The Shape of Things to Come – No More Nonprofits
As the current Administration continues channeling Silicon Valley – “Go fast and break things” – there is a great deal of upset in certain segments of our country. However, the segment that is always utmost on my mind is the nonprofit community and the nonprofit management profession.
The federal government is big, and so is our national debt. Our current US debt is $36.22 TRILLION – this data is from the US Treasury Department. You can find more information on their website: https://fiscaldata.treasury.gov/americas-finance-guide/
To give you an idea of how much that actually is, it is roughly the value of the economies of China, Japan, Germany, India, and the United Kingdom COMBINED. Our national debt is equal to the economies of FIVE COUNTRIES.
This debt hangs over the head of everyone who lives and works in the United States. Changes need to happen in order to prevent the debt load from destroying our economy. It’s one of the reasons the Trump Administration is slashing spending and laying people off. They see the impending economic catastrophe and are trying to “head it off at the pass” as the saying goes.
Because of the Administration’s sense of urgency, many of us in the nonprofit community and the nonprofit management profession are worried and/or scared that 501c organizations could become subject to the 21% corporate tax rate so the federal government can create a new revenue stream.
That is actually something that could happen, and in some cases maybe it should. There is too much abuse of the nonprofit status across our society as large entities determined to get even larger hide behind a “nonprofit” status. As I shared last week, Kaiser Permanente would be in the Fortune 40 if it were not a “nonprofit.” Does that sound like an organization that should be included in the 501c category?
I am an advocate on behalf of the nonprofit management profession because the organizations we serve make the world a better place. But we don’t oversee nonprofit organizations or our own profession. We do not educate the public about why nonprofits are important. And it is NOT the business case that sets nonprofits apart: it is our higher calling to contribute to a better society and thus a better world that sets us apart.
Making “the business case” for nonprofit existence is actually slitting our own throats. We are making the argument FOR taxing us and FOR taking away our unique status. We need to make the case for WHY we are different and unique and important.
If we are not going to hold ourselves accountable with industry or professional standards, someone else will do it for us. We need to take action to manage our own community, our own profession, and to hold accountable those who abuse the status. Currently, there is no system in place to do this. The IRS sets the regulations and collects the 990 forms – they are not responsible for oversight.
Some things I imagine could happen to nonprofits if we don’t take action to hold ourselves accountable are the following:
The nonprofit status is eliminated; or
UBIT is made stronger and fewer exceptions will be allowed (like royalties or interest from investments); or
There will be taxes on all nonprofit income; or
Donations to 501c3 organizations would still be deductible but the 501c3 organizations will pay taxes on it; or
An income threshold will be added for 501c organizations – if the organization takes in X amount of dollars, the 501c will pay 21% on any income over that amount; and
This will lead to fewer services for those who need them, like the hungry, the homeless, the abused, and those who need health care; and
Professional and industry associations will disappear leaving a gap in advocacy, societal contributions, and thus creating a vacuum of leadership in the business community.
So long, corporate responsibility and good corporate citizens.
Like the Tax Foundation white paper and the Cato Institute white paper, these are ideas and extrapolations. Will these things happen? I have no way of knowing. Could they happen? Definitely.
We are not like for-profit businesses despite the many times people in the nonprofit management profession have demanded we “act more like for-profits.” Acting like for-profits is what led to the abuse of the status and put us in the crosshairs of those outside our community. If we are going to act like for-profit companies, then we are going to be treated like them.
And maybe we should.
