Written by Jennifer Fitzgerald
Ed. note: Go HERE to read profiles of 10 heads of regional WNC nonprofits.
“If business is the backbone of a community, nonprofits are the heart.”
If you stop a person on the street and ask them what their favorite nonprofit is, chances are they will have a quick answer of a local organization they support financially or with volunteer time. In Western North Carolina, there are a multitude of nonprofits that focus on everything from assisting the homeless to supporting the arts/crafts community to preserving the environment.
Traditionally, we think of a nonprofit as a group working together to bring about change and make a positive impact in a community. Associates at Johnson Price Sprinkle PA (JPS) explain that the nonprofit sector is a strong economic driver in Western North Carolina, covering a broad spectrum of public needs including education, healthcare, social services, environmental issues, the arts, and economic development. While it is easy to create a nonprofit organization as a legal entity, the legal formation is not the end of the process. Unless exempted under IRS rules (churches and governmental units, for instance), an entity is not exempt from income tax until specifically recognized as such by the IRS.
he public is most familiar with the term “501(c)(3)” in reference to nonprofit organizations. This designation carries the benefit of being able to receive contributions that are tax deductible to the donor. Other organizations (social welfare clubs, for example) may operate with an exempt purpose, and be exempt from income tax, but cannot receive tax deductible contributions.
In the 18-county market of Western North Carolina, there are well over 4,500 nonprofit organizations, with 12% classified as churches, according to the IRS Exempt Organizations Business Master File Extract. (See link at end of this report.) Buncombe County is home to 1,737 nonprofits, followed by Henderson County with 480, Rutherford County with 295, Watauga County with 289, Haywood County with 268, and Macon County with 241.
The nonprofit sector pays more than $15 billion in wages to North Carolinians according to the North Carolina Center for Nonprofits. This economic impact has nearly doubled in a decade. In Buncombe County, for example, nonprofits employ 16,196 individuals, or 13.83% of total employment. Average annual wages for these nonprofit employees is $35,274. (See link at end for the complete List of Nonprofits by Economic Development Region and County.)
“We are fortunate in Western North Carolina to have many not-for-profit organizations that provide valuable services and opportunities to members of our community,” says Ben Hamrick, JPS chief executive officer. “We’re very pleased and excited to work with a number of them over the years in different capacities.”
Nonprofits play an important role in the community—enriching the lives of both those served by, and those serving for, the organization. The North Carolina Center for Nonprofits notes that nonprofits are important for the state’s quality of life and for attracting businesses and keeping them here. The Center lists these characteristics of nonprofits: deliver needed services; educate the public on vital issues; find solutions; nurture our culture; engage people in the community; provide a voice for the voiceless; improve government policies; and provide faith-based activities.
“Embracing Uncertainty” was the theme for the North Carolina Center for Nonprofits’ 2017 Conference for North Carolina’s Nonprofit Sector, held September 13-15 in Concord, based on the challenges that the nonprofit sector faces.
“From the mountains to the coast, nonprofits will face an uncertain future as they feel the impact of proposed federal program cuts compounded by emerging proposed tax cuts,” says Jeanne Canina Tedrow, president and CEO of the North Carolina Center for Nonprofits. “These, taken together, have the potential to adversely impact charitable giving in significant ways. Nonprofits will be more challenged to do so much more for so many with so much less.”
The Center’s weekly policy update follows the following key issues: the threat of the repeal or weakening of the Johnson Amendment, which could harm the public’s trust in nonprofits and divert financial resources away from charitable nonprofits to help politicians; implications of tax reform on charitable giving; threats to nonprofit tax exemption (primarily at the state and local level); and cuts in government spending (at all levels) on public services, which effectively offloads government programs onto charitable nonprofits.
“Balancing resources is a skill that all nonprofit directors need to build, especially given the challenge of making ends meet to achieve our mission,” says Tedrow. “To strengthen our reach, we are being called increasingly to collaborate for greater impact. With philanthropic dollars increasingly focused on outcome measures, the sector will need to leverage resources to build its capacity with technology and shared back office support. So, fundraising for our causes will require new thinking about ways to connect with our supporters, our philanthropic community, and our private sector generally.”
What’s an MBA got to do with it?
As a nod to the significance of nonprofits, Lenoir-Rhyne University launched this fall an MBA in Social Entrepreneurship program, as well as an MBA in Non-Profit Management program. According to the National Center for Charitable Statistics (NCCS), there are more than 1.5 million nonprofit organizations registered in the United States. Lenoir-Rhyne recognizes that this sector is attractive to students who identify with nonprofit societal missions.
According to Dr. Lisa Fournier, assistant professor, business and entrepreneurship, coordinator, BSBA, at the university’s Asheville campus, there are similar programs offered at other universities and some have an MBA associated with them while others do not. However, schools which offer an MBA are larger, such as Harvard, University of California-Berkeley, and Duke.
“Considering the program is brand new, we are very excited to have 10 outstanding students in the program,” says Fournier.
Lenoir-Rhyne conducted research with dozens of community leaders, as well as nonprofit executive directors and people in the industry, to determine there was a need in the region. Round-table focus groups showed that issues central to nonprofit management and operations included: new revenue streams; accounting and finance; work life balance and sustainability in the profession; managing human resources; and how to better position for needed resources such as donors or volunteers. (See the November 2016 issue of Capital at Play for our report of the different types of revenue streams that nonprofits in Western North Carolina utilize.)
Resilient to Changes
The Collider, a nonprofit located in Asheville, is a nonpartisan, non-advocacy innovation center focused on catalyzing solutions for the problems of climate change. It offers cowork, business, and event space in addition to providing memberships, education, internships, sponsorships, and public opportunities to “collide.” It produces and hosts professional and public events on climate science and solutions, and is working to grow the climate solutions industry.
In addition to professional workshops and events, The Collider offers public opportunities to engage in climate, science and environmental education, and discussion. Among those are films, science lectures, and a new science book club. In March 2018 The Collider will be spearheading a new conference on the business of climate, ClimateCon, aiming to address the opportunities for innovative solutions for climate change.
In her role as executive director of The Collider, Megan Robinson notes that nonprofits will continue to be fundamental to our communities, but need to be resilient to changes in funding streams and political direction and need to be adaptive to the needs of their constituents.
She believes we will see an increase in nonprofits that incorporate social enterprise models into their funding models. Social enterprises are nonprofits that operate businesses to expand their revenue streams.
“If business is the backbone of a community, nonprofits are the heart,” says Robinson. “Nonprofits elevate social causes that make a difference in the lives of people, the state of environment, and the future of our world. Nonprofits help connect, nurture, and propel forward initiatives and programs that are often underfunded, but tremendously valued.
“A quote by Jane Goodall sums it up the best: ‘We have the choice to use the gift of life to make the world a better place – or not bother.’ I choose to do this through working in the nonprofit sector.”
BY THE BOOKS
The following are organizations qualifying as public charities
if the IRS structure and operational guidelines are met:
(public schools are governmental units)
Organizations conducting active medical research in conjunction with hospitals
Organizations receiving and managing property for, and expending funds to benefit, a public (not private) colleges or universities
Organizations that are publicly supported by:
Proving that a substantial part of its contribution revenue comes from a governmental unit or the general public.
Operating as a community trust
Proving that no more than 1/3 of its support comes from investment income and unrelated business income, while more than 1/3 comes from contributions and program service revenue from exempt function activities.
Organizations organized and operated exclusively to test for public safety
Supporting organizations, organized and operated exclusively to support another public charity, further distinguished by qualifying as one of the following types:
The supporting organization is operated and controlled by the organization it supports.
The supporting organization is supervised or controlled in connection with the supported organization through common governance.
Type III, functionally integrated
A supporting organization that is operated in connection with and functionally integrated with its supporting organization.
Type IV, not functionally integrated
A supporting organization that is operated in connection with its supported organization, but not functionally integrated, so generally must satisfy a distribution requirement and other structural requirements.
The private foundation arena includes the following sub-categories:
The most typical private foundation structure is a non-operating private foundation. This entity generally holds assets for the purpose of generating investment income and is subject to a 2% excise tax on net investment income. These organizations promote a variety of exempt purposes by making grants to other organizations, whether funded by a local philanthropist or the rich and famous. Each year, the organization is required to calculate a minimum distribution amount that must be granted in the following year. A generous granting policy can effectively reduce the excise tax rate to 1%.
A private operating foundation is an organization that carries on its own program as opposed to giving funds to others. The program must serve an exempt purpose, but is not required to be funded with public funds. An operating foundation may qualify as exempt from the excise tax on net investment income if certain criteria are met.
North Carolina Center for Nonprofits: ncnonprofits.org
IRS Exempt Organizations Business Master File Extract:
North Carolina Center for Nonprofits List of Nonprofits by Economic Development Region and County: ncnonprofits.org/sites/default/files/public_resources/NCNonprofitRegionalData.pdf
National Center for Charitable Statistics: nccs.urban.org
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