Some ideas are new, some are old, but all are aimed at strengthening smaller charities as well as the nonprofit sector as a whole. Released by the Nonprofit Sector and Philanthropy Program of the Aspen Institute at the recent Nonprofit Congress in Washington, D.C., “Mobilizing Change: 10 Nonprofit Policy Proposals to Strengthen Communities,” breaks down 10 ideas aimed at improving the social sector.
“The stature and importance of the social sector has grown considerably in recent decades, yet — except for issues of oversight and accountability — policymakers pay scant attention to nonprofit organizations,” according to the report’s abstract. “An enormous opportunity exists to develop public policies that enhance the sector’s capacity to benefit our communities. This set of proposals…provides a starting point for a bipartisan commission to focus on maximizing the relationship between government and civil society,” the report states.
The report indicates that nonprofit and voluntary activity accounts for more than 7 percent of the nation’s Gross Domestic Product (GDP), more than the entire construction industry, and utilizes a combined (6.4 percent).
It is estimated that almost a third of all nonprofit revenue comes from government sources, whether grants-in-aid, Medicare and Medicaid payments, vouchers, service contracts and other public funds. “It is a relationship often overlooked by policymakers,” the report states.
The report “supports the establishment of a bipartisan commission to study the relationship ad recommend policies to strengthen the sector’s capacity to improve lives and solve the society’s most pressing problems.” While some innovations would help nonprofits strengthen their fiscal viability, other ideas would help build overall capacity and improve integration with government agencies and services.
The ideas include:
- Generate growth capital for promising nonprofits by creating a Social Investment Fund Network. Funds would be created by matching federal dollars with state, local and private sector contributions and distributed to nonprofits or social enterprises that exhibit the most potential for achieving him impact and yielding significant return.
- Promote the growth of enterprises that mix business practices with social missions by creating a special tax code designation for social-benefit enterprises, such as L3Cs, which were approved in Vermont this year.
- Increase donations by extending the deadline to April 15 for making tax-deductible charitable contributions.
- Increase the funds available to nonprofits by simplifying or reducing the excise tax for private foundations.
- Improve the viability of smaller nonprofits by creating a Small Business Administration for nonprofits. The Nonprofit Capacity Building Initiative (NCBI), “a possible precursor to an Small Nonprofit Association (SNA), calls for $25 million per year over three years,” and would affect nonprofits with budgets of less than $5 million.
- Advance knowledge and improve the performance of nonprofits and philanthropy by creating a Strategic Nonprofit Research Collaborative to support independent analysis of nonprofit data, issues and challenges.
- Improve disaster relief, especially for low-income and vulnerable people, by integrating local nonprofits and faith-based groups into official response systems.
- Ensure strong nonprofits by recruiting, training and retaining the next generation of leaders for the nonprofit sector.
- Encourage public service by making a “summer of Service” a rite of passage for every young person during the transition from middle school to high school.
- Encourage the use of music as a development tool by creating a Music National Service initiative, strengthening and expanding music-based public service.
The Low-Profit Limited Liability Company, or L3C, might be a useful tool for charities and others that are looking at socially useful goals in particular those that require capital, said Marcus Owens, a former director of the Exempt Organizations Division of the Internal Revenue Service and now an attorney with Caplin & Drysdale in Washington, D.C.
L3Cs cannot have profit as their primary objective, instead they must have a specific charitable purpose, Owens said, but they are not allowed to lobby or be involved in politicking. The originating document must set forth a charitable primary purpose, he said, while the secondary purpose may be to generate revenue.
The Vermont legislature enacted the L3C corporation model in April and it’s under consideration in other states, including California, Georgia, Michigan and Montana. It nearly was adopted last year in North Carolina, having passed one house but not the other, Owens said, because it was part of omnibus legislation with changes to the insurance code. An LC3 can start in Vermont, but operate in all 50 states.
There’s been some resistance, he added, from trusts formed for education purposes because of a belief that it would try to get them to spend money on other things. There also was confusion in North Carolina about whether LC3s were competition for nonprofits. It’s not a substitute for charity by any means, but an incentive for economic activity, Owens said, “it’s an investment in a business.” There’s no tax deduction because it’s not a tax-exempt organization, he added. Program-related investments are allowed.
Washington, D.C.-based Independent Sector, a coalition of 600 charities, foundations and corporate giving programs, came out in support of a Small Business Administration-type agency for nonprofits.
Business has a variety of government agencies to make sure business working correctly, but there’s nothing like that for nonprofits, said Owens, adding that there’s no one who can come before entities like the Senate Finance Committee to speak with any authority about the nonprofit sector. Either the sector will do it or there won’t be anyone else, Owens said, and if the sector does, it will look self-congratulatory.
Ann Beltran, public policy analyst for the NCNA, said people aren’t looking for an agency to be created immediately, but more likely looking five to 10 years into the future. A likely federal administrator could be the Corporation for National and Community Service (CNCS).
This article is from NPT Weekly, a publication of The NonProfit Times.
Subscribe to The NPT Weekly eNewsletter or any of our other enewsletters and get the latest news and ideas related to fundraising delivered to your inbox