2022-2023 Tax Planning Guide
VIEWpoint Issue 1 | 2022
Brief Insights | Meeting Provider Relief Fund Reporting Requireme...
What Do the 2023 Cost-of-Living Adjustment Numbers Mean For You...
Manageable Growth Should Be a Strategic Planning Focus
Is Your Current Bad Debt Allowance Reasonable?
If your non-profit organization constricted spending in recent years, you may have a hard time resuming prerecession programming, let alone expanding your reach. With a strengthening economy, it may be time to actively seek new sources of funds so that you can invest in the people, facilities and other resources that organizations require to thrive and grow. Non-profit accounting firm Doeren Mayhew explains how you can tap into new funding sources for growth.
You may wonder whether you’re ready to shift gears from subsistence to expansion mode. As a group, smaller non-profits, which usually don’t have endowments or substantial savings cushions, have struggled more than their large counterparts over the past few years. And your organization may grapple with unique challenges preventing it from growing just now.
If you plan to rejuvenate programming by tapping existing income sources exclusively, think again. Although donors remained relatively supportive of their favorite charities during the recession and some higher-income donors may be motivated to give more now that their tax rates have increased, donor fatigue is a real risk, and you need to tread lightly with fresh funding appeals. And if you’ve traditionally relied on government grants, getting new ones in this era of big budget deficits is about as easy as squeezing blood from a stone. Instead, start looking for creative new sources of operating capital in your non-profit budgeting process. Consider grantmakers you might have overlooked in the past, such as large family and community foundations. These groups generally have knowledgeable staff and are capable of making big awards. Smaller family foundations usually make less-sizable grants, but if they have a particular interest in your nonprofit’s mission, you may find it easier to qualify for them. And don’t forget federated funds such as the United Way, which supports social-service providers, and United Arts, which lends to arts organizations.
Your nonprofit might also consider a moneymaking venture such as running an onsite café or selling charity-related goods on your website. Even if such activities aren’t directly related to your mission, they don’t have to threaten your exempt status. Just make sure you:
If you have a bigger income-producing project in mind, consider creating a for-profit subsidiary. You’ll need to discuss with your legal counsel and financial professionals at your non-profit accounting firm, but the setup process can take time. Also, many organizations that go this route have trouble keeping the two entities completely separate, so this might be a challenge for your nonprofit, too. But the rewards – including the ability to raise unrestricted funds from angel investors and venture capital funds – can make the effort worthwhile.
Other forms of non-profit/for-profit hybrids are emerging. For example, certified benefit (“B”) corporations are companies structured to benefit both shareholders and charitable causes. As of February 2013, there were more than 600 in nearly 25 countries, and seven U.S. states had passed B corporation legislation. Although B corporations must pay corporate income tax, one city — Philadelphia — offers them a tax credit. Other cities seem likely to follow in the next few years.
These are only a few ideas for boosting your nonprofit’s income. For others that take into account your financial requirements and organizational strengths, contact Doeren Mayhew’s dedicated Governmental and Non-Profit Group, with CPAs in Michigan, Houston and Ft. Lauderdale.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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