When Nonprofits Can Be Like Politicians

When Nonprofits Can Be Like Politicians
September 30, 2015 Ron Wormser

“Whatever do you mean by that?”

You wouldn’t think that nonprofits and politicians would have, or would want to have anything in common. While both may be devoted to serving their respective constituencies, typically that’s the only thing they have – or want to have – in common.

But that’s not always the case anymore.

Owing to changes in their respective worlds, there is another circumstance they increasingly have in common: the ever-increasing dependence on contributions and particularly on big ones.

“That alone doesn’t have to be a bad thing. What’s wrong with seeking and accepting donations from those who are willing to support what you do?”

Usually nothing. Contributions of any size are essential to both nonprofits and politicians: contributions enable them to do what they do.

In fact, the need to seek and accept contributions by nonprofits is even enshrined in laws and public policy and has been for a very, very long time.

“What do you mean?”

When the IRS determines that a nonprofit is tax-exempt based on its mission and the work it does, its consequences are felt at all levels of government and by all taxpayers. That determination not only exempts nonprofits from paying taxes otherwise due to various levels of government, it also stimulates donations by making them eligible for reducing taxable income. Both consequences impact taxpayers in two ways:

  1. Since nonprofits do not pay for various public services such as fire and police protection and all other municipal, state and Federal services funded by tax revenues, which means that the costs of those services nonprofits use are paid for by those who do pay income, property and sales taxes. That means that every taxpayer is subsidizing nonprofits.
  2. In granting tax exempt status to a nonprofit based on its charitable mission and work, the expectation and obligation are that the nonprofit will not charge the full cost to those it serves and will seek contributions to make up the difference.

To put it differently, there wouldn’t be anything charitable about a nonprofit requiring payment in-full for services rendered.

“So if we are expected and obligated to accept contributions, what’s the problem?”

The problem – for nonprofits as well as for politicians – is that money, and particularly big money, buys access; and with access comes influence. And with influence comes expectations.

I am not saying that all donors and especially big donors have less than benevolent expectations or even seek influence. Thankfully there always have been and always will be true philanthropists: those who give money to support a person or nonprofit to help make it possible to carry out their good work.

The problem arises when the gift comes with unwelcomed and unwanted strings attached, i.e. when the accepting the gift would require a nonprofit to do something that it would not otherwise choose to do.

The reality is that nonprofits are increasing being exposed to a different version of the Golden Rule from the traditional one we all grew up learning. The new version, equally applicable to nonprofits as to politicians is, “He who has the gold rules.”

Therein lies the new circumstance shared by nonprofits and politicians: Being increasingly tempted by big gifts with unwelcomed strings or expectations attached, and having to choose between financial realities and basic principles.

To understand the options available to a nonprofit to prevent or mitigate gifts with unwelcomed strings, please see the commentary ‘Beware of Trojan Horse Donors’ in the Fundraising section under Commentaries.

This commentary is copyrighted © 2015 by Ron Wormser.

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