Not-for-profit Farm Bureau sits on surplus

For the Iowa Farm Bureau Federation, a not-for-profit organization, the last few years have been very profitable.

The Farm Bureau took in nearly $88 million in 2015, the most recent year of tax records on file. The group spent $31.5 million on expenses including employee salaries, marketing, lobbying, scholarships and grants to groups such as the Iowa Girls High School Athletic Union, 4-H and FFA.

This left $56.4 million to put in the bank or invest, Farm Bureau President Craig Hill said. The group's surplus in 2014 was $32 million and in 2013, nearly $81 million.

Not-for-profit, tax-exempt organizations may make business revenue as long as it's 'substantially related' to its mission, according to the IRS. That surplus must be used to achieve the organization's mission.

'Usually if you make money in a way that furthers your purpose, that's OK,' said Andy Grewal, a University of Iowa law professor whose research includes federal income tax. 'Generally, if you are making money hand over fist every year, you may wonder whether the organization is organized exclusively for charitable purpose.'

Hill said the Farm Bureau, which has the mission of 'helping farm families prosper,' follows the law. 'Anyone who would look at our activities would know they are mission-oriented,' he said.

The federation is 60 percent owner of Farm Bureau Life Insurance Company.

'Because it's been a very generous investment for us to have those insurance companies makes us a target,' Hill said. 'I've got more eyes on me than most people and they're all wanting to make sure we're honest.'

The IRS raised questions in the early 1990s about whether Farm Bureau federations should be required to pay taxes on the dues of non-farming members, most of whom join to get Farm Bureau insurance, not necessarily because they support the ideals of the Farm Bureau.

'The Service determined that such dues were payments for insurance and subject to the unrelated business tax,' according to a 1995 IRS analysis of the topic.

The scrutiny did not lead to enforcement of taxes for those associate member dues.

U.S. Sen. Chuck Grassley, R-New Hartford, has grilled some not-for-profits, including megachurches with ministers leading lavish lifestyles and hospitals that sued patients to determine whether they violated their tax-exempt status.

'Well-funded colleges that raised tuition or limited student aid as they stockpiled large endowment funds drew criticism for not doing more to help students in need,' Grassley told The Gazette in an email last week. 'After the attention, including mine, many of them increased their financial aid.'

But Grassley, a Farm Bureau member, said he wasn't ready to weigh in on the Iowa Farm Bureau's tax-exempt status.

'Before I could comment on the Iowa Farm Bureau Federation, I'd want to know whether the people who are meant to benefit from the federation feel satisfied with the level of services they're getting.'

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