Nonprofit Organizations

Business: The Benefits and Challenges of Nonprofit Organizations
This discussion is intended to help you grapple with the benefits and challenges of the structure of your proposal for a new program in a nonprofit organization. Based upon your community problem, identify a type of nonprofit organization that would be an appropriate host for your program. Provide a rationale for your choice. Then, complete your initial post with at least two benefits and one challenge for adopting a nonprofit organization model for your program.

•    For-Profit Business Opportunities
You have identified a specific community problem through your community needs assessment. In this discussion, present at least two specific ways in which for-profit businesses could help address this community problem. Provide a rationale that links the for-profit business, its program (of a service and/or product), and the community problem.

Response Guidelines
Respond to two fellow learners with posts that are supported with reputable sources; local websites and newspapers would be appropriate for this discussion. Your writing must comply with APA style and format, and be consistent with expectations for the human services profession.
In each peer response, recommend an alternative type of nonprofit organization that could be an appropriate host for this new program. Provide a rationale for your choice. In addition, compare and contrast your peer’s choice of organization to yours, focusing on whether this type of nonprofit would have the same or different benefits and challenges.



Strategic Planning for Non-Profit Organizations
What Constitutes a Non-Profit Organization?
What constitutes a nonprofit organization in today’s world and what are the reasons to form a non-profit organization are questions that I often get asked.
Our nation has a long and rich tradition of people coming together and forming organizations to solve problems and enrich their communities. The concept of non-profit organizations and associations is an important part of our history and culture. In our current time, there has literally been an explosion of nonprofit organizations.
But, just what is a “non-profit,” anyway?
Trying to describe a “non-profit” is a bit like playing the game “twenty questions. If you don’t remember how that game worked — you try to guess the answer to a question by the process of elimination. Non-profits are defined in federal and state law, by what they do NOT, or cannot do.
To make matters more confusing, the term “non-profit” does not have a statutory meaning on the federal level. On the state level, it is used to describe corporations that are organized to advance a public or community interest rather than for individual personal or financial gain. Thus, non-profits may NOT distribute earnings or pay dividends; any surplus must be used to further the corporation’s organizational purpose. However, all non-profits are permitted to hire paid staff to conduct their organization’s activities.
Many — but not all — non-profit corporations, depending upon their purposes, can qualify for exemption from federal corporate income taxes. The U.S. Internal Revenue Code contains more than 25 different classifications of tax-exempt groups, including professional associations, charitable organizations, civic leagues, labor unions, fraternal organizations, and social clubs, to name just a few. Depending on the category of the exemption, such groups are entitled to certain privileges and subject to certain reporting and disclosure requirements and limitations on their activities. In certain instances, contributions to non-profit organizations are deductible from federal income taxes.
Charitable Organization, or Charity
This is the category people think of most often when they are referring to a non-profit. It refers generally to organizations that are exempt from taxation under Section 501(c)(3) of the Internal Revenue Code. The United States has more than one million charitable organizations-twice as many as in 2000. Charitable organizations employ 10.2 million people, which is 7% of our workforce. (Giving, p 9)
Although the word “charity” is often used as a “catch-all” for simplicity’s sake, Section 501(c)(3) describes groups organized and operated for one or more of the following purposes: charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, or the prevention of cruelty to children or animals. Day care centers, food banks, low-income housing organizations, mental health organizations, United Ways, museums, theatre groups, colleges, and environmental groups are just some examples of the many types of charities.
In general, 501(c)(3) organizations are divided into two categories, “public charities” or “private foundations.” Public charities are 501(c)(3) organizations that can demonstrate that a certain part of their support (usually 1/3 on average) comes from the general public or a unit of government; or organizations formed to raise money for a specific school, hospital, governmental unit or publicly supported charity. However, charities are permitted to charge fees for their services; in fact, most charities rely on fees for a substantial part of their revenues. Contributions to public charities are usually tax-deductible, a significant privilege not granted to most other types of organizations. Public charities are prohibited from engaging in any activities to support or oppose political candidates, but are permitted to influence legislation within legal limits.
Private foundations are organizations that distribute money to fulfill a public purpose. Foundations are subject to different laws and regulations than public charities. Foundations must distribute a certain portion of their income for charitable purposes; are subject to strict rules and penalties to prevent personal gain on the part of trustees, substantial contributors and other disqualified persons; must pay an excise tax on investment income. Under most circumstances, contributions to private foundations are tax-deductible. Private foundations are prohibited from engaging in lobbying activities, but may contribute to charities that lobby as long as the funds are not earmarked for lobbying purposes.
Civic Leagues and Social Welfare Organizations
This category, described in Section 501(c)(4) of the Internal Revenue Code, refers to organizations that are created to further the common good and general welfare of the people of the community. Examples can include civic groups, downtown improvement associations, and social action organizations. Because the purposes of 501(c)(3) and 501(c)(4) organizations can be very similar, some organizations could potentially qualify for either classification. There are pros and cons to each structure. For example, contributions to 501(c)(4) groups are usually not tax-deductible, but lobbying activities of 501(c)(4) organizations are not limited by law, and partisan political activities are subject to different restrictions.
Trade and Professional Associations
Business leagues, trade associations and the like are described in Section 501(c)(6) of the Internal Revenue Code. Chambers of commerce, retail merchants associations and real estate boards are examples of 501(c)(6) organizations. Contributions to trade associations are not tax-deductible as such, but may be deductible as business expenses within certain limits (membership dues used for lobbying purposes, for example, are not tax-deductible). Trade associations are not subject to legal limitations on lobbying and political activity beyond normally applicable election laws.
Social and Recreational Clubs
Social and recreational clubs are the last category of non-profits. They are described in Section 501(c)(7) of the Internal Revenue Code, include hobby clubs, country clubs, garden and variety clubs, amateur hunting, fishing or other sport clubs and similar groups organized primarily for recreation or pleasure and not for profit. Social clubs may not discriminate against any person on the basis of race or color.
In short, non-profit corporations are for people, to help them achieve some common purpose. Non-profit and charitable organizations play a vital role in the economic and social well-being of our communities, state and nation. They provide a means for people to contribute time, resources and expertise for a greater good.

Code of ethics for nonprofits – Why your nonprofit may want to adopt a statement of values
Does your nonprofit need a code of ethics or statement of values?
It’s useful to adopt a set of principles to guide a nonprofit organization’s decision making and activities, as well as the behavior of its employees, volunteers, and board members. These principles could be called a “code of ethics” but they might be called the nonprofit’s “statement of values” or “code of conduct,” or something else. The purpose of adopting such a statement formally is to provide employees, volunteers, and board members with guidelines for making ethical choices and to ensure that there is accountability for those choices. When board members of a charitable nonprofit adopt a code of ethics, they are expressing their commitment to ethical behavior. Such a commitment goes a long way to earning the public’s trust. Honesty, integrity, transparency, confidentiality, and equity are each examples of values that are typically expressed in a charitable nonprofit’s code of ethics – but there may be other values that are very important to your nonprofit – and you may wish to spell those out so that the donating public, prospective employees, volunteers, and anyone who may be considering partnering with your organization, is aware of its values.
The Council of Nonprofits encourages all nonprofits to craft an appropriate “statement of values” or “code of ethics” for your nonprofit. For some charitable nonprofits it may be appropriate that their codes incorporate standards already adopted by certain professional groups. (An example might be a charitable nonprofit that employs licensed clinical social workers may incorporate the Code of Ethics of the National Association of Social Workers [1] into its own ethical code.) Other nonprofits may create their own statement that reflects that particular charitable nonprofit’s unique mission, activities, and interaction with clients, volunteers, and the public. Whatever the nomenclature, crafting (and revisiting periodically) a written document that articulates the core beliefs of the charitable nonprofit can be useful for practical as well as ethical reasons.
Practice Pointers
•    Having a code of ethics or statement of values helps attract talented employees, recruit board members, retain donors, and of course ensure that all transactions are aligned with the values of the organization.
•    Many organizations post their statement of values/code on their websites to be fully transparent and to demonstrate their organization’s commitment to accountability.
•    Nonprofits often engage with clients and consumers in ways that touch on confidential matters so adopting a confidentiality policy [2] demonstrates the nonprofit’s commitment to protect the confidentiality and maintain the trust of those it serves.
•    Here are lots of ideas for ways your nonprofit can demonstrate ethical leadership. [3]
Sample statements
•    Statement of Core Values [4] (North Carolina Center for Nonprofits)
•    Code of Ethics [5] (Charles Stewart Mott Foundation)
•    Equity Statement [6] (Nonprofit Association of Oregon)
What is a “Nonprofit”?
Charitable nonprofits embody the best of America. They provide a way for people to work together for the common good, transforming shared beliefs and hopes into action. They give shape to our boldest dreams, highest ideals, and noblest causes. America’s 1.3 million charitable nonprofits feed, heal, shelter, educate, inspire, enlighten, and nurture people of every age, gender, race, and socioeconomic status, from coast to coast, border to border, and beyond. They foster civic engagement and leadership, drive economic growth, and strengthen the fabric of our communities. Every single day.
The word “nonprofits”
The term “nonprofit” means different things to many different people. It’s a commonly used word without a common understanding between writer and reader. People often use the words “nonprofit” and “tax exempt” interchangeably. Congress has created almost three dozen types of tax-exempt organizations in different sections of the tax code. These include Section 501(c)(4) (social welfare organizations, homeowners associations, and volunteer fire companies), Section 501(c)(5) (includes labor unions), Section 501(c)(6) (includes chambers of commerce), and Section 501(k) (child care organizations). Each section identifies certain conditions that must be met to be exempt from paying federal income taxes. The one common condition is not paying out profits (“no part of the organization’s net earnings can inure to the benefit of any private shareholder or individual”); hence the term, “nonprofit.” Section 501(c)(3) of the tax code refers to “public charities” (also known as charitable nonprofits) and “private foundations.” The tax code considers “churches and religious organizations” (which the IRS defines to include mosques, synagogues, temples, and other houses of worship) to be “public charities.”
The figures below illustrate how the numbers of nonprofits that operate in different states covers quite a range. (Source: IRS)


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