What's so funny about peace, love, and public policy?
So you are thinking about starting a nonprofit?
I am totally aware that most people are not interested in policy and laws. It is often dry and boring and incredibly hard to apply. However, when I was working on my graduate school final project most of the existing nonprofits I looked into did not explore public policy implications for their organization when applying for tax-exempt status. Since policy is the primary factor that can cause an organization to lose their tax-exempt status why don’t more small nonprofits (referring to the under $25k/year crowd) take policy into consideration? Why don’t they have someone in their organization (besides the CPA or lawyer that created their documents for submission) know more about it? What about the nitty-gritty down and dirty side of policy that we should all be aware of? If we are a nonprofit or we dream of having our own nonprofit shouldn’t we know about this sort of thing?
By now, you might be guessing I have the proverbial stick up my hind-end. Yes, I am someone who feels more comfortable with clearly stated rules and expectations. Sorry- growing up in a chaotic atmosphere makes one yearn for something…clear and defined. I digress- that’s for an entirely different type of blog- probably something to do with nature versus nurture or something like that. Many people who create or work in nonprofits are totally focused on the greater good- not the legislative details that often make no sense. So, let’s stick with just some basic issues, shall we?
Public policy and nonprofits should be of utmost concern to smaller nonprofits. Despite tax-exempt status, nonprofits are impacted by federal, state, and local tax policies and tax treatment of donations (Simon, 1987).* Nonprofits are disproportionately affected by policy decisions in certain areas especially if the nonprofits help to fill in a gap which public programs try to fill (Lowery, 1995).
There are also many regulations on fund-raising activities. In California, for instance, regulations prohibit raffle activities unless a fee is paid and authorization is granted by the Attorney General in advance under California Law on Nonprofit Raffles - Penal Code section 320.5. Moreover, if nonprofits receive public funding in any way there will most likely be limitations on the types of advocacy activities that can be undertaken (Lowery, 1995).
Other regulations governed by the state Attorney General that should be given consideration include:
1. California Law On Charitable Solicitations - Business and Professions CodeSections 17510 - 17510.95.
2. California Law on the Supervision of Trustees and Fundraisers for Charitable Purposes - Government Code Sections 12580-12599.7.
3. California Regulations on the Supervision of Trustees and Fundraisers for Charitable Purposes - Title 11, Division 1, Chapter 4, Sections 300-312.1.
4. California Regulations on Nonprofit Corporations Relating to Transactions Requiring Notice to or Attorney General Approval - Title 11, Chapter 15, Sections 999.1-999.5)
5. California Regulations on Administrative Review of Refusal, Suspension, and Revocation of Registrations With the Registry of Charitable Trusts - Title 11, Division 1, Chapter 15, Sections 999.6-999.8.
For small nonprofits operating in California, another relevant policy is The Brown Act of 2003. Although designed specifically for legislative bodies, the policy does affect nonprofits should a legislative body delegate some role or duty to a nonprofit. This would require the nonprofit to conduct meetings and operations with a high level of transparency and public involvement that the organization may do well to implement even if they have no interaction with legislators on an ongoing basis.
Under Federal Policy, The Pension Protection Act of 2006 now requires small organizations with revenue of less than $25,000 per year to file a Form 990-N. It has been suggested that this new filing requirement will bring more attention from the public and government and may shape their future role in the nonprofit sector (Roeger, 2010) As these groups are also often too small to have paid staff they must rely on volunteer staff. Therefore, another relevant policy affecting small nonprofits is the Federal Volunteer Protection Act of 1997, which requires nonprofits to treat volunteers like paid staff in order to limit the liability of the nonprofit organization, meaning that they are screened, trained, and have volunteer position descriptions.
Currently, the government is considering a removal of tax deductions for charitable giving for individuals who donate less then a certain percentage of their income or have a household income over a certain amount. For the small nonprofit this could have important implications that need to be understood should these changes occur.
The deductions made it through the last round of “debt-ceiling” wars but I do not think we are in the clear yet; there is still an election next year you know. I predict, with the ever increasing use of social media and nonprofits that someone will be creating policy issues very soon to regulate and monitor that as well. Once the wheels start turning, you can expect someone will try to create a policy about it. Is that bad? Over-reaching? Micro-managing the nonprofit sector? Maybe- but does that mean it won’t happen? My guess is no.
I would love to hear about your public policy experience or how you integrate it in your nonprofit organization. Please share!
*Cited references available upon request. Of course, I will be happy to provide them to you because you will remind me of myself and I will feel comfortable with that.