Inside Philanthropy

A blog on philanthropy and nonprofit news and issues. A publication of Philanthropy Journal.

May 9, 2011

Charitable value must be earned

By Todd Cohen

Many charities seem to operate with a split personality.

In working to serve people and places in need, nonprofits and philanthropic organizations are hard-working, resourceful heroes in our communities.

But in assuming their good work entitles them to special treatment, and whining when they do not get what they want, too many nonprofits and foundations seem spoiled and smug.

Make no mistake: The charitable marketplace is a treasure of our democracy, addressing the symptoms and causes of our most urgent social and global problems, and independently taking on the tough jobs that government and business either cannot or will not handle.

But many nonprofits and foundations, and the trade groups that represent them, apparently infected with the increasingly toxic mindset that pollutes much of our culture, also are quick to blame others for the organizational challenges they face, and to stamp their feet when they don’t get their way.

Instead of pouting and pointing fingers, nonprofits and foundations should do what they do best, which is to build strong organizations that can sustain themselves in helping the communities they serve improve themselves.

Consider the recent report by the Johns Hopkins Listening Post Project that says local governments in recent years, with little public attention, have burdened a lot of nonprofits with taxes and fees, and now are planning hikes that could damage nonprofits and local governments alike.

Nonprofits and foundations receive special tax treatment because lawmakers in the past concluded their work provides an important service to the public.

But that special treatment is a gift based on a policy decision, not a constitutional or innate right, and nonprofits and foundations must continue to earn the tax and regulatory privileges they enjoy.

Nonprofits, for example, consume local services like water, roads, and police and fire protection, yet they seem to believe their charitable mission should free them from paying their fair share of the cost to a community of those services.

But are nonprofits prepared to make the case, complete with metrics, that the value they provide to the community, based on a calculation that accounts both for their impact and their cost of doing business, justifies the taxpayer investment the community makes in them?

That can be a tough case to make, and some nonprofits act as if it is beneath them to have to make it.

What is more, some nonprofits – all along the spectrum of ideological orientation -- are quick to complain about special spending or tax breaks for wealthy people, corporations, special-interest groups or vulnerable social groups.

And organized philanthropy, which collectively controls over half-a-trillion dollars in invested assets, screams bloody murder any time a lawmaker suggests private foundations should have to pay out more than the currently-required 5 percent of their assets each year in grants and overhead expenses.

But why should wealthy donors get up-front tax breaks for parking their fortunes in charitable foundations, which then get to invest that wealth and enjoy the power it gives them, while hoarding most of the funds even though their tax-exemption is based on the expectation the funds will be used to address social needs?

Like any other organization, interest group or individual, nonprofits and foundations can and do make the case for tax breaks and other public policies they believe will support the common good.

Instead of just moaning about not getting what they assume they are owed, however, nonprofits should make a clear and compelling case about the value they add to their communities in return for the taxpayer investment they believe they should get.

Equally important, if not more so, nonprofits and foundations should make sure their own houses are in order and that they truly are adding to their communities the value they claim to be adding and in return for which they received their tax-exempt status in the first place.


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