350 posts categorized "Nonprofits"

At What Cost 'Mission'?

January 15, 2018

Why_are_whereWhen an exempt nonprofit organization's single-minded pursuit of funding for its mission threatens to damage the broader common good, many in the larger community will question the tax advantages that enable that organization to thrive while others suffer. And so they should.

Recently, this tension was underscored by a situation in our nation's capital, where tax-exempt American University's activities as a commercial real estate developer have led to the loss of local businesses much valued in (and beyond) adjacent neighborhoods — and raised additional concerns about the sometimes-harmful practices of "charitable" entities. While local residents around the country have been doing what they can to maintain the increasingly fragile business mix that reflects the often-historic and unique character of their neighborhoods, too many exempt organizations ignore such concerns and go about their business with a blatant disregard for the consequences of their actions on others.

We've all become familiar with the egregious practices of commercial real estate owners who double, triple, or quadruple a small business owner's rent when a lease expires, forcing the business to vacate the space and leaving it empty for years in hopes that, at some point down the road, it can be combined with adjacent properties to create an attractive parcel for luxury development or perhaps a national chain tenant, even as the surrounding neighborhood retail ecosystem withers and dies.

And when ostensibly nonprofit organizations get into the game, it adds more than insult to injury. Indeed, in the recent case involving American University, which is taking steps to force out a popular family-owned garden center from one of the commercial properties it owns, it heightens the scrutiny on all exempt organizations.

Our current tax code allows exempt nonprofit organizations and institutions to maximize the revenue they generate by mimicking the often-rapacious behavior of commercial real estate developers. While some defenders of exempt organizations’ commercial real estate ventures believe that income from such activities are subject to Unrelated Business Income Tax (UBIT), they are wrong.

For all "charitable" organizations, federal — and, in most cases, local — income taxes are not applied to "passive income" derived from commercial rental properties that aren't debt-financed — although, in most locales, property taxes do apply. Astoundingly, however, educational institutions benefit from a special provision in the tax code that allows them to also avoid income taxes on profitable mortgage-encumbered properties. In fact, educational and other nonprofit institutions can use their tax-advantaged status to establish for-profit corporations (e.g., a "single-member LLC") to manage their real estate developments as a "disregarded entity" and completely avoid income taxes on those properties.

Even in cases where the exception doesn't apply, all exempt organizations can extend their tax-deductibility to donors of debt-free commercial property; can use tax-deductible cash and other donated financial instruments to purchase commercial property outright; and many — such as universities — can even use government-issued tax-exempt bonds to finance the mission-related acquisition of property, thereby freeing up fungible dollars to buy other properties for commercial development.

Some may applaud these organizations and institutions for using any and all available means to generate every last dollar to advance their missions, but too often such behavior has a deleterious effect on the common good. As prevailing wisdom would have it, the common good "[i]s much more than the aggregate of individual goods and accomplishments" — more, for instance, than the sum total of the benefits that accrue to a university’s graduates. "Rather, it reflects both the morality and enlightened self-interest that allows institutions across society to operate so that all might enjoy a life of justly and humanely distributed resources, rewards, responsibilities and obligations."

When exempt organizations and institutions operate to the detriment of the common good, when they serve a narrower constituency — even if a portion of that constituency has pressing needs — at a real cost to the quality of life to others in the community (and to the broader public interest), it focuses our attention on their overall contribution to society and begs the question of their tax advantages and other privileges.

Commercial real estate development that destroys the character of a neighborhood and squeezes already hard-pressed local businesses to the point of extinction might not seem to be an assault on the common good. But for those who live and work in and around affected communities, for those who value retail and business diversity, for those whose livelihoods are destroyed, and for those who believe that all tax-exempt organization should serve the larger public interest, it is. And it raises a host of serious and related questions.

For instance, should a charity's or educational institution's investment portfolio include stock in companies whose activities harm the environment and/or the quality of life in a community or region? (It's worth noting that many such organizations and institutions exclude commercial property and other investment holdings, as American University did, when self-rating their performance on "do-good" indexes like that compiled by the Association for the Advancement of Sustainability in Higher Education.)

Should a charity or educational institution hold stock or bonds issued by companies whose activities cause health problems in humans or involve experiments on animals? What about businesses that actively lobby to roll back public safeguards, government protections, and commonsense regulations designed to protect the public against toxic pollution or dangerous manufacturing practices?

While many organizations have socially-responsible investment committees and policies in place, too often they are toothless or simply provide a patina of respectability to what is otherwise business as usual. (In other cases, the recommendations forwarded by such bodies are rejected by boards as being too costly.)

Should charities and educational institutions seek the highest possible returns in their portfolios by investing in corporations that lobby for self-serving tax cuts and/or to reduce government spending on safety-net, public-benefit, and entitlement programs like Social Security and Medicare? What about businesses that have poor track records with respect to employment equity and diversity hiring?

What about their our own supply chains? Should charities and educational institutions favor low-cost suppliers even when they’ve been known to exploit low-income labor or compel employees to work in unsafe conditions? Many organizations publish lofty statements about the social responsibility they require of their "business partners," but there are woefully few examples of those policies ever being enforced.

And what about charities or educational institutions that fail to pay their own workforce a living wage or fail to offer a benefits package that allows employees to achieve a reasonable standard of living? Should we expect them to try to save on labor costs by pushing people into part-time positions or to fight any attempt to unionize their workers? Or should we limit their tax privileges when they do?

Should nonprofit institutions contract-out to for-profit corporations to provide and oversee workers or to offer other services when the charities know that particular businesses have faced repeated protests and litigation in support of the rights of such workers and the unions that represent them?

Too many exempt organizations operate in ways that too narrowly serve their own purposes while ignoring the adverse consequences their actions have on others. That not only harms people and communities, it also muddies the water for other organizations working hard against long odds and with limited resources to make the world a better place.

And so the question stands: Should exempt organizations benefit from self-serving tax-advantaged commercial and other activities that harm the common good. We’d love to hear from you in the comments section below.

Headhost_mark_rosenman_square_175Mark Rosenman is a professor emeritus at the Union Institute & University. To read more of Rosenman's commentary, click here.

5 Questions for...Laura Kalick, Tax Consulting Director, BDO

January 12, 2018

The GOP tax reform bill agreed to by the U.S. Senate and House in December and signed into law by the president on December 22 is over a thousand pages long. The bill is so long, in fact, that many members of Congress haven’t read — and are unlikely to ever read — it in its entirety. Its impact on nonprofits and the charitable sector could be significant, however, which is why earlier this month we spoke with Laura Kalick, national non-profit tax consulting director for the nonprofit and nonprofit healthcare industry at BDO in Washington, D.C., about provisions in the new law most likely to affect nonprofits in 2018, and beyond.

Headshot_laura_kalickPhilanthropy News Digest: There are lots of provisions in the tax reform bill that are going to affect nonprofits and charities. In your view, what is the one provision likely to have the greatest impact on the sector?

Laura Kalick: Well, the one that’s going to have the most impact is the doubling of the standard deduction and the limitation on deducting state and local taxes. These two provisions will likely result in a huge number of American taxpayers not itemizing their deductions and therefore not being able to deduct charitable gifts, which, as you know, is an important incentive for charitable giving. It's hard to know, of course, what people will do, but estimates from the likes of Independent Sector and the Council on Foundations suggest that charitable giving in the U.S. may take a hit of as much as a $20 billion, which is pretty substantial.

PND: The bill includes two provisions likely to be popular among individuals who do itemize their returns. One is an increase in the charitable contribution deduction limit, and the other is repeal of the so-called Pease limitation. How are those changes likely to affect charitable giving?

LK: The Pease limitation was more of a concern for high-income taxpayers, in that it reduced the value of a taxpayer's itemized deductions by 3 percent for every dollar of taxable income above a certain threshold — something like $250,00 for an individual and $300,000 for a married couple. With its repeal, people whose total income exceeds those levels will now get the full benefit of their contributions, so in that sense it could be an incentive for higher income taxpayers to give more.

The other provision is of little help to anyone, in my opinion. Previously, you could deduct charitable gifts totaling up to 50 percent of your contribution base — essentially, your adjusted gross income (AGI). That's a pretty large number, and although I don't have the stats for you, it's a lot more than most people actually allocate to charity. A provision in the new tax bill raises the maximum to 60 percent of one's contribution base, which is an even bigger number and not something that is likely to apply to too many people in any given year. I would also note that in addition to being able to deduct contributions up to 50 percent of one's contribution base, if there are contributions in excess of that amount, they could have, under the old code, and still can be carried forward under special rules. So I believe that increasing the limit to 60 percent is likely to have little impact.

PND: The bill also doubled the estate tax exemption from $5 million to $10 million, indexed for inflation — a provision that, if nothing changes, is scheduled to expire in 2026. I’m thinking the impact of that provision on charitable giving is de minimus. Do you agree?

LK: I do. A $5 million estate is a good amount of money, and a $10 million estate is even nicer, but a lot of people who are in that category still would rather give their money to their children than to charity, and a doubling of the exemption isn't going to change people's behavior very much. Now, had Congress gone ahead and eliminated the tax entirely, as the House version of the bill proposed, I think we would have seen a profound effect on giving, in that it would have eliminated an important driver of charitable bequests.

PND: Are there other provisions in the bill that nonprofits and charities should know about?

LK: There are some big changes in the way unrelated business income is treated. In effect, what the legislation does is disallow the use of unrelated business income losses to offset gains from a different unrelated business activity. Organizations in the past would minimize their unrelated business income by netting the income and losses from one activity against those of another. For example, say you were a big nonprofit institution with a million dollars of advertising income, income that would have been taxed as unrelated business income, and you had an alternative investment in a partnership that generated big losses, say, a million dollars of losses. Under the old tax code, you could have offset the million dollars of losses against the million dollars of gain. But under the legislation signed into law recently, you will no longer be able to use your unrelated business losses to offset unrelated business gains from a different activity. Which means the million dollars of unrelated business income in the example I just gave will now be taxed, although at the new corporate rate of 21 percent.

What's interesting, though, is that the code retains the offset provision for regular C corporations, so exempt organizations might decide, if the amounts involved are large enough to justify it, to put their unrelated business activity income into a taxable subsidiary where gains from one activity can be used to offset losses from a different activity.

PND: What should individual nonprofit organizations be doing to prepare for these changes?

LK: Well, obviously, they need to review their budgets and see how much income they are raising in the form of charitable contributions, then try to project what kind of hit they can expect from the reduction in contributions from those who itemize and begin to take steps to make up the shortfall, whether that involves cutting expenses, or focusing more of their fundraising efforts on high-net-worth donors, or some other way. That's the first thing.

Second, if you have unrelated business activities that are losing money, you need to take a close business look at why those activities are generating losses and try to figure out how you can make the business profitable since you will not be able to use the losses to offset the gains from other unrelated activities.

And third — and this has to do with a provision in the bill I didn't mention but that could impact a lot of nonprofits — organizations need to see if they are providing free parking, other transportation benefits, and/or onsite athletic facilities to employees, because the new law provides that the costs associated with such fringe benefits will now be treated as unrelated business income.

There are other provisions that may affect them, as well. Maybe the best advice I can give is, talk to your accountant. And if you don't have one, get one.

— Mitch Nauffts

Most Popular PhilanTopic Posts 2017

January 02, 2018

It's no surprise, perhaps, that the most popular item on the blog in 2017 was a post, by Michael Edwards, from 2012. Back then, the country was clawing its way back from the worst economic downturn since the Great Depression, and the future, if not exactly bright, was looking better. Two thousand-seventeen, in contrast, was...well, let's just say it was a year many would like to forget. Edwards, a former program officer at the Ford Foundation and the editor of the Transformation blog on the openDemocracy site, had agreed to write a four-part series (check out parts one, two, and four) on the Bellagio Initiative, an effort funded by the Rockefeller Foundation to produce a new framework for philanthropic and international development, and his third post had much to say about how and when, in development work, we measure, how we use and interpret the results, and who decides these things — concerns as relevant today as they were in the final year of Barack Obama's first term in office.

Of course, smart thinking and useful advice never go out of fashion — as the posts gathered below amply demonstrate. Indeed, with an administration and majorities in both chambers of Congress seemingly determined to roll back many of the progressive gains achieved over the last half-century, nonprofits and social entrepreneurs working to protect the rights of marginalized and vulnerable populations, undo the vast harm caused by a systemically biased criminal justice system, combat the corrosive effects of money on our politics, and address the existential threat posed by climate change will need all the smart thinking and useful advice they can lay their hands on. So, sit back, buckle your seat belt, and get ready for 2018. It's going to be an...interesting year.

What have you read/watched/heard lately that got your attention, made you think, or charged you up? Feel free to share in the comments section below.

Interested in writing for PND or PhilanTopic? We'd love to hear from you. Send a few lines about your idea/article/post to mfn@foundationcenter.org.

Weekend Link Roundup (December 30-31, 2017)

December 31, 2017

2017-2018Our weekly roundup of noteworthy items from and about the social sector. For more links to great content, follow us on Twitter at @pndblog....

Giving

In his final post of the year, Nonprofit Chronicles blogger (and transparency advocate) Marc Gunther shares what (and why) he and his wife gave to charity in 2017.  

Inequality

"The world's 500 richest people have increased their wealth by $1tn (£745bn)...this year due to a huge increase in the value of global stock markets," the Guardian reports. In fact, as 2017 comes to a close, the "world’s super-rich hold the greatest concentration of wealth since the US Gilded Age at the turn of the 20th century, when families like the Carnegies, Rockefellers and Vanderbilts controlled vast fortunes...." 

Amazon.com founder Jeff Bezos ($99bn) tops the list, followed by Bill Gates ($91.8bn) and Warren Buffett ($85.3bn). For those interested in tracking such things, the Bloomberg Billionaires Index provides statistical profiles, updated on a daily basis, of the hundred richest people in the world.

The Republican tax bill signed into law by President Trump just before Christmas is likely to worsen inequality in the United States. Referring to the bill as "a lump of coal" for average Americans, the California Wellness Foundation suggests in a statement on its website that the new law will further cement America's status as "a nation of profound inequality" and regrets the fact that it "was enacted despite the fact that so many were not in favor of it." The foundation closes with a call to "other funders committed to the public good to join with us as we move forward with even greater resolve to build the power of the many, not the few." 

Nonprofits

"The nonprofit sector is woefully lacking creative destruction. Mediocre and weak organizations are still attracting funding and the best organizations are not accessing the funding they need to achieve real impact." Catarina Schwab and Lindsay Beck hope to change that with something called an impact security. Devin Thorpe reports for Forbes

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'Tis the Season to Give — Now More Than Ever Under Tax Reform

December 16, 2017

Holiday-charity-smart-givingGiving Tuesday broke all records this year. On November 28, a total of $274 million was donated to charity through the online campaign, as millions of individuals contributed an average of about $110 to great organizations around the globe. According to the Urban-Brookings Tax Policy Center, however, if certain provisions in the House and Senate versions of the Tax Cuts and Jobs Act become law, nonprofits could lose between $12 billion and $20 billion in annual charitable revenues. And that means donors will need to give a whole lot more on future #GivingTuesdays — and every other day of the year — if those nonprofits hope to maintain the same level of service they currently provide.

With Republicans racing to pass a final bill before Christmas, the outlook for nonprofits is bleak. Like the Grinch who stole Christmas, the plan making its way through Congress could steal billions in would-be donations from worthy causes. One provision in the bill is particularly damaging: the increase in the standard deduction.

By doubling the standard deduction and repealing or scaling back many itemized deductions, the plan would substantially reduce the number of taxpayers who elect to itemize their returns. The Tax Policy Center estimates that fewer than thirteen million taxpayers would itemize deductions in 2018 under the House version of the plan, down from more than 46 million under current law. The net effect: significantly reduced incentives for people to give. Urban-Brookings analysts note that most economists generally agree that tax deductions boost charitable giving — although to what degree is open to debate. Whatever the level, the likely trajectory for giving under the Republican plan is downward — an unfortunate circumstance for nonprofits, since the vast majority — 72 percent — of the more than $390 billion given to nonprofits last year came from individual donors (GivingUSA). These are the everyday givers who contribute $25, $50, or $100 to their favorite causes and many itemize those contributions.

Given these and other changes to the tax code that could undermine charitable giving, here is some advice for nonprofits seeking to sustain their good work and the donors who support them — individual givers as well as philanthropic foundations and corporations.

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[Review] 'The Unfinished Social Entrepreneur'

December 04, 2017

Social entrepreneur. A once-niche label for a great many people who toiled as environmentalists, civil rights activists, and suffrage fighters before any of those was a "cool" thing to be. It's also the focus of The Unfin sh d Social Entrepreneur — as the book's cover cleverly renders it — by Jonathan C. Lewis, a life-long social justice activist and accomplished social entrepreneur who has founded two socially focused enterprises, MCE Social Capital and Opportunity Collaboration; co-founded another, Copia Global; and currently serves as a trustee for the Swift Foundation, which was founded by UPS heir John Swift in 1992 with a mission to enhance the well-being of people and the environment.

Book_unfinished_social_entrepreneurIntended as a guide for current and would-be social entrepreneurs, the book outlines twenty-one themes that Lewis believes are essential values for anyone thinking about jumping into, or currently working in, the social entrepreneurship space. In short (five to ten page) chapters, Lewis uses each theme as a lens through which to explore the mindset required to be truly successful in the world of social justice, whether it's founding your own social enterprise or joining someone else's cause.

He begins with a chapter on "Justice," describing how he dropped out of college to work as a legislative aide for Nicholas C. Petris, a California state senator representing the 11th district (consisting of portions of Alameda, Contra Costa, San Joaquin, and Santa Clara counties) from 1966 to 1976 and the 9th district (encompassing most of the East Bay area) from 1976 until he was termed out in 1996. Petris's "clear sense of right and wrong; his bold embrace of new and controversial ideas; his courageous use of power; his principled instinct to fight alongside those without privilege or advantage" are, writes Lewis, "the very soul of the social entrepreneur." Lewis then weaves his personal story through chapters titled "Starting," "Passion," "Rescued," "Connection," "Failure," and "Misgivings," walking readers through the twists and turns of his journey, with each chapter highlighting a lesson learned and/or core value to be absorbed and put into practice by would-be social entrepreneurs among his readers. Taken together, they are values that — if we remain cognizant of them in our day-to-day lives, writes Lewis — will help us be better, more compassionate, and empathetic, both as human beings and as professionals.

For example, in the chapter on "Listenership," Lewis shares a moment in which he learned the value of listening "authentically," of paying attention to both verbal and non-verbal cues, and of pushing our understanding beyond the limitations of our individual frames of reference. "Listenership means hearing others: the Others who have come before us, the Others who walk alongside us, the Others who are marginalized," he writes. "Listenership is social entrepreneurship....Social entrepreneurship valorizes the listening skill because it's so fundamental, so vital, to achieving social impact." 

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Weekend Link Roundup (December 2-3, 2017)

December 03, 2017

Local-food-and-wine-roasted-chestnutsOur weekly roundup of noteworthy items from and about the social sector. For more links to great content, follow us on Twitter at @pndblog....

Aging

According to Claire Petersky, executive director of the Wallingford Community Senior Center in Seattle, "Only 4 percent of us end up in nursing homes, and that number is dropping. Dementia? The vast majority of us, 90 percent, have our marbles when we die, and the numbers who die with dementia is also dropping. Depression? Turns out, we are happiest at the beginnings and ends of our lives. It's called the U Curve of Happiness." Petersky's colleague, Nonprofit AF blogger Vu Le, explains why we all need to change the way we think about older adults.

Climate Change

The California Public Employees' Retirement System (CalPERS), the largest public pension fund, in the U.S., has announced an equity investment in two large wind farms, the Caney River facility in Elk County, Kansas, and the Rocky Ridge facility in Kiowa and Washita counties, Oklahoma.

An NPR analysis of grants awarded by the National Science Foundation found a steady decline in the number with the phrase "climate change" in the title or summary — a change in language that "appears to be driven in part by the Trump administration's open hostility to the topic of climate change." Rebecca Hersher reports for NPR.

Disaster Relief

Mother Jones editor Kanyakrit Vongkiatkajorn shares some good advice for those who want to help in the wake of a natural disaster.

Giving

If you haven't heard, this year's #GivingTuesday campaign (the sixth annual) was a huge success, raising more than $274 million for nonprofits working in the U.S. and around the world. Congrats to all who gave and participated!

Felix Salmon, host and editor of the Cause & Effect blog, had charitable giving on his mind this week, posting a piece on Tuesday about why it's okay if the charitable sector shrinks a little as a result of the Republican tax bills working their way through Congress ("[A] a lot of very rich people are going to see their taxes cut, and at the margin, the less you pay in taxes, the less incentive you have to try to avoid them through mechanisms like charitable giving") and following that up with a piece on Thursday that addresses the question: How do you get people to donate less money to less-effective charities, and more money to more-effective charities.

According to Network for Good, 29 percent of all online giving happens in December and 11 percent happens in the last three days of the month. Which is why you'll want to spend a few minutes with these "essential" fundraising resources compiled by Brady Josephson.

It's not exactly news anymore, but Tennessean.com business columnist Jennifer Pagliara has some good advice for those who are looking to reach out to to today’s digitally savvy contributors — millennial or otherwise.

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Joint Letter of Opposition to the Senate Tax Reform Bill

December 01, 2017

On Wednesday, the leaders of three D.C.-based nonprofit intermediary organizations — Vikki Spruill, president and CEO of the Council on Foundations; Tim Delaney; president and CEO of the National Council of Nonprofits; and Dan Cardinali, president and CEO of Independent Sector — released a letter to lawmakers on Capitol Hill stating their joint opposition to the tax bill that is rapidly moving toward a vote in the U.S. Senate. You can read the full text of the letter below, and learn more about the organizations' policy-focused advocacy efforts here, here, and here.

___________

Dear Senators,

The charitable nonprofit and foundation communities stand united in opposition to the Tax Cuts and Jobs Act and, in the strongest possible terms, urge a "NO" vote on the bill. The current legislation damages the civic infrastructure upon which our communities depend, and hurts the people that we serve.

We collectively represent tens of thousands of charitable and philanthropic organizations that employ millions of individuals in every state, engage tens of millions of additional individuals who serve as board members and other volunteers, and touch the lives of virtually every American every day. For 100 years, federal tax policy has incentivized this giving spirit and empowered this crucial work. Our overriding concern, and that of our member organizations, is the impact of both versions of the Tax Cuts and Jobs Act on the people and communities we serve. On the basis of securing a sound future, maintaining our ability to serve as dedicated problem solvers in our communities, and the ability of the sector to secure resources to perform necessary work, the Tax Cuts and Jobs Act is fatally flawed.

The goal of simplifying the tax code and making it easier for Americans to file their taxes is admirable, but the collateral damage this simplification would cause is too great a cost. According to Republican estimates, nearly doubling the standard deduction would result in only five percent of taxpayers itemizing their tax deductions — placing the charitable deduction out of the reach for 95 percent of taxpayers. As a result, experts calculate that the absence of this powerful incentive for such a vast majority of taxpayers would reduce giving by $13 – $20 billion every year. It is regrettable that neither chamber has recognized the simple solution to this issue: a universal charitable deduction that would extend an incentive to give to all taxpayers, not just the very few who would itemize.

A decrease in giving of this scale would force charitable nonprofits to make significant cuts to their operations — meaning that millions of people will no longer have access to the services that nonprofits are currently able to offer. Economists also estimate a loss of 220,000 to 264,000 jobs in the nonprofit sector as a result of the cuts that will be necessary for many charities to keep their doors open. A bill that is designed to create jobs shouldn't be taking away the jobs of almost a quarter of a million Americans who are trying to help others.

While we were encouraged to see that the Senate bill does not contain the same provision that was buried in the House bill to repeal the so-called "Johnson Amendment,” we continue to hear that this provision may be offered as an amendment to the Senate version, or could survive in the bill post-conference. This provision alone is independent grounds for the entire tax package to be rejected. More than 5,500 nonprofits and foundations, more than 4,200 faith leaders, more than 100 religious and denominational organizations, the state law enforcement officials who focus on regulating nonprofits,  89 percent of Evangelical pastors, and 79 percent of the American public have expressed steadfast support for the law that has been in place for more than 60 years. The nonprofit and foundation communities strenuously oppose the addition of corrosive partisanship to our sector. The proposal to take this important protection away is an affront to organizations that are dedicated to improving our communities through nonpartisan engagement. Current law doesn't cost anything, but the unwanted change would cost taxpayers billions of dollars, according to the Joint Committee on Taxation.

Our three organizations stand ready to work with Congress on future legislation to improve our communities and strengthen civil society through the tax code. However, for the reasons stated above and many more that affect the people in communities across this country that rely on our services, we must urge each of you to vote "NO" on the tax bill before the Senate.

Respectfully,

Vikki Spruill
President and CEO
Council on Foundations

Tim Delaney
President and CEO
National Council of Nonprofits

Dan Cardinali
President and CEO
Independent Sector

[Review] 'Engine of Impact: Essentials of Strategic Leadership in the Nonprofit Sector'

November 28, 2017

The nonprofit sector has never faced more difficult challenges — or had the potential to create greater impact — than it does today, argue William F. Meehan III, director emeritus of McKinsey & Company, and Kim Starkey Jonker, president and CEO of King Philanthropies, in their new book, Engine of Impact: Essentials of Strategic Leadership in the Nonprofit Sector. But for nonprofits — by 2025 projected to need up to $300 billion more annually beyond currently expected revenues in order to meet demand — to benefit from the largest intergenerational wealth transfer in U.S. history (an estimated $59 trillion expected to change hands between 2007 and 2061), they will have to "earn the right to expand [their] role and maximize [their] impact" in what Meehan and Jonker refer to as the coming "Impact Era."

Book_engine_of_impact_3dDrawing on a number of surveys, including the 2016 Stanford Survey on Leadership and Management in the Nonprofit Sector; a variety of Stanford Social Innovation Review articles, business and nonprofit management books, and Meehan's course on nonprofit leadership at the Stanford Graduate School of Business; and Jonker's experience overseeing the Henry R. Kravis Prize in Nonprofit LeadershipEngine of Impact outlines the challenges nonprofits currently face — lack of impact data, transparency, and sustainable operational support; donors' tendency to give impulsively to well-known organizations rather than high-impact ones; ineffective boards — and then explores a number of tools that nonprofits can use to address those challenges. They do not include venture philanthropy or impact investments, which Meehan and Jonker, somewhat "controversially," are skeptical of. Instead, they urge nonprofits to embrace the "essentials of strategic leadership" — mission, strategy, impact evaluation, insight and courage, funding, talent/organization, and board governance — which, when brought together thoughtfully and intentionally, create an engine of impact that drives organizational success.

Quoting liberally from business management expert Peter Drucker, Ashoka founder Bill Drayton (an early mentor of Meehan's), Good to Great author Jim Collins, and other luminaries, the authors illustrate each component of strategic leadership with concrete examples often drawn from the work of Kravis Prize winners such as the Afghan Institute of Learning (AIL), BRACLandesa, and Helen Keller International. And while they concede that some of them may be obvious, they are quick to note, based on survey results, that they are not all well understood or effectively implemented.

They emphasize, for example, the importance of a well-crafted mission statement, and caution organizations against mission creep, even if avoiding the latter means saying no to a new funding source. Indeed, saying "no" seems to be a critical part of strategic leadership, in that the urgent need to achieve maximum impact in a time of enormous challenges and limited resources is too important for nonprofit leaders to be distracted by non-mission-aligned activities — or by debates over semantics (e.g., "theory of change" vs. "logic model"): "if you ever find yourself caught in a debate about these terms' usage," Meehan and Jonkers write, "we suggest you leave the room immediately. We do."

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Weekend Link Roundup (November 18-19, 2017)

November 19, 2017

Say no to sexual harassmentOur weekly roundup of noteworthy items from and about the social sector. For more links to great content, follow us on Twitter at @pndblog....

Communications/Marketing

"In a world where there is 'an avalanche of crazy things coming out of the [current] administration', communications professionals find themselves having to rethink how they communicate both internally and externally," writes Jason Tomassini, associate director for editorial at Atlantic Media Strategies, on the Communications Network site. At the recent ComNet17 conference, Tomassini and the network invited attendees to participate in a discussion about how they're navigating communications challenges in the current political environment. Here are four key takeaways from that discussion.

Disaster Relief

The Hurricane Harvey Relief Fund, the fund created by Houston mayor Sylvester Turner and Harris County judge Ed Emmett, has announced a second round of grants totaling $28.9 million to nintey nonprofits. The Houston Chronicle's Mike Morris has the details.

Giving

Although the giving traditions of the Rockefeller family were established almost a hundred and fifty years ago, writes Rockefeller Philanthropy Advisor's Melissa Blackerby, modern philanthropists can still learn from the family's values and example.

Gun Violence

In the HuffPost, Melissa Jeltsen and Sarah Ruiz-Grossman use data collected by Everytown for Gun Safety to argue that most mass shootings in America are related to domestic violence.

Higher Education

The dueling Republican tax bills working their way through Congress have implications for exempt sectors of the economy that could fundamentally change the way they operate. In this Weekend Edition segment, NPR's Lulu Garcia-Navarro talks to Raynard Kington, president of Grinnell College, a small liberal arts college in Iowa with a large endowment, about the Republican proposal to levy an excise tax on endowment income.

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The Worst Tax Reform That Money Can Buy

November 15, 2017

Tax-reformCharities and foundations are lucky. Often their self-interest and the public interest seem to be in conflict. But not this month, thanks to Congressional Republican efforts to "reform" the U.S. tax system.

In simple terms, the Republican plan is an effort to transfer more than $1.5 trillion from public purposes, government, and charities in order to further enrich already fantastically wealthy individuals and corporations. Under both the House and Senate plans, far less of the proposed cuts would benefit middle-class folks — many of whom would actually end up paying more in taxes. And even if Republican leaders' hopes to finance their scheme through cuts to Medicare and Medicaid fail, many of the other so-called reforms would profoundly hamstring our nation's ability to address critical social needs.

It's the same old class warfare that Republicans have promoted since the days of Ronald Reagan, and it must be opposed for the sake of both the nonprofit sector and the people and causes who rely and depend on the sector.

As detailed elsewhere, standard deduction provisions alone would cost charities more than $13 billion in donations each year. Changes in the estate tax, which the House proposes to eliminate and the Senate would reform by doubling the exempt amount, would also have a devastating impact. When the tax was suspended for a year in 2010, bequests dropped by over a third; full repeal would cost the Treasury $270 billion over a decade that might otherwise fund critical needs across America. Yet the Republican proposals allow the top one-fifth of one-percent, the very wealthiest 00.2 percent of Americans, to keep that money, even though most of it has never been and never would be taxed.

Simply put, the various tax policies being pushed in both the House and Senate would significantly cut charitable donations and otherwise harm nonprofits in order to finance giveaways to Americans who already hold a disproportionate share of the nation's wealth.

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Spoiler Alert: It’s Not All About Fundraising

November 07, 2017

Spoiler-alertAs a nonprofit leader, you'll be delighted to learn that new research affirms what most of us knew: Americans are generous. In fact, this year’s edition of Giving USA found that charitable giving by individuals in the U.S. was up nearly 4 percent in 2016, hitting an all-time high.

But as The Chronicle of Philanthropy notes in How America Gives, a recently released analysis of American giving patterns, these gifts are coming from fewer people. In 2015, the Chronicle notes,

only 24 percent of taxpayers reported a charitable gift....That’s down from 2000 to 2006, years when that figure routinely reached 30 or 31 percent....

While the Chronicle suggests the drop off could be due to a decrease in the number of Americans itemizing deductions on their tax returns, they also point to other possibilities: the lingering after effects of the Great Recession, an increase in the number of struggling middle-class families, more competition for fewer dollars.

And then there's the millennial factor. The generation born between 1980 and 2000 is the largest in American history, and as the Chronicle notes, "it's well known that [millennials] aren't embracing traditional ideas of giving."

It's a trend that's reflected in our own research. Indeed, Phase 2 of our 2017 Millennial Impact Report found that the millennial generation doesn't rank giving — or volunteering — as all that meaningful in terms of effecting change. In the study, survey respondents were asked to rank their typical cause/social issue-related behaviors in order of how influential they believed each to be. Out of ten actions, volunteering for a cause or organization ranked sixth while giving ranked eighth — well behind other actions such as signing a petition, attending a march or rally, voting, or taking to social media to share one's views.

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Weekend Link Roundup (October 28-29, 2017)

October 29, 2017

Tax_2Our weekly roundup of noteworthy items from and about the social sector. For more links to great content, follow us on Twitter at @pndblog....

Civic Tech

On the Getting Smart blog, Tom Vander Ark, former director of education at the Bill & Melinda Gates Foundation and author of Getting Smart: How Personal Digital Learning is Changing the World, highlights ten tech-driven developments (widespread unemployment, widening inequality, algorithmic bias, machine ethics, genome editing) that require decisions, sooner rather than later, we are not prepared to make.

In a new post on her Philanthropy 2173 blog, Lucy Bernholz wonders whether the social sector can "pre-emptively develop a set of guardrails for the application of new technologies so that predictable harm (at least) can be minimized or prevented?" 

Disaster Relief/Recovery

In Houston, the newly formed Greater Houston Flood Mitigation Consortium is convening leading  researchers to compile, analyze, and share an array of scientifically-informed data about flooding risk and mitigation opportunities in the region. Three key stakeholders in the effort — Ann Stern, president and CEO of the Houston Endowment; Nancy Kinder, president of the Kinder Foundation; and Katherine Lorenz, president of the Cynthia & George Mitchell Foundation — explain what the initiative hopes to accomplish.

Education

"It is the latest iteration for a philanthropy that has both had a significant influence on K-12 policy over its two-decades-long involvement in the sector — and drawn harsh criticism for pushing ideas that some see as technocratic." Education Week's Stephen Sawchuck examines what the Bill & Melinda Gates Foundation’s recent strategy pivot and new investments in K-12 education signal for the field.

Giving

Donald Trump and his administration's policies appear to be behind a dramatic increase in giving to progress groups. Ben Paynter reports for Fast Company.

Forbes has published its annual list of the top givers in the U.S.

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Weekend Link Roundup (October 21-22, 2017)

October 22, 2017

Jose_altuveOur weekly roundup of noteworthy items from and about the social sector. For more links to great content, follow us on Twitter at @pndblog....

Education

In 2010, Facebook founder Mark Zuckerberg made a $100 million gift in support of a major overhaul of the public school system in Newark, New Jersey. To be spearheaded by then-Newark Mayor Cory Booker (now a U.S. senator) and New Jersey governor Chris Christie, the effort stumbled out of the gate and became the object of derision (as well as the subject of a well-reviewed book by education reporter Dale Russakoff). But a new study from a team led by a Harvard University researcher finds that the performance of students in the district has improved significantly in English (although not so much in math) since 2010. Greg Toppo reports for USA Today.

Giving

In a post for Forbes, Kris Putnam-Walkerly offers ten reasons why community foundations are your best for disaster relief giving.

On Beth Kanter's blog, Alison Carlman,  director of impact and communications at GlobalGiving, challenges the conventional wisdom that donors are fatigued by the series of disasters that have hit the U.S. , Mexico, and Caribbeanf.  

Interestingly, a new study from Indiana University’s Lilly Family School of Philanthropy shows that since the early 2000s, volunteering and charitable giving in the United States has dropped roughly 11 percent. And, as a country, our generosity appears to have peaked around 2005, with giving hitting an average of $1,024 annually; in 2015, the most recent year measured, that number dropped to $872. Eillie Anzilotti reports for Fast Company.

In the Stanford Social Innovation Review Jennifer Xia and Patrick Schmitt, students at Stanford’s Graduate School of Business, note that while the largest wealth transfer in human history will take place over the next twenty years, most nonprofits are poorly positioned to take advantage of it.

In a video on the CNBC site, tech entrepreneur Alexandre Mars, the "French Bill Gates," argues that giving is something that anyone can — and everyone should — do.

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Deepening Audience Engagement With Long-Form Content

October 18, 2017

Communicating complicated ideas can be a significant challenge for social change organizations trying to reach diverse audiences in a short-attention-span world. But it's something long-form content is particularly well suited for. If your organization publishes research, reports, and other types of long-form content, what strategies can you use to ensure that your content resonates with and engages your target audiences?

Audience-Engagement-bubblesDigital communications and social media have had a tremendous impact on our ability to maintain focus and attention — not just online, but in the real world. Online and offline, we are awash in content that's fragmented and comes at us fast. Distractions are everywhere and, for social change organizations, creating awareness around complex issues can feel like an uphill battle.

But even as short-form platforms like Twitter increasingly shape how issues are framed by the media, recent studies show that when it comes to audience engagement, long-form content performs better than shorter content. So, while we may live in a world dominated by short bursts of commentary, opinion, and insights, long-form content remains a critical (and effective!) format.

While every organization with a message to communicate has to learn how to navigate this dynamic, social change organizations face a bigger challenge. Because when your mission revolves around a complicated issue, is connected to a problem in a far-away place or the distant future, or is just removed from the concerns of everyday life, maintaining audience engagement is inherently more difficult.

Still, it usually boils down to the same question: How can we elevate our issue or cause and engage our target audiences? The time-tested principles used by storytellers since, well, forever are an excellent place to start.

Leveraging Narrative Structure

Whether presented as narrative or as academic research, all long-form content can benefit from the three-act structure of exposition, confrontation, and resolution familiar to professional storytellers. In general, it works like this:

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    — James Baldwin (1924-1987)

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