Archive for the ‘Finances’ Category
February 1, 2012
but she’d really have preferred not to have this as an inspiration. There is no excuse for the decision of Susan G. Komen for the Cure, until now a respected source of information and funding in the fight against breast cancer, to defund Planned Parenthood‘s program of providing breast exams to poor women.
In fact, the decision doesn’t even make sense–unless you consider that a recent addition to the Board of Komen is an anti-choice ex-politician from Georgia. As another commentator has wisely noted, Planned Parenthood will survive this latest injury–the Nonprofiteer’s determination to support the agency has just been redoubled, and probably her gift will be, too–but Komen may not.
Please join the Nonprofiteer in notifying Komen of your distress at its decision to let irrelevant politics endanger the lives and health of poor women, and of your decision to redirect to Planned Parenthood any support you may have been giving to Komen.
Tags:501c3, Advocacy, Board of Directors, Boards of Directors, charity, foundations, Fundraising, Health care, Komen, Mission, nonprofit, not for profit, philanthropy, Planned Parenthood, politics, Poverty, Private Philanthropy, Relations with funders, social services, women, women's health, Women's Issues
Posted in Advocacy, Advocacy groups, Boards of Directors, Current Affairs, Disease charities, Finances, Foundation Hall of Shame/Stupid Foundation Tricks, Fundraising, Health care, Mission, Nonprofits--General, Poverty, Private Philanthropy, Social Service Agencies, Women's Issues | 4 Comments »
January 13, 2012
The Nonprofiteer’s readers might enjoy this account of a pissing match between Warren Buffett and Mitch McConnell. The Senator from Kentucky has been urging the Sage of Omaha to make voluntary contributions to the Treasury if he felt he was undertaxed. Buffett has now responded that he’ll match any such contributions made by Republican Senators.
This dialogue makes in a different form Milton Friedman’s point as recounted by the Nonprofiteer yesterday. Voluntary contributions to reduce poverty (or do any of the other things we rely on the government to do) are insufficient, because everyone would be willing to pay his/her share only if s/he could be sure that everyone else would be willing to pay his/her share. Otherwise, no dice.
Doubtless McConnell will ignore Buffett’s challenge and continue his nonsensical bluster about Buffett’s freedom to pay extra if he feels “guilty” about his low tax rate. But the point isn’t, of course, how Buffett feels, or even what he does—it’s what everyone else does. And if McConnell and his buddies don’t donate to the Treasury, then they are poster children for the free-rider problem—thereby proving Buffett right: philanthropy is not sufficient and taxation is necessary.
H/T the indispensable Rick Cohen at The Nonprofit Quarterly.
Tags:501c3, charity, donors, IRS, nonprofit, not for profit, philanthropy, Poverty, Private Philanthropy, social capital
Posted in Coverage of nonprofits, Current Affairs, Finances, Government grants, Nonprofits--General, Philanthropy and Taxation, Poverty, Private Philanthropy | Leave a Comment »
January 11, 2012
I am distressed by the sight of poverty; I am benefited by its alleviation; but I am benefited equally whether I or someone else pays for its alleviation; the benefits of other people’s charity therefore partly accrue to me. To put it differently, we might all of us be willing to contribute to the relief of poverty, provided everyone else did. We might not be willing to contribute the same amount without such assurance.
Therefore, this wild-eyed radical continues, the government must step in. If poverty is to be alleviated, everyone must be taxed so that no one gets a free ride to the benefits of poverty eradication.
How appalling! How socialistic! Of course, what else could one expect from an ivory-tower academic complete with Nobel prize?
No, not that one (or even that one): Milton Friedman.
When the man said “There ain’t no such thing as a free lunch,” he meant it.
H/t Allen R. Sanderson.
Tags:501c3, charity, donors, IRS, nonprofit, Nonprofit management, not for profit, philanthropy, Poverty, Private Philanthropy, taxation
Posted in Coverage of nonprofits, Finances, Nonprofit management, Nonprofits--General, Philanthropy and Taxation, Poverty, Private Philanthropy | 1 Comment »
January 10, 2012
From an article in the New York Times whose date the Nonprofiteer neglected to notice:
“It’s admirable when people back their charitable impulses up with donations,” said Scott Klinger, tax policy director of the group Business for Shared Prosperity. “But the tax code shouldn’t allow the wealthy the kind of loopholes that let them, essentially, force other taxpayers to underwrite donations to their pet causes.”
“The kind of loopholes . . . “ Is there some other kind? That is, can we have the tax code encourage individual generosity without delegating to private individuals decisions about what constitutes the public good? The Nonprofiteer doesn’t see how. Either you have a tax subsidy—which means by definition that other taxpayers bear a bigger burden—or you don’t.
Without the subsidy, current donors might give less but the government would have more to give out to public causes (health, education, welfare) now privately supported. And perhaps without the subsidy, current donors would be replaced by those less-burdened other taxpayers in a burst of their own generosity. And maybe this would mean fewer snow-globe museums and more attention to human services in the nonprofit sector.
Or maybe it would just mean a reduction in charity and an increase in the government’s resources, which could then be used on public education and public housing. Or missiles and drones.
This is why the Nonprofiteer remains at war with herself over the charitable deduction. She wants a thousand flowers to bloom. She believes any free society requires a counter-balance to whatever the current government has decided about anything. And she believes this counter-balance requires money. The whole point of the nonprofit sector is that it permits people to identify and respond to their own needs in their own communities, producing a closer fit between service and community than is possible with centralized programs.
But she also believes that society-wide priorities should be funded society-wide, which means limiting the number of pots of money exempted from inclusion in the public fisc. And she doesn’t want society-wide priorities to be determined by people who have so much money they can buy entire public school systems and experiment on them.
To quote the great Yul Brenner: Is a puzzlement.
Tags:501c3, charity, donors, Fundraising, IRS, Mission, nonprofit, Nonprofit management, not for profit, philanthropy, politics, Private Philanthropy, Relations with funders, social services
Posted in Finances, Government grants, Mission, Nonprofit management, Nonprofits--General, Philanthropy and Taxation, Private Philanthropy, Relations with funders, Social Service Agencies | 1 Comment »
January 5, 2012
Dear Nonprofiteer,
I am the president of my local alumni chapter for a large university located in another state. The National Alumni Association is a 501(c)(3) organization with by-laws that state it can create various chapters around the country. When our local chapter was created, the founding president filed the paperwork for an EIN so we could open a checking account. That is all he did; we are not incorporated as a 501-anything. When he filled out the EIN paperwork, for “type of entity,” he clicked the “other” box and wrote “social club” in the blank. Our little chapter brings in less than $10,000 per year. We then funnel most of that back to the university’s scholarship fund.
My question is: are we supposed to be paying federal income taxes? State of Illinois income taxes?
My university is being remarkably unhelpful. They did definitively say that they strongly advise their chapters against incorporating as their own 501(c)(3).
I have done some research and seen that other universities structure their alumni associations so that the national association is a 501(c)(3) and the local chapters are 501(c)(4)s. The local chapters then file what is called a “IRS-990 postcard.” This seems a reasonable solution, but it also requires that my chapter incorporate as a 501(c)(4), and I am hesitant to do that without official word from my university. I have a fellow board member who is breathing down my neck, convinced we are breaking all kinds of laws. What should I do?
Signed, Clueless in Chicago
Dear Clueless:
The Nonprofiteer knows even less about tax law than you do, so she turned to her Association of Consultants to Nonprofits colleague Kathryn Vanden Berk, whose nonprofit law practice makes the Internal Revenue Code her constant companion. Kathryn characterized your question as “easy but in multiple parts,” and her answer appears below. Many thanks to her for her guidance, and for demonstrating that the author of Good Counsel isn’t the only nonprofit lawyer the Nonprofiteer knows!
There are four ways to handle this. (1) ask the national association to take you on as a fiscal agent, (2) ask the national to file as a group exemption so that each chapter may get its exemption from the central organization of the group; (3) incorporate and go through the exemption application; and (4) do nothing.
Of these, the easiest is to be sponsored by the national (or any other already-existing) 501(c)(3). The exempt entity confers the local chapter with its exempt status automatically and no paperwork needs to be filed. However, the fiscal agent must report to the IRS on what happens within the local chapter.
The easiest for the locals, but harder for the national, is for the national to seek a group exemption. It can then manage each of the local chapters as subsidiaries. As above, the national is responsible for reporting to the IRS.
If the local decides to incorporate and seek its own exemption, it should identify its purpose as “educational and charitable”. Generally, a scholarship organization must file a Schedule H with its exemption application, but it appears that this local forwards its funds to the national, and the national makes the selection. In that case, it is not necessary for the local to go through the scholarship preparation.
An organization that identifies itself as a “social club” is exempt under 501(c)(6) of the Code. However, I would not suggest that in this case. The money collected is used for scholarships, and that is clearly a charitable purpose. Since the national was able to get a 501(c)(3) ruling, it would be foolish for the locals to seek a different, less valuable exemption. If the IRS balks at the (c)(3) classification, I would suggest that the national seek a group exemption.
Doing nothing is maybe not a crazy approach, but it risks exposure and the protections of the IRS Code and IL law are not available to the chapter leadership and members. The reason I say it’s not crazy is the small amount of $$ that flows through the organization. No one is going to come after them unless (and this is the big risk) something happens. Then I can predict that there will be a great deal of embarrassment and perhaps even personal liability.
Bottom line: if you have not filed for a tax exemption, you must file as if you are a for-profit business, using Form 1120. If you give your funds to the national at year’s end, then it is unlikely you will have to pay taxes. However, your members cannot take deductions for the gifts they make to the local, even if they go to the national’s scholarship fund. Same with Illinois: if the chapter is not tax exempt, then it is taxable and must file as such.
I should note that if you collect charitable funds in Illinois, you really need to be registered with the IL Attorney General, even if you are not exempt via the IRS. The AG’s office is very strict about this. You will have to pay a late filing penalty because you have been soliciting without being registered. You might be exempt if you can convince the AG that $$ was raised only from members, but they are not as flexible on this as they once were.
I don’t know why the university advises against incorporation. It’s a fairly inexpensive thing to do, and it gives liability protection to every member. It’s a small price to pay for the protection it gives. You need to have someone agree to be your Registered Agent, and to have his/her office or residence registered as the Registered Office. You need to file annual reports (in Illinois and most states) to stay in good standing. In Illinois, this costs $10.00 per year.
I don’t know why the (c)(3) and (c)(4) approach is used. You would want every part of the organization to be classified as 501(c)(3) so that all gifts, grants and contributions are tax exempt and deductible to the donor. I’d want to explore this further before acting.
So, Clueless, the answer is that no good deed goes unpunished. Having investigated the question, you’ve now unearthed a series of obligations, decisions and tasks which I’m sure you’d rather not have known about. You’re not about to go to jail but to protect yourselves it seems that getting your university to agree to serve as your fiscal agent, and then registering to raise funds in the state of Illinois, is the bare minimum you should do.
Tags:Fundraising, Higher education, legal services, Management Advice Day tip, Nonprofit management
Posted in Finances, Fundraising, Higher education, legal services, Nonprofit management, Nonprofits--General, Philanthropy and Taxation, Volunteers/Volunteerism | 1 Comment »
January 4, 2012
Here’s a chronic story (h/t The Nonprofit Quarterly), about how the United States is the most generous nation on earth. This annual survey measures how often people donate money to charity, how often they volunteer and how often they help strangers in need—the distinction between #1 and #3 being a little vague.
While the Nonprofiteer salutes all the donors among us, she feels constrained to point out that the United States leaves to private charity a whole range of activities provided elsewhere by the government. Are the citizens of France really less giving, or are they just willing to give free public higher education through their taxes rather than depend on the kindness of strangers? Are the Swedes, who provide paid parenthood leave while Americans think they’re generous to provide unpaid leave, really stingier than we are? And do the English really turn their backs on the needy, or do they instead provide health care for everyone?
The Nonprofiteer is proud to be an American, but she prefers to be proud of the things we really do well rather than the things we do to compensate for what we do poorly, namely, supply adequate social services to all our citizens.
Tags:Health care, Higher education, International, Poverty, Private Philanthropy
Posted in Coverage of nonprofits, Finances, Government grants, Health care, Higher education, International, Nonprofits--General, Philanthropy and Taxation, Poverty, Private Philanthropy | 2 Comments »
December 20, 2011
The most powerful argument Jack Shakely makes in his LA Times op-ed piece opposing the charitable tax deduction is that it’s a poor trade-off. The retired foundation executive points out that charities have permitted themselves to be shorn of their ability to influence policy and politics in return for a mess of pottage. Of course the restrictions on charitable participation in the public arena aren’t as draconian as nonprofit executives (and especially Boards) think they are—but the point is that nonprofits understand themselves to be constrained, and rather than bothering with the details remain quiescent politically.
As strong a proponent as the Nonprofiteer is of the pursuit of individual gifts, in the real world virtually every social service agency needs seriously more government money if it’s going to make any dent in the social problems it faces. The more social service agencies feel free to advocate for this particular budget bill or that particular provision in a piece of legislation—both prohibited by the current tax-code provisions—the more likely it is that those bills and provisions will pass, which would serve way more of the agencies’ clients than the most blue-sky estimates of their potential for growth in individual giving.
And for someone with foundation cred to say this! All hail Jack Shakely.
h/t The Nonprofit Quarterly Newswire.
Tags:501c3, Advocacy, charitable tax deduction, charity, donors, Executive Director, Fundraising, IRS, nonprofit, Nonprofit management, not for profit, philanthropy, Private Philanthropy, Relations with funders, social services
Posted in Advocacy, Coverage of nonprofits, Current Affairs, Fundraising, Government grants, Nonprofit management, Nonprofits--General, Philanthropy and Taxation, Private Philanthropy, Social Service Agencies | Leave a Comment »
December 6, 2011
The Nonprofiteer had a fascinating conversation with Margy Waller, a special advisor to Cincinnati’s ArtsWave, which leads the nation in evidence-based approaches to advocating for arts funding. Ms. Waller had reached out to correct the Nonprofiteer’s misunderstanding (and therefore misreporting) of ArtsWave’s efforts, noting that the argument is not that the public should fund the arts to promote economic recovery but that it should fund the arts to promote neighborhood vibrancy. This nuance turns out to make all the difference.
Here’s the ArtsWave insight: people are ready enough to agree with the notion that the arts are good for the economy. But if you probe deeper, and ask what top three things we should do to improve the economy, no one answers “subsidize the arts.” So apparently the argument that the arts are an economic engine (true or false) is unpersuasive, which is what really matters.
But the ArtsWave research also uncovered the fact that if you ask people what would improve their neighborhood the most, the arts come up time and time again. Why? Because artists’ residences are known to herald an improvement in real-estate values; because arts audiences mean feet on the street and therefore greater public safety; because arts venues are known to spawn coffee shops and restaurants and other places of urban liveliness.
Therefore, the argument for public funding needs to be focused not on the art but on the public benefits of art-making. This simultaneously ends the unwinnable argument about whether x or y is valid art or a useful expenditure of public funds and reminds people of what they believe anyway, that investment in arts-related infrastructure benefits everyone—not in some airy-fairy, soul-stirring, life-improving sense but in the grossest day-to-day experience of quality of life.
Thus an appeal to provide tax breaks to bring artists to a particular area would be framed not as a subsidy to these all-important art-making beings (read: overprivileged white people who ought to get jobs) but as a way to offset (maybe even reverse) the damage to property values wrought by foreclosures. The subsidy is to the value of private property (something that can be monetized) rather than to the value of art (something that cannot).
As instrumental and cold-blooded as this approach may seem, Ms. Waller makes the powerful point that vibrancy is what people love about the arts—and that weaving the arts into the fabric of other social needs and activities enables people to appreciate the arts “not as consumers but as citizens.”
The Nonprofiteer was particularly struck by that last point. Asked what citizens should do to respond to 9/11, then-President Bush had nothing more to offer than, “Go shopping.” Anything that enables us to respond to public concerns in a public spirit; anything that combats the notion that government is the problem and privatization the solution; anything that reminds us that we’re a republic if we can keep it; anything that illustrates we don’t have to buy something to value it—any of these is a consummation devoutly to be wished.
As a wise person once noted, the important thing is not to have BEEN right, but to BE right. The Nonprofiteer has been wrong in her blanket condemnation of public funding for the arts, because she thought of it exclusively in the frame established by its opponents: as subsidies to artists to create what might or might not actually be valuable. Once the framing shifts to “vibrancy,”* and to concrete benefits to the broader society, public arts support suddenly makes sense. No one else may care, but it will be a relief to her to stop being the only left-wing theater critic in the country opposed to public funding for the arts.
She continues to think that the NEA itself is a lost cause and that energy spent defending it would be better spent squeezing support for the arts out of HUD, Fannie Mae/Freddie Mac and local housing authorities. But that’s a matter of strategy. As a matter of principle, the Nonprofiteer is grateful to have discovered a valid way to defend taxpayer support to something that matters so much to her.
—————–
*Yes, “vibrancy” can be a euphemism for “gentrification,” or at least its prodroma. But if we plan for vibrancy (instead of simply hoping that lightening strikes in this ‘hood or that), we can also plan to prevent displacement. And without displacement, “gentrification” is just another word for “safe streets, amenities and public services”—for everyone, rich or poor.
Tags:501c3, Advocacy, arts groups, Arts Organizations, charity, nonprofit, not for profit, public funding for the arts
Posted in Advocacy, Advocacy groups, Arts Organizations, Finances, Government grants, Nonprofits--General | 7 Comments »
November 29, 2011
Look, there are numerous “good cases” where one can see that infusion of capital that doesn’t really have to be repaid at market rates makes good sense. (Actually, government loan guarantees of, say, solar power start-ups falls into this category.) The problem with allowing 501(c)(3)’s to make these sorts of investments is that the process is subject to abuse.
Say that I want to create “Stuart Levine’s Good Works Foundation.” The Foundation attracts $10M in tax deductible contributions. The Foundation uses the cash to “invest” in projects operated either by me or my Aunt Minnie. While Minnie and I invest our own funds in these businesses, our capital position is ahead of the Foundation’s and gets a higher return, so that the first profit out goes to pay us and, if the deal craters, the biggest part of the hit will fall on the foundation. (Did I mention the $250K a year consulting fee paid to me by the investment entity?)
I don’t for a minute believe that the Bill and Melinda Gates Foundation is engaged in double-dealing of the sort that I described. I have less faith in the “Stuart Levine’s Good Works Foundation.” Has everyone forgotten the Pallottine Fathers? See here:
http://tvnews.vanderbilt.edu/program.pl?ID=254962
Or, as one might say, everything old is new again.
The burden of proof rests on those who believe L3Cs are essential. They must demonstrate that the entities’ potential for abuse is outweighed by their capacity to meet needs that are otherwise unmet. But all that’s unmet so far is that burden of proof.
Tags:501c3, charity, Conflict of Interest, donors, foundations, nonprofit, Nonprofit management, not for profit, philanthrocapitalism, philanthropy, Relations with funders, social entrepreneurship
Posted in Conflict of Interest, Finances, Foundation Hall of Shame/Stupid Foundation Tricks, Investment, Nonprofit management, Nonprofits--General, Philanthropy and Taxation, Relations with funders, Social enterprise | 3 Comments »
November 22, 2011
Now here’s something that breaks the Nonprofiteer’s heart: the MacArthur Foundation is making grants to a dozen libraries and museums nationwide to establish youth computer learning centers modeled on YOUMedia, the Chicago Public Library’s innovative youth learning project.
Why does such good news evoke such profound sorrow? Because the Nonprofiteer can remember when the notion was that the philanthropic sector would serve as a laboratory, trying out new approaches to solving social problems and then passing along the ones that worked to be funded by the government. What we have here, however, is a model already vetted in the public sector whose future sustenance apparently will have to come from private charity.
This role-reversal is particularly galling here in Chicago, where the reward for the library’s pioneering work has been a substantial chop in the city’s library budget.
It’s hard to read a computer screen, or learn anything, when the world is upside-down.
Tags:501c3, charity, Chicago, Chicago Public Library, donors, Education, MacArthur Foundation, Mission, nonprofit, Nonprofit management, not for profit, philanthropy, Poverty, Private Philanthropy, recession
Posted in Charity scandals, Current Affairs, Education, Finances, Government grants, Mission, Nonprofit management, Nonprofits--General, Poverty, Private Philanthropy, Public private partnerships, Technology | Leave a Comment »
