Archive for the ‘Finances’ Category
November 18, 2011
While the Feds debate the future of the charitable deduction (among many other aspects of the tax code), some states are diving in with modifications to their own tax subsidies to charity. Michigan, for instance, will apparently permit a tax credit for donations (available for the past forty-plus years) to expire at year’s end.
Naturally, nonprofit leaders are distressed and are giving voice to their concerns. The Nonprofit Quarterly reports:
According to Michigan Radio, the credit allows Michigan taxpayers to essentially double their contribution when they give to community foundations, homeless shelters, food banks, and public institutions (such as Michigan universities, museums, public libraries, and public broadcasting stations).
The tax credit has been eliminated as part of the governor’s plan to pay for a business tax cut. According to the Detroit News, 250,000 made use of the credit in 2010, and it earned $100 million for Michigan charities and provided $40 million in write-offs.
You won’t find the Nonprofiteer cheering any endeavor designed to pay for a business tax cut, especially when it’s so well-documented that many businesses pay nothing like the nominal rate–or even pay nothing at all. But it’s too simple, and not exactly correct, to argue that the tax credit earned $100 million on a $40 million investment. First, we don’t know how many of those gifts to charities would have been made anyway. Second, as is the case with all tax subsidies, the money taken from the public fisc doesn’t support the same public purposes it would if the taxes were paid. If Michigan traded $40 million worth of public schools and police officers for $100 million worth of private schools and university police forces, is it really better off? The allocation of funds matters as much as, if not more than, the raw amounts.
NPQ further quotes a representative of the Community Foundation for Southeast Michigan:
Studies have shown that people give to charity because they care about the cause, but tax policy influences how much people are able to give . . . . We anticipate that with the loss of the tax credit, people will give to charities they’ve supported in the past, but they will give less because it costs them more.
She may be correct, but that’s actually less an argument for maintaining the credit than for raising the tax rate on individuals. The higher the tax, the greater the value of any tax subsidy, and therefore the more likely individuals are to make tax-subsidized gifts.
That’s the theory, anyway. We’ll all be interested to see how this turns out.
And meanwhile, the Cook County Assessor has begun the process of returning Northwestern Memorial Hospital buildings to the property tax rolls, after a court ruled they were not “charities” and therefore not entitled to continued exemption under the state Constitution. The Illinois situation is worth watching because it represents a modification to tax subsidies not by the legislature but by the courts–meaning something not subject to public pressure or comment.
The Nonprofiteer is NOT arguing against “activist judges,” or any nonsense of that kind. The Illinois Supreme Court’s rulings in this area have been (in her view) utterly within the four corners of the Illinois Constitution. She’s merely making the point that sector-wide outcry will have no impact on judicial changes to the tax environment–which means that one way or another we’ll all find out soon how important tax subsidies really are.
Tags:501c3, charity, Chicago, donors, nonprofit, Nonprofit management, not for profit, philanthropy, Private Philanthropy
Posted in Coverage of nonprofits, Current Affairs, Finances, Nonprofit management, Nonprofits--General, Philanthropy and Taxation, Private Philanthropy, Public private partnerships | 1 Comment »
November 7, 2011
Alarms are sounding in the Nonprofiteer’s home town of Chicago today about the first budget proposed by Mayor Rahm Emanuel, which requires nonprofits to pay for water and sewer services they previously received free. A sector-wide outcry produced one modification—a phasing-in of the charges over three years at smaller nonprofits—but generally the Mayor is keeping a campaign promise to ask nonprofits to bear their “fair share” of municipal costs.
He also seems to be following the lead of the Illinois courts which, as previously noted, are re-examining the nonprofit status of several of the state’s hospitals. The Nonprofiteer’s colleagues at The Nonprofit Quarterly characterize Emanuel’s move as over-reaching, in that it affects nonprofits other than hospitals. But the Nonprofiteer has no difficulty identifying non-hospital nonprofits whose water and sewer bills she doesn’t feel like subsidizing: the YMCA of Metropolitan Chicago (which, notwithstanding the social services it provides, is mostly a very successful health club that uses a lot of water); the Art Institute of Chicago (which, notwithstanding the educational programs it provides, is a wealthy institution with very low personnel costs because every art-history major wants to work there); the University of Chicago (whose housing and athletic facilities use as much water as any suburban development and whose property tax exemption is secured by the Illinois Constitution). And let’s remember that the smallest nonprofits are renters, most of whom get water and sewer as part of their leases from for-profit landlords, and won’t be affected in the least. So a bit less howling, okay?
Especially as we contemplate this past weekend’s flood of accounts transferred to nonprofit credit unions in reaction to the obvious greed of the largest banks, particularly Bank of America. (Even a major philanthropist has moved his accounts to protest B of A’s failure or refusal to modify a reasonable number of mortgages). Maybe if the credit unions get wealthy enough they’ll be able to provide the rest of the sector with the working-capital loans it can rarely get from commercial banks. Maybe they’ll offer special water-and-sewer-bill loans.
And maybe a little taste of self-help will remind the sector that it’s supposed to be independent. Political trends come and go but the work we do must continue, and it’s our business to organize ourselves so it can.
Tags:501c3, arts groups, Arts Organizations, charity, Chicago, credit, Environmental, Health care, Higher education, nonprofit, Nonprofit management, not for profit, philanthropy, Private Philanthropy, Real Estate, recession, Relations with funders, social services, taxation, water bills
Posted in Arts Organizations, Coverage of nonprofits, Current Affairs, Environmental, Finances, Government grants, Health care, Higher education, Nonprofit management, Nonprofits--General, Private Philanthropy, Public private partnerships, Real Estate, Relations with funders, Social Service Agencies | Leave a Comment »
November 4, 2011
The Nonprofiteer has never had much time for people who want to change the name of the sector to something non-”non”—something more positive, like “Civil Society Organization,” or less meaningful, like “independent.” But this article about the connection between Herman Cain’s campaign and a Tea Party front group funded by the Koch Brothers has her rethinking her position. Under the headline “Cain to Review Links to a Nonprofit” we learn that
An outside lawyer will review allegations that Herman Cain’s presidential campaign accepted tens of thousands of dollars in goods and services from a tax-exempt organization founded by his chief of staff . . .
The front group, “Americans for Prosperity,” is a Wisconsin nonprofit granted at least preliminary 501c3 recognition by the IRS. And if it were actually nothing more than a group of citizens banded together to advocate for policies they believe will lead to prosperity, there would be nothing wrong with that. But if instead it’s just a mouthpiece for the Koch brothers—an Astroturf, rather than a grassroots, organization—then there is something wrong.
The IRS requires 501c3s to raise a third of their money from the public precisely to prevent the creation of captive organizations of this kind. Use of a tax-exempt entity to promote the interests of a single individual or family is a violation of Federal tax law. Moreover, if the nonprofit paid some of the Cain campaign’s expenses, that’s a violation of Federal election law—perhaps one of the few activities left that is.
The Cain campaign may collapse under the weight of far more interesting allegations (sex beats money every time); but if in fact this nonprofit was nothing more than a campaign slush fund, its existence represents a taint on the “nonprofit” label. What a shame that “handmaiden to profit and to policies assuring that the profitable get more so and the rest of us get squat” is so unwieldy.
Maybe a new name for the sector wouldn’t come amiss; but let’s be realistic. The Iron Law of Euphemisms means that whatever name is adopted instead will soon become an epithet itself. This explains the “progress” in designating African-Americans, from “n****r” to “colored” to “Negro” to “black” to “Black” to “people of color”: as long as people using the term hate the people they’re describing, the term will be infected with their hatred and soon need to be abandoned.
And as long as the wealthiest people using the term “nonprofit” are determined to distort the form to support the worst excesses of the profit-driven world, it hardly matters what the rest of us call it.
Tags:501c3, Advocacy, Americans for Prosperity, Cain, campaign finance, charity, Conflict of Interest, IRS, Koch, Mission, nonprofit, Nonprofit management, not for profit, politics, Private Philanthropy, Relations with funders, Tea Party
Posted in Advocacy, Advocacy groups, Campaign finance, Charity scandals, Coverage of nonprofits, Finances, Mission, Nonprofit management, Nonprofits--General, Private Philanthropy, Relations with funders | 6 Comments »
November 3, 2011
Thanks to Thomas Cott of You’ve Cott Mail for pointing the Nonprofiteer to this article in Crain’s New York Business about the value of collaboration among small arts organizations as typified by the Lower Manhattan Arts League.
The league — which includes small groups like Access Theater and larger organizations such as Dance New Amsterdam and the Children’s Museum of the Arts — has monthly meetings where constituents help each other with everything from fundraising to legal advice. The groups have created a downtown cultural festival, which they produce in the fall and spring. The members even apply for some grants as one entity and lobby the city government as a pack. Individually, some members with budgets as small as $100,000 are barely on funders’ radar, but as a group the members generate around $14 million in economic activity per year and employ roughly 1,200 people full- and part-time. After years when none of the groups were able to score a grant from American Express, for example, the consortium applied together in 2009 and was awarded $100,000. They divvied up the money according to the size of each budget.
While the cheery tone of the article elides some of the serious difficulties arts organizations face in aligning their missions and needs with one another, the point is nonetheless well-taken: organizations too small to get attention on their own may be big enough when combined with others to secure foundation funding and government cooperation.
Such collaborations also serve as living ripostes to the chronic funder complaint that the supply of arts organizations exceeds the demand for them: if these disparate groups can work together without cannibalizing their audiences or funding, they must not be duplicating each other’s work. Or, as it is written: the whole [collaborative network] is greater than the sum of its parts.
Tags:501c3, Advocacy, arts groups, Arts Organizations, charity, collaboration, donors, foundations, Fundraising, Management Advice Day tip, Mission, nonprofit, Nonprofit management, not for profit, philanthropy, public funding for the arts, Relations with funders, theater
Posted in Advocacy, Arts Organizations, Coverage of nonprofits, Government grants, Mergers, acquisitions and consolidations, Mission, Nonprofit management, Nonprofits--General, Relations with funders | 3 Comments »
November 2, 2011
Ellen Alberding’s interview with the Chicago Tribune in advance of the Independent Sector‘s meeting in Chicago earlier this week pressed nearly every one of the Nonprofiteer’s buttons. Ms. Alberding, head of the Joyce Foundation, described the Foundation’s approach to what even she characterizes as a perfect storm of increased need and reduced resources in the nonprofit sector:
We do what any good business person would do when faced with reduced resources. We have become very focused on first maintaining support of our core grantees. Foundations are required to spend a minimum amount — 5 percent of our assets. On occasion, we will overspend that in order to keep our grantees whole.
In other words, business as usual. Most likely the Joyce Foundation’s governing documents prevent its Board from spending its assets down to zero, but there’s no reason why the Foundation shouldn’t use more than the statutory minimum 5% of its $800 million in assets to sustain the work it exists to support. Foundations are NOT businesses; they exist to give their money away, and only in some vague theoretical sense is an institution with $800 million facing constraints preventing it from giving away more than $40 million.
If Joyce gave only 6% instead, that would be another $8 million available to nonprofits in its areas of concern—a not-insubstantial 20% increase. What is stopping the Foundation from doing this, other than a misguided sense that preserving its capital is more important than doing its job?
And then the cherry on the sundae:
It’s the position of the Independent Sector that a cap [on charitable deductions] will reduce charitable contributions across the board and diminish support for nonprofit organizations. I believe it’s the administration’s view that the 28 percent cap might have some impact, but it wouldn’t have a dire impact. (But) I think we have to listen to the organizations themselves, who feel otherwise.
In other words, notwithstanding reality, the prejudices of self-interested parties will dictate the organization’s behavior. Their minds are made up—don’t confuse them with the facts. But as President of the organization, doesn’t it behoove Ms. Alberding to make sure her members don’t make their decisions based on fantasy?
Grrrr.
Tags:501c3, Board of Directors, Boards of Directors, charity, Conflict of Interest, donors, Endowment, foundations, Fundraising, grantmaking, grants, IRS, Mission, nonprofit, Nonprofit management, not for profit, philanthropy, politics, Private Philanthropy, recession, Relations with funders
Posted in Boards of Directors, Conflict of Interest, Coverage of nonprofits, Finances, Foundation Hall of Shame/Stupid Foundation Tricks, Fundraising, Investment, Mission, Nonprofit management, Nonprofits--General, Philanthropy and Taxation, Private Philanthropy, Relations with funders | Leave a Comment »
October 27, 2011
Kudos to the Nonprofiteer’s nonprofit consulting colleagues Campbell and Co. for sponsoring a study by the Indiana University Center on Philanthropy to determine the impact on giving of increased marginal tax rates and a cap the charitable-giving deduction. While some of us have been arguing that both of these moves toward social justice should be supported by the nonprofit community, and others have been arguing that the world will come to an end if every penny of tax savings isn’t afforded to the generous rich, these institutions decided to look for the facts.
The facts–as elegantly stated in a Congressional Research Service study that came to the same conclusion–are these:
The estimated effects of the cap and other elements of the budget package depend on whether the proposals are compared with the current tax rates of 33% and 35% or the rates scheduled for 2011, 36% and 39.6%. Compared with current rules, estimated effects are between one-half a percent and 1% decline in charitable giving . . . . When compared with tax rate provisions in 2011, charitable deductions are estimated to fall by about 1.5% if only the cap is considered, but if income effects from the entire budget package are included contributions actually rise 2.5%. The relatively modest effects of the proposal arise because (1) the effect of caps on the subsidy value is limited, (2) only a fraction (about 16%) of charitable giving is affected, and (3) because evidence suggests that behavioral responses to changes in subsidies are relatively small.
(Emphasis the Nonprofiteer’s.) To paraphrase: the tax subsidy isn’t much reduced; that small reduction doesn’t affect 84% of charitable giving; and, in fact, charitable giving isn’t all that tied to tax benefit.
So whether we take the IUPUI findings that charitable giving is likely to decline modestly if these tax reforms are enacted, or the CRS findings that it might actually go up, we should realize that everyone who’s hyperventilating about the impact of these changes on their poor struggling private school, museum or hospital should just take a deep breath. Given that the reforms will support many of the social programs, environmental protections, educational institutions and health care options the nonprofits themselves seek to provide, it’s about time for the community to stop whining and agree to pony up.
Tags:501c3, Advocacy, Arts Organizations, charitable tax deduction, charity, donors, Education, Environmental, Fundraising, Health care, Higher education, IRS, nonprofit, Nonprofit management, nonprofits, not for profit, philanthropy, Private Philanthropy
Posted in Advocacy, Arts Organizations, Coverage of nonprofits, Current Affairs, Disease charities, Education, Environmental, Finances, Fundraising, Health care, Higher education, Nonprofit management, Nonprofits--General, Philanthropy and Taxation, Private Philanthropy, Social Service Agencies | Leave a Comment »
August 9, 2011
Boy, this guy is the gift that just keeps on giving: Wisconsin Governor Scott Walker, not content to interfere with the provision of public services by destroying public-sector unions, has now decided to refuse to sign off on nonprofit grant applications to the Federal government that might “lead to ongoing programs that would need money from state taxpayers later.” The first wave of grant applications deprived of the state’s endorsement would have supported health services, including programs to reduce binge drinking, an unhealthy activity in which Wisconsin leads the nation.
The hard Right has long argued that government services were unnecessary because nonprofits could step into the breach. This claim was always nonsense; but at least its exponents didn’t also take on themselves the task of interfering with the charities’ overwhelmed attempts to do so. Wisconsinites will pay the same Federal taxes whether or not the state receives Federal grants to support its nonprofit sector. So clearly the point is not to shelter the state’s citizens from confiscatory taxes but to punish people who need help. Governor Walker’s ideology apparently requires not just that people in need of assistance seek private charity but that private charity be deprived of the means of assisting them.
And let’s be clear about the legal antecedents of what’s going on here. Groups of citizens of a single state are being deprived of access to something available to all other citizens of the United States—just as groups of citizens of the states of the Old Confederacy were once deprived of the vote. Then, “states’ rights” was a buzz-phrase meaning “the opportunity to mistreat black people without interference from those durned Feds.” Now, in Governor Walker’s view, the phrase is even more expansive, meaning “the opportunity to mistreat unhealthy and/or poor people of every color to make the point that those durned Feds have no right to interfere.” Anyone who’s enthusiastic about the states’ rights claims in the governors’ lawsuit against the Affordable Care Act should check out Wisconsin for a foretaste of what states’ rights really mean to the rights of states’ citizens.
The good news is, the Voting Rights Act of 1965 made clear that states’ rights are trumped by citizens’ right to vote. Thus—and despite many recent efforts to enact barriers to that right–-there’s a reasonable chance that Governor Walker will lose his legislative majority in the next few weeks, whereupon the appropriate state-federal balance can be restored.
Or, should I say, the Constitution can be restored.
——————
On Wisconsin! Part I appears here.
Tags:501c3, charity, Fundraising, grantmaking, grants, Health care, Mission, nonprofit, Nonprofit management, nonprofits, not for profit, politics, Poverty, Racism, recession, social services
Posted in Current Affairs, Disease charities, Finances, Fundraising, Government grants, Health care, Mission, Nonprofit management, Nonprofits--General, Poverty, Public private partnerships, Racism, Social Service Agencies | 2 Comments »
July 13, 2011
About a month ago the Nonprofiteer received a note from a public relations officer at the Jewish Federations of North America describing the Federations’ opposition to placing caps on tax deductions. Being well aware that the debt ceiling negotiations are completely out of her control (and probably out of anyone’s control at this point), this letter failed to move the Nonprofiteer to leap to her telephone and urge her Congressbeing to beat back this latest assault on the nonprofit sector.
But it wasn’t mere laziness that kept her from the front lines in this particular battle; it was actual disagreement, based on the letter’s own summary of the horrifying proposal:
Specifically, the Administration has proposed limiting tax benefits for charitable contributions for those earning over $250,000 (married) or $200,000 (single). The tax benefit of all itemized deductions, including charitable contributions, would be capped at 28 percent and the Jewish Federations want the charitable portion to be exempted.
Thus, an extremely modest proposal for assuring that the wealthiest citizens pay some additional portion of our shared tax burden is considered a threat to the health and well-being of the hundreds of thousands of people served by the Jewish Federations. This, despite the fact that deductibility’s impact on giving is far from clear.
Listen up, gang. You want to see a threat to health and well-being? How about cuts in Medicaid, in Medicare, in the Affordable Care Act, in Social Security, in food stamps, in child care, in education? The fundamental problem of the American economy is that we don’t pay enough in taxes to support the services we very reasonably demand. We don’t pay nearly as much in taxes as our quite conservative neighbors to the north, or our counterparts in Europe or Japan. So we don’t have the health care, the educational system or the family support services we need.
Even complete abolition of the charitable deduction wouldn’t make much of a dent in the shortfall we’ve created out of pure political cowardice and foolishness. The deficit is not the result of social spending but of three simultaneous wars piled on multiple tax cuts. So the hideous notion of a cap on deductions fails on the Willie Sutton basis: you don’t rob nonprofits because that’s not where the money is.
But. If there were what Everett Dirksen called “real money” hidden in the charitable deduction for wealthy families, it absolutely should be subject to revision, for the same reason every other deduction and credit and tax dodge should: because those dodges enable the wealthy to pay less than their share, and because this society needs more money than poor people’s taxes provide to continue those services necessary for us to remain a member in good standing of the developed world.
The Jewish Federations’ objection to this proposal—while completely understandable from their perspective—suggests that even the nonprofit sector has become infected with the shortsighted quarter-to-quarter thinking which addles Wall Street. Rather than consider the long-term good of the society they serve, the Federations are concerned about balancing next year’s budget. And while the Nonprofiteer doesn’t blame them for that—that’s their job—you’ll pardon her if she sides with (and cites) a different giant of the American Jewish community, Samuel Goldwyn*:
“Include me out.”
———————–
*Per Wikipedia: “In 1916, Goldfish partnered with Broadway producers Edgar and Archibald Selwyn, using a combination of both names to call their movie-making enterprise the Goldwyn Pictures Corporation. Seeing an opportunity, Samuel Gelbfisz then had his name legally changed to Samuel Goldwyn, which he used for the rest of his life. “
Could this possibly be because the alternative combination of their names is Selfish?
Tags:501c3, Advocacy, charitable deduction, charity, deductibility, donors, Fundraising, IRS, nonprofit, Nonprofit management, nonprofits, not for profit, philanthropy, Private Philanthropy, social services, taxation
Posted in Advocacy, Coverage of nonprofits, Current Affairs, Finances, Fundraising, Nonprofit management, Nonprofits--General, Philanthropy and Taxation, Private Philanthropy, Social Service Agencies | 5 Comments »
June 2, 2011
This branch of Habitat for Humanity has chosen to charge volunteers for the privilege of helping out.
When the Nonprofiteer pointed out that volunteers give more readily to the agencies they serve than non-volunteers, she wasn’t advocating admission fees. Volunteers may have paid to paint Tom Sawyer’s fence, but Twain’s point was that they were stupid. Your volunteers aren’t.
Even if mandatory “contributions” (oxymoron watch!) weren’t offensive in suggesting that volunteers’ time has less than no value, they’re practically the definition of penny-wise and pound-foolish: people will pay what you require (or not) and then regard their giving to the agency as being done for the year.
Or forever. Please stop this idea before it kills again.
Tags:501c3, Benefit events, charity, donors, Fundraising, Habitat, Habitat for Humanity, human resources, Management Advice Day tip, Marketing, nonprofit, Nonprofit management, nonprofits, not for profit, personnel, philanthropy, Private Philanthropy, Relations with funders, volunteer, volunteering, volunteers
Posted in Benefit events, Charity scandals, Coverage of nonprofits, Current Affairs, Earned income, Finances, Fundraising, Housing, Nonprofit management, Nonprofits--General, Personnel Issues, Private Philanthropy, Relations with funders, Social Service Agencies, Volunteers/Volunteerism | 4 Comments »
May 31, 2011
Who are these people, and how did they get to be so smart?
A new study has found that inverting state tax structures—whereby the highest income earners would be taxed at the current percentage of income for the lowest income earners, and vice versa—would collectively raise $490 billion in new revenue, immediately eliminating states’ budget deficits and avoiding the serious consequences of budget cuts.
The report, titled “Flip It to Fix It: An Immediate, Fair Solution to State Budget Shortfalls” was released today by Boston-based United for a Fair Economy and 13 state organizations around the country.
What’s being “flipped,” of course, is the current regressive tax system, which depends on getting more and more money from those who have the least of it—or, as a study co-author bluntly phrased it, “squeez[ing] water out of a stone.”
Is there any possibility that state legislatures will accept this sensible suggestion? Maybe not this minute; but the Nonprofiteer suggests we all wait until crime spikes this summer (not enough police officers) and schools open this fall with huge classes (not enough teachers). Maybe then our elected officials will get a clue that dismantling workers’ compensation and blaming public employee unions will be insufficient to preserve essential services.
Tags:Advocacy, Education, Poverty, state budgets, state taxation, tax
Posted in Advocacy, Advocacy groups, Current Affairs, Education, Finances, Poverty | 2 Comments »
