries af members do not qualify for exemption from federal income tax under I.R.C. code section 501(cj(4). Since full time and Volunteer Fire Relief Associations are organized similiar to Police Relief Associations and have been previasly exempt from federal taxation under the same code section, Rev. Ruling 81-58 would appear to apply to them as we11. The tax consequences of this ruling on our relief association, if it is upheld, are staggering. The tax rate on corporate excess retained earnings run as high as 50%. The annual contribution by the city could mare than double in order to replace the taxed earnings on investments and contributions. The city is required to provide a level of funding tMat meets the normal cost and amortizes any existing actuarial deficits during the next 30 years. HISTORY Police and Fire Relief Associations throughout Minnesota were placed under the 5Q1(c)(4) exemption by the I.R.S, during the last twenty years. The problem appears to lie in the f act that 501(c)(4) does not on its f ace describe Police and Fire Relief Associations. The I,R.S. has been challenged by other groups, such as civil rights organizations, whom _� have been denied• exemption under 501(c)(4) , As a result the I.R.S, has � reevaluated existing exempted gro�ups. T'he I .R.S. has formally notified the Crookston, Minnesota Police Relief Association and at least one other Relief Association that as a result of Rev. Ruling 81-58, they will no longer qualify as being exempt from federal tax under 501(E)(4). Two Relief Associations within Minnesota haue recieved private legal opinions that they are covered by Rev. Ruling 81-58. These associations have by-laws and operate similiar to most Police and Fire Relief Associations throughout the State of Minnesota. The impact will therefore be felt throughout the entire State SOLUTIONS Dealing with the I.R.S is never easy and usually time consuming. Our time table for action is short, since quarterly estimates will be due on April 1, 1982. An appeal should be filed with the Commissioner of the I .R.S. . Legal action should be pursued in dis�rict court as opposed to tax court. This would require the payment of the contested taxes but would preserve the right to appeal. The most appropriate solution would appear to be the addition of an exemption for Police and Fire Relief Associations similiar to the exemption that exists for Teachers Retirement Fund Associations located at I .R.C.501(c)(11). This would require federal legislation, A coardinated effort between the Relief Associations, City Staff and the Council will be needed to accomplish this. • � .— � � J�, �O ....�u,,,,,�,R -��`"' �,�'''- CITY OF SAINT PAUL _�• ;,. �� DEPARTMENT OF FINANCE AND MANAGEMENT SERVICES ;� i ii°i �= ;,,�� ^Q� = TREASURY DIVISION 'JI'u��,�T��•°��•``~ 219 City Hall GEORGE LATIMER Saint Paul, Minnesota 55102 MAYOR 612-298-4406 November 23, 1981 A1 Olson City Clerk 386 City Hall Dear Mr. Olson: Council File No. 277596, adopted October 20, 1981, requested the Minnesota Congreesional Delegation to work closely with our local Police and Fire Relief Associations to address Revenue Ruling No. 81-58 relating to the removal of the exemption from federal taxation on earnings of Police and Fire Pension Associations. I sent a cover letter and a copy of the resolution to each member of the delegation. Since that time, police and fire representatives and the delegation met with the Internal Revenue Service and as a result of that meeting the IRS is reviewing the situation. Senator Durenberger asked me to share the attached correspondence with the City Council. Very ruly yours, — s .._-.�,,,,,.� � ary R. Norstrem Treasury Manager c� ^'� . c: GRN/jm --� "� c,:-< e•,,, `'c� c.r cc: Mayor Latimer ,;,�'r,� -.n C"'� i-�- Attach. �cn" � a ��'_� —� ?=-,� � c7 � rn � �� s �',� : . _ --- - - ., - . .. . . --. - - ._ � . �� - - �- � : .:-. ... _ ., � _ � . ��_ �� .�: ; � _ . .... � . �� :.. _ -�; _ . - ._ _. .7..7,_•N �� - ._ . . .., A.: •,tt L�a. .. �n. __-. . - ^�`iJL rL ,�. �1 �_ _..�....1. .� l� ', '.:-...?5 r. _ .r_. ... �iGEe • . '. � �.J T<:':/._D K.i .C[ � I�:�A31ii�TNA::YCI.�r., AI�: - __ . ._ . _..__ c.��•rc �� .._,,,., l''.{k�Ijlll�`;:1, :�.�-. :'�':!� ,� . � .,. � �. __sts ,,._ __�..,.. t.�0 . �.' .�'c i" i .. _ . � > - , :�� :,o�,Ur��; e �e� �� L . Ea�er , Jr . _ _ . . . � si �r, _ r _ r: �� ',r� � i -,_ . � „ '�� _ � . . � C° , _ _ _ .r,�,ns�i ..u -. . ,,r , . � ., ..� , i; . 'i;' . . . ..�� it� rl � ��lri � ✓ . :. . � r.�= Y , � .. . �. �cY' �il.:i??lSSiCr:c1" : � .:pNi'�� a(�t�� lV�S 0- ��'iC i' . ,., _ _ :i.. � C� � C� .-�.!'�0 .` it'E �2� 1 �i . S � �' _la� lv�iS ,,:c . �ti; ..Ii i;:c?;"i�° i�5 0 .- V ..ii;" _ �c � . OCi �'i�!� �a�' i �\CVC'Iil�'`a � r � , �0 C1 � C::SS �.fi° '_'i:�;i',i�� LZ�L'� G - Lr�cl t' :.�?�Gdlll Za�1 U(;S � C� 3SS1 - �icz� ion u,-, c� r �ection 501 ( c ) ( � ) 01= �r;� � RS C,oae i � light oF :=��,��.-�ue Ru; irg c �- 58 . :•,� � �fl _ iJ!i�JCr� � QCI�d Ner:bers G i i,;: E ��i nn�soi � r_'�r� 2�;d'C1011 are e Ulio�': 1f:l0USlj' O��C�2a t0 i.hlS Y'UIirG . ltlE iii ;:;?250� c � C��iS � a�ure has � r1 � t01"1CoI �J� Qi1':.r � OC� � co�muni �lp5 dUi.O!'iOTV lt'i ;rl° handling Qi �ers i on =�ncs . '.;e strcngly opp�5e t'?G)"�ar, i Z i tlq d 5 �ruc�ure , VJfll Ch has vrorE:nd �;rel l �or the people o` t;� nneso�a ;or ov�r a hundred years , �or �he s aE:e of semanti cs . ive 4JGU� Q i i ke za °xpress c;� r aprr�ci a�i on �o you an� ihose S�di i fl�fi'�C�T'S '.•+h0 at�endpd thlS P12°�1r� rOr the COUI"�°OU5 atteni.lOri ro ne�•r facts ard cenuine concerr �bout the �inancial viabilit}� of �ne� e vi �al servic` organiza�icns . In 1 i gr�� o� i�he n�t�; i nror�a�.i on and the F:avy �egEJ1 ati ans - '. aced on �hese �rus� �unds by �'r�e st?�e o� ?�ii nr�esoia and the loc?? co�:runiiies , ��essrs . Coler�an , r:ell�� und rri �diander s �a �ed that ;.��•.� '' ,•:oui � review the situation and �'ACCh Q dec� si �n by De�erber 1 , ?9�? . ;, :� This letter is to again thank }�ou and �he ? �S i-epresentat; ��_ ;eniiored above sor your attention and ccnczrr Gr; c again request � ��, G� t:�e be noti �ie� by December 1 of your dec� sion . i� me is o; � nariicular i �nporiance in this ma��er , and ��our cooperation in rezching a tirr•ely decision is gra�erully zpprpc� a�ed . � ; :t i �h be� = ,�ecarc+s , , r �oschvriiz... Wi .-�-------__------ ,�o^ �,av aorn , �: . � . , , � ! � F � ~� ;�~ - _ r � . . `. . -�f� �_1 , :j. ;t�. . - -_ - :;� . _ . ,,. �nbe cer , t�� . C . ,, Gi71 �renzei , ►'•� . C . � � � v' .� "� . a �`;��y'� -� - ��. .�,-�S ie roscoe L . Eog� r , Jr . : ,;- �° r '_ 3 , i981 . � = _ = 2 . � - � 4 . .—.?' � ._�—--_ �_`...�! � � !i . C J . �----- --- _ . . . i__ • .: �-es Oberstar �; C� —" ' � ^ / . � , . . �fit ,`�� ,: � - ; ; _ l-- "� ��.�`� v I '. . . _ .__ , . ,��, , ,' ' • _ , � � n �Sabc , M � , �� ^ ,- - ° - - _ ; r+ i d(1 $L�R�Z� dtl� ,` ��t , C , j � � '� ` . � .. . ---� - - � _`�;,� �/ ' ; � ` ' . . - ^ � • �^ _,----=-- _ , �� , i ':✓ ....J r �/,�e :�--!,' �� . � '. ' .F : 3ruce l'enZ� , t� . C , Vin t�!eber, h� . C . ! , � � : t � �� ;: , ��'. '_ '� "�� CITY OF SAINT PAUL INTERDEPARTMENTAL MEMORANDUM December 23, 1981 TO: Albert Olson, City Cle�k FR: Gary Norstrem, Treas RE: C.F. 277596 - Petitioning Congress to assist in restoxinc� the Tax Exemption for the St. Paul PQlice �telief Ass.oci�tion and the St. Paul Fire Department Relief Association I am pleased to report that the Tax Exemption for the above Pension Associations will continue. The attached coxrespondence from Congressxnan Hagedorn explains the situation. Enc. cc/Mayor George Latimer � � �� . . . � � 7J y'� DISTRIGT OFFICES: r TOM HAGEDORN P.0•Box 9�d8 YND DIffTRICT.MINNESCTA M ANKATO,MINNESOTA SBOU1 (507)387-8226 COMMITTEES: AGRICULTURE Zl l SWTM NEWTON STNEET PUBLIC WORKS AND �or�gre�� of t�je �r�iteb �tateg A�E� (507)377N7676A 5�07 TRANSPORTATION �ou�e of �e�re�entatibe� qDM N STRATDIVE ASSIsTA1rf WASNINGTON OFFICE: /,�. 44�CANNON Hd18E OFFICE BUILD�Nf. �g�jington� ��✓. 20515 WASNInoTON,D.C. 20515 (202)226-2472 December 14, 1981 Mr. Gary R. Norstrem City Treasurer, City of St. Paul Dept. of Finance & Management Services 219 City Hall St. Paul, Minnesota 55102 Dear Mr. Norstrem: I wanted to take this opportunity to share some good news with you regarding Internal Revenue Ruling 81-58. As you know, this ruling would have removed your relief organization from the exempt status you now have as a social welfare organization under Section 501(c)(4) of the Internal Revenue Code. The Internal Revenue Service in Washington contacted my office this morning to advise that they have ruled favorably in Mankato Fire Association's behalf. This application was considered a "trial" case and all Minnesota associations should maintain their exempt status under Section 501(c)(4). I am very pleased to be able to bring you this good news aknow� I have had this opportunity to be of service to you. As you may originally contacted the IRS in September regarding this issue and have since written to the President and sent a Minnesota delegation letter to the Commissioner of IRS on your behalf. I intend to introduce legislation which will amend the Internal Revenue Code to include police and fire relief organizations to assure that you will not be again threatened in the future. Hopefully, this legislation will be introduced sometime in January. I will, of course, keep you posted on the progress. Should you have problems clarifying your status with the St. Paul Internal Revenue Office, please do not hesitate to contact me for assistance. I am enclosing a press release on this subject which you may wish to post for the benefit of all your members. • With best regards, I am Sincerely, T�bM HAG Member Congress � �y�Y;r�.; CI'P1' OF ►�AI\TT PAUL �o" �� ';�^ � OFFICE OF THE MAYOR � � .+ ,s�il;nu`t ,; ;j+,r iU! 111 II o� '?> t+.. �` 3A7 CITY HALL '"Q.i�� '` �+. �� SAINT PAUL, MINNESOTA 55102 �� ..�� /� GEORGE LATIMER (612) 298-4323 1�iAYOR TO: Council President Ruby Hunt and Members of the City Council FROM: Mayor George Latime ( � DATE: October 15, 1981 �`/ SUBJECT: Appointment to the Saint Paul Civic Center Authority Attached for your consideration and approval is a Council Resolution naming Frank Delaney to fill the unexpired term of Frank Farrell on the Civic Center Authority. Frank Delaney, Vice President of the American National Bank, has been named by the guarantors. Thank you. GL/lm attachment _-� , , � l �,��y'6 � Congressman �¢�F�� ; � � � .f�� `S�e�} ., ��N �� Y. , N E �� i OM AGED�4RN , � � { � �� .�� , ��.w,v'' �,e e.o s �J/y T'�TES Of 2nd Cong�essional District, Minnesota •• •- • . . . . . i . . � � For immediate release Dec. 16 , 1981 POLICE, FIRE TAX RULING PRAISED BY HAGEDORN WASHINGTON -- Minnesota's 626 local police and fire relief associations will maintain their federal tax exempt status under a new Internal Revenue Service ruling, according to an announcement Wednesday by `2nd District Rep. Tom Hagedorn , (R-Minn. ) . Hagedorn was informed this week that the Pdankato Fire Association, in a trial case , could keep their tax exempt status under Section 501 (c) (4) of the IRS code . An IRS ruling effective on . Aug. 23 of this year threatened to bar volunteer and salaried police and fire relief associations from the continued use of the exemption because their primary ac�ivity of p�oviding retirement payments and death benefits to; members does not qualify as a social welfare organization. � "The men and women who serve on police and fire departments contribute -a priceless service to our communities , and should be� protected from having their retirement and death benefit funds from being unjustly taxed, " said Hagedorn. ' The original ruling to eliminate the tax exempt status was ; protested in an Oct. 22 letter from Nagedorn to the President as discriminatory towards the associations and contrary to the renewed commitment to volunteerism. Hagedorn also gathered the signature of all 10 members of the Minnesota Congressional delegation in a Nov. 13 letter of opposition to the IRS Commi�sioner in Washington. To insure that the tax exempt status will not be threatened in the future , Hagedorn said he will introduce legislation to amend the tax code to include police and fire relief organizations . # # # DISTRICT OFFICE WASHINGTON OFFICE P.O. Box 3148 325 Can�on BIdQ. Mankato, MN.56001 WashinQton, D.C.20515 507/388-4563 202/2252472 ,�, �„