What are nonprofits for?
What are nonprofits for?
This seems like a question that used to have an easy answer - they are tax-exempt organizations that provide services, from education to art to meals; they offer a place for ideological, ethnic or other minority groups to express their ideas and serve their communities; they offer complements or alternatives to services provided by the government; and they advocate for change.
While it never really was all that clear cut I think there was a general sense among Americans at least that, within the U.S., you knew a nonprofit when you saw one.
Well, if it was clear once, it's not clear now. And there are challenges to the notion of "nonprofits do X" coming from many directions. Here are a few headlines that show this:
"For-profit health clubs challenge nonprofit YMCA's tax exempt status "
The Nonprofit Quarterly, July 15, 2014
"IRS says free software projects can't be nonprofits "
Boing Boing, July 2, 2014
In both cases above the challenge comes because of who the organizations serve - in the YMCA case the membership is very similar to those folks who join commercial gyms, so why does one get tax privileges over the other. The argument raised in the case against free software is that such a resource might be used by commercial enterprises - so where's the public benefit?
The nature of these challenges focuses on who might be benefitting from the services, not whether the services themselves are a public benefit. This is ironic from a nonprofit standpoint. For decades nonprofit managers and funders have been trying to build sustainable revenue sources for nonprofit organizations so they can survive. So much so, the Red Cross recently argued that its spending practices are trade secrets! BUT, at least in the logic of the two headlines above, if the organizations might serve those who can pay (one source of sustaining revenue) then they may not be nonprofit.
As if the market-based challenges to nonprofits weren't confusing enough, in the U.S.A. there's the growing challenge of political action within the nonprofit frame. I'm in the middle of reading Ken Vogel's Big Money about campaign finance post-Citizens United. He has evidence aplenty of the deliberate weaving of 501c4s (nonprofits which provide donor anonymity) into the mix of enterprise networks being built to raise independent cash for campaign politics. And then, along comes this study, showing us what we all suspected, the IRS can't (and possibly shouldn't be) regulate these organizations - "Hobbled IRS can't stem dark money flow," Center for Public Integrity, July 15, 2014.
Of course, given recent rulings on corporate rights as religious enterprises (pdf), the movement to build socially responsible businesses, and the shenanigans of big companies "inverting" to save taxes, it's no longer really clear what a company is either.
In a story on the compensation of a nonprofit hospital director, Senator Charles Grassley is quoted in today's New York Times as saying, "major nonprofit hospitals often are indistinguishable from for-profit hospitals in their operations.”
Clearly there's lots of change afoot in the corporate code and practices - from the commercial space, political realm, and within the independent sector. If it's getting so hard to distinguish these enterprises, shouldn't we be asking "What about the distinction matters?" That way we can focus our attention (and regulation, oversight and incentives) on the real reasons we have separate sectors of commerce, government and civil society - not the special interests that have grown up around and within each of them.