Computers and the Internet are producing an explosion of data and knowledge about philanthropy, enabling — and even compelling — us to update our terminology and practices.
The chart below is an example. It presents IRS data, via the National Center for Charitable Statistics (NCCS), on the numbers of charities and private foundations filing Forms 990, 990-EZ, and 990-PF in the last two years, arranged in new ways: by states and nationally, and as a percentage of all "nonprofits." The numbers show that "charities" and "philanthropic" organizations account for only about a quarter of the "nonprofits" in the U.S., rendering the conventional use of the latter as a synonym for charities and philanthropic entities problematic.
The term "nonprofit" refers to a tax-exempt organization. All charities and foundations are "nonprofits," but only a quarter of the "nonprofits" registered with the IRS are actually philanthropies — conventionally defined as "private initiatives, for public good, engaged in public fundraising for tax-deductible donations." The 75 percent of non-philanthropic nonprofits registered with the IRS are extremely heterogeneous and include things like condo associations, real estate trusts, trade associations, social clubs, cemeteries, teacher retirement funds, and so on. Although they are in the "public interest" (and thus are tax-exempt), they are generally self-serving and the donations they receive are not tax-deductible.
A decade ago, the Catalogue for Philanthropy examined in detail the IRS Master Nonprofit Data File for Massachusetts and found that 75 percent of the state's more than 40,000 "nonprofit" organizations had nothing to do with philanthropy as defined above. Another 15 percent fell into a "gray" area requiring further examination beyond what we could glean from their 990s and websites. The remaining 10 percent, approximately 4,000 organizations, were determined by us to be philanthropic. Based on that 1:10 ratio, we estimated that, nationally, there were 200,000 to 300,000 "philanthropies" registered with the IRS, out of a "nonprofit" total (depending on the source) of 1.5 million or more.
Since then, my colleagues and I have identified independent data — millions of contributions, nationwide, over the last twenty-five years from donor-advised funds, community foundations, and Internet giving platforms — that seem to confirm our view that the number of charities and philanthropies in the U.S. is closer to our lower estimate than the million-plus organization number routinely cited as the size of the "nonprofit" sector.
Then, last spring, the Chronicle of Philanthropy reported that in 2015 the IRS had received only 295,000 Form 990s, the tax document that active 501(c)(3) "public charities" are required to file annually. In our view, this is incontrovertible evidence that confirms our lower estimate of the number of charities nationally and further suggests that the number of Form 990s filed with the IRS could be a useful criterion for distinguishing the number of "public charities" from "nonprofits."
After the Chronicle article appeared, we went to the NCCS website and, using the "TableWizard" tool there, produced counts for the previous two years (August 2014 to August 2016) of the numbers of charities and private foundations, by state, that had submitted Forms 990, 990-EZ,or 990-PF. To those, we added another category, number of "nonprofits" by state (and total). This is the result: