Back in May, Stephanie Strom at the New York Times wrote an article about increasing challenges to the tax-exempt status of nonprofits. I think there’s plenty of rational positions to take on issues like whether universities should be required to pay out a certain percentage of their endowment, whether nonprofit hospitals deserve full tax exempt status and if nonprofits who serve wealthy clientèle (such as the opera) should be given a tax exemption. But there was another theme to the article that I want to explore.
Strom writes about how last year the Minnesota Supreme Court denied a property tax exemption to a nonprofit day care agency because (in Strom’s words) “it gave nothing away.” Audrey Alvarado, executive director of the National Council of Nonprofit Associations agreed with Strom’s interpretation of the court decision saying that the court, “is saying, ‘wait a minute, charities are supposed to give things away for free.'”
I think this is such a disturbing concept. Recently I’ve been writing about how philanthropy is not defined by making the gift of money, it is the impact that the gift achieves. The idea that “free” equals maximum impact is asinine. Nonprofits are not supposed to “give things away”, they are suppose to provide public goods and services (goods and services that benefit society as a whole). The government also has the role of providing public goods and services. But imagine the outrage if the government made it policy to only give things away for free. No more toll bridges, museums all free, welfare checks and college tuition aid given without any expectations of the recipient.
Doing good is not the same as giving something away for free. Let’s set aside the intellectual argument for a minute and just look at how nonprofits actually work. According to the Urban Institute, in 2005 nonprofits collected $1.6 TRILLION in revenue.
The Minnesota Supreme court ruling is so damaging because it reinforces the idea that running a nonprofit is easy (jeez, you’re just giving stuff away, how hard can that be?) and it validates the idea that nonprofits should keep operating expenses very low (if you’re just giving things away, why would you need a complex infrastructure and highly talented employees?).
Giving something away is easy. Doing good social sector work is hard because it has nothing to do with giving things away for free.