Posted on December 30, 2010
NTEN Receives $1.1 Million From Google to Boost Nonprofit Technology Adoption
The Nonprofit Technology Network in Portland, Oregon, has announced a two-year, $1.1 million grant from the Google Inc. Charitable Giving Fund of Tides Foundation to promote the benefits of technology to nonprofit leaders.
The grant will support NTEN's efforts to educate technology leaders about the evolving role of technology in nonprofit work and to produce research and training on cloud technologies — Web-based applications that manage constituent conversations and information — visualization, and collaboration. The funds will also be used to develop and distribute NTEN:Change, a free quarterly journal for nonprofit leaders.
"This is not just an investment in NTEN, it's an investment in our entire sector," said NTEN executive director Holly Ross. "With this support, we can provide new ways to help our community connect with each other and learn about the most important technology strategies, tools, and trends. What's more exciting is that we can now reach beyond our core audiences and help a broader part of the sector transform technology into social change."
“NTEN Receives $1.1Million Grant From Google to Aid Nonprofit Technology Adoption.” NTEN Press Release 12/20/10.
http://foundationcenter.org/pnd/news/story.jhtml?id=319800002
Thursday, December 30, 2010
Tuesday, December 28, 2010
Friday, December 10, 2010
The ‘L3C’: The new double-hybrid entity
The ‘L3C’: The new double-hybrid entity
Deborah B. Andrews |
On August 3, 2010, North Carolina created a new type of entity when it adopted legislation recognizing the low-profit limited liability company, also known as the "L3C".
The L3C is a hybrid form of a limited liability company that blends the attributes of a for-profit entity with those of a nonprofit entity.
As a for-profit entity, an L3C can have owners who receive profit distributions from the entity. However, like a nonprofit, the L3C's primary purpose must be to promote a charitable purpose.
The intent is to harness the use of profit-seeking capital for socially-beneficial goals - a hopefully win-win scenario.
Overview of limited liability companies
The LLC itself is a hybrid entity that combines the limited-liability aspects of a corporation with the flow-through tax aspects of a partnership.
Like a corporation, an LLC offers limited liability to its owners. Only its members' investment in the LLC is at risk; their personal assets are protected from the reach of the LLC's creditors.
However, an LLC is not subject to tax like a corporation. Like a partnership, income or loss of an LLC flows to its members and is reflected on the members' tax returns.
Unlike the traditional LLC, the L3C must be formed to accomplish a charitable purpose in addition to a business purpose. Although the L3C must have a charitable purpose, donations to an L3C are not deductible as a charitable contribution because the L3C is a for-profit entity.
Why use an L3C? The importance of private foundations
One of the primary reasons for creating an L3C is to attract investments from private foundations.
Under IRS rules, a private foundation must distribute a certain percentage of its assets each year for a charitable purpose or be subject to a penalty.
In addition, a private foundation may be penalized if its assets are invested in a way that jeopardizes the foundation's charitable purpose.
If an investment qualifies as a program-related investment (PRI), the investment will count toward a foundation's mandatory distribution requirement and will not be characterized as a "jeopardizing investment."
The North Carolina L3C and the PRI
To qualify as a PRI, the IRS mandates the investment meet the following three requirements:
The primary purpose of the investment must be to accomplish a charitable or educational purpose;
The production of income or capital appreciation of property cannot be a significant purpose of the investment; and,
The investment cannot be used for political or legislative purposes.
A PRI allows private foundations to make investments in the form of loans, grants and equity purchases in socially-motivated for-profit entities.
Because of the uncertainty of whether an investment will qualify as a PRI, private foundations generally seek a ruling from the IRS that the proposed investment will qualify as a PRI and not constitute a "jeopardizing investment."
However, seeking an IRS ruling is expensive and time consuming. Therefore, private foundations often refrain from investing in for-profit entities because of the potential risk.
If the investment does not qualify as a PRI, the private foundation and its directors or trustees may face significant penalties. In addition, the private foundation could lose its tax-exempt status.
It is unclear how the IRS will treat a North Carolina L3C. Although the IRS has issued favorable rulings on the ability of private foundations to invest in for-profit LLCs with a charitable purpose, the IRS has not ruled that a private foundation's investment in an L3C automatically qualifies as a PRI.
However, North Carolina's L3C legislation was written specifically to mirror the IRS requirements for a PRI in an effort to provide assurance to private foundations that their investment in a North Carolina L3C will qualify as a PRI.
In fact, to qualify as a North Carolina L3C, the three IRS requirements listed above must be included in the L3C's Articles of Organization.
Attracting investors
The perfect scenario for an L3C is for it to attract investments both from private foundations seeking out charitable endeavors while obtaining some return on capital, and from private investors who will be more motivated to seek profits.
A private foundation's investment in an L3C may be critical in attracting private investors.
A major benefit of the L3C is that it can offer layered ownership in which the investment risk and return are distributed unevenly among its members.
Normally, investors with the riskiest investment seek the highest rate of return on their investment.
However, to provide an incentive for private investors to participate, the L3C should be structured so that the private foundation would accept the highest risk while receiving a lower rate of return on its investment.
Conclusion
The L3C may become an important tool in achieving socially-beneficial objectives such as developing affordable housing for the poor and providing low-interest loans to businesses relocating to economically distressed areas.
While the benefits could be substantial, until the IRS rules that a private foundation's investment in a North Carolina L3C automatically qualifies as a PRI, some private foundations may be hesitant to invest in these new entities regardless of the fact that they will have the ability to earn a profit while furthering their charitable goals.
Ward and Smith, P.A. provides a multi-specialty approach to the representation of for-profit and nonprofit organizations and their officers, directors, employees, and investors.
http://www.philanthropyjournal.org/resources/managementleadership/%E2%80%98l3c%E2%80%99-new-double-hybrid-entity
Deborah B. Andrews |
On August 3, 2010, North Carolina created a new type of entity when it adopted legislation recognizing the low-profit limited liability company, also known as the "L3C".
The L3C is a hybrid form of a limited liability company that blends the attributes of a for-profit entity with those of a nonprofit entity.
As a for-profit entity, an L3C can have owners who receive profit distributions from the entity. However, like a nonprofit, the L3C's primary purpose must be to promote a charitable purpose.
The intent is to harness the use of profit-seeking capital for socially-beneficial goals - a hopefully win-win scenario.
Overview of limited liability companies
The LLC itself is a hybrid entity that combines the limited-liability aspects of a corporation with the flow-through tax aspects of a partnership.
Like a corporation, an LLC offers limited liability to its owners. Only its members' investment in the LLC is at risk; their personal assets are protected from the reach of the LLC's creditors.
However, an LLC is not subject to tax like a corporation. Like a partnership, income or loss of an LLC flows to its members and is reflected on the members' tax returns.
Unlike the traditional LLC, the L3C must be formed to accomplish a charitable purpose in addition to a business purpose. Although the L3C must have a charitable purpose, donations to an L3C are not deductible as a charitable contribution because the L3C is a for-profit entity.
Why use an L3C? The importance of private foundations
One of the primary reasons for creating an L3C is to attract investments from private foundations.
Under IRS rules, a private foundation must distribute a certain percentage of its assets each year for a charitable purpose or be subject to a penalty.
In addition, a private foundation may be penalized if its assets are invested in a way that jeopardizes the foundation's charitable purpose.
If an investment qualifies as a program-related investment (PRI), the investment will count toward a foundation's mandatory distribution requirement and will not be characterized as a "jeopardizing investment."
The North Carolina L3C and the PRI
To qualify as a PRI, the IRS mandates the investment meet the following three requirements:
The primary purpose of the investment must be to accomplish a charitable or educational purpose;
The production of income or capital appreciation of property cannot be a significant purpose of the investment; and,
The investment cannot be used for political or legislative purposes.
A PRI allows private foundations to make investments in the form of loans, grants and equity purchases in socially-motivated for-profit entities.
Because of the uncertainty of whether an investment will qualify as a PRI, private foundations generally seek a ruling from the IRS that the proposed investment will qualify as a PRI and not constitute a "jeopardizing investment."
However, seeking an IRS ruling is expensive and time consuming. Therefore, private foundations often refrain from investing in for-profit entities because of the potential risk.
If the investment does not qualify as a PRI, the private foundation and its directors or trustees may face significant penalties. In addition, the private foundation could lose its tax-exempt status.
It is unclear how the IRS will treat a North Carolina L3C. Although the IRS has issued favorable rulings on the ability of private foundations to invest in for-profit LLCs with a charitable purpose, the IRS has not ruled that a private foundation's investment in an L3C automatically qualifies as a PRI.
However, North Carolina's L3C legislation was written specifically to mirror the IRS requirements for a PRI in an effort to provide assurance to private foundations that their investment in a North Carolina L3C will qualify as a PRI.
In fact, to qualify as a North Carolina L3C, the three IRS requirements listed above must be included in the L3C's Articles of Organization.
Attracting investors
The perfect scenario for an L3C is for it to attract investments both from private foundations seeking out charitable endeavors while obtaining some return on capital, and from private investors who will be more motivated to seek profits.
A private foundation's investment in an L3C may be critical in attracting private investors.
A major benefit of the L3C is that it can offer layered ownership in which the investment risk and return are distributed unevenly among its members.
Normally, investors with the riskiest investment seek the highest rate of return on their investment.
However, to provide an incentive for private investors to participate, the L3C should be structured so that the private foundation would accept the highest risk while receiving a lower rate of return on its investment.
Conclusion
The L3C may become an important tool in achieving socially-beneficial objectives such as developing affordable housing for the poor and providing low-interest loans to businesses relocating to economically distressed areas.
While the benefits could be substantial, until the IRS rules that a private foundation's investment in a North Carolina L3C automatically qualifies as a PRI, some private foundations may be hesitant to invest in these new entities regardless of the fact that they will have the ability to earn a profit while furthering their charitable goals.
Ward and Smith, P.A. provides a multi-specialty approach to the representation of for-profit and nonprofit organizations and their officers, directors, employees, and investors.
http://www.philanthropyjournal.org/resources/managementleadership/%E2%80%98l3c%E2%80%99-new-double-hybrid-entity
Wednesday, December 8, 2010
Charities Seeing Slight, But Not Enough, Recovery in Giving
Charities Seeing Slight, But Not Enough, Recovery in Giving
November 30th, 2010 |
Nonprofit organizations have seen a slight turnaround in giving so far this year that mirrors the slow economic recovery, a new survey from the Nonprofit Research Collaborative (NRC) finds. But the small rebound hasn’t been enough to help many nonprofits that are grappling with staff and service cuts even as demand for their services has increased.
The national survey showed that 36 percent of charities reported an increase in donations in the first nine months of 2010, compared with only 23 percent in the same period of 2009.
Thirty-seven percent of charities reported a decrease in giving, a dramatic change from 2009′s 51 percent. Among those experiencing a decline in giving, the main reason cited was fewer individual donations and smaller amounts. Lower amounts received from foundations and corporations also contributed to the overall lower giving amounts at these charities. Giving remained unchanged at 26 percent of nonprofits in 2010 vs. 25 percent in 2009.
“We are beginning to see some positive signs, but despite that giving still has a long way to go to return to the levels it was at three or four years ago,” said Patrick M. Rooney, executive director of the Center on Philanthropy at Indiana University, which spearheaded the collaboration. “One-fifth of charities in the survey said their budgets for 2011 will be lower than for 2010, forcing many of them to look at cuts in services, salaries and staff.”
Among the 20 percent of nonprofits anticipating reduced budgets next year, 66 percent say they will have to reduce programs, services or operating hours, 59 percent expect to cut or freeze staff salaries or benefits, and 49 percent are planning layoffs or hiring freezes.
“The Nonprofit Fundraising Survey: November 2010” is the first product of a collaboration involving six organizations that serve the nonprofit sector: the Association of Fundraising Professionals, Blackbaud, the Center on Philanthropy at Indiana University, the Foundation Center, GuideStar USA Inc., and the Urban Institute’s National Center for Charitable Statistics.
“For the first time in two years, there is cause for cautious optimism about the nonprofit sector in this economy,” said Bob Ottenhoff, president and CEO of GuideStar. “Nonetheless, in this latest study, as in all prior years, nonprofits also are reporting increased demand for their services. Even as giving increases, philanthropic dollars fall short of the amounts needed to help people in our country and abroad.”
Demand for services increased at 78 percent of human service nonprofits and 68 percent of charities overall in 2010. Charities will be hard-pressed in 2011 to secure funding for growing needs, especially as individual and foundation donors are cautious about boosting support and other sources of funding — including government contracts for services — are cut.
“Younger, less well-established nonprofits have been especially hard hit by the recession,” noted Lawrence T. McGill, vice president for research at the Foundation Center. “Many foundations, seeking to maximize more limited resources, have steered their grantmaking toward organizations they believe have the best chance to weather the economic storm.”
Other Key NRC Survey Findings:
■In four of eight subsectors, the share of organizations reporting an increase in contributions was about the same as the share reporting a decrease. The four with nearly equal percentages of organizations with giving up and giving down are: arts, education, environment/animals, and human services.
■International organizations were the most likely to report an increase in contributions, reflecting donations made for disaster relief.
■In three subsectors — health, public-society benefit, and religion — a larger share of the organizations reported declines than reported increases.
■The larger an organization’s annual expenditures, the more likely it reported an increase in charitable receipts in the first nine months of 2010 compared with the same period in 2009.
■Most organizations were guardedly optimistic about 2011. Forty-seven percent plan budget increases, 33 percent expect to maintain their current level of expenditures, and 20 percent anticipate a lower budget for 2011.
The Collaborative and Survey Methodology
By working together, the Nonprofit Research Collaborative can reduce the number of surveys nonprofits are asked to complete, collect information more efficiently, and analyze it in more useful ways to create the benchmarks and trends that nonprofits and grant makers use to guide their work. Each partner has at least a decade of direct experience collecting information from nonprofits on charitable receipts, fundraising practices, and/or grantmaking activities. Survey participants will form a panel over time, allowing for trend comparisons among the same organizations. This approach provides more useful benchmarking information than repeated cross-sectional studies.
The first NRC survey, based on questions that GuideStar used for its annual economic surveys, was fielded between October 19 and November 3, 2010. It received 2,513 responses. More than 2,350 charities completed the questions, as did 163 foundations. The analysis for grant makers includes responses from charities that make grants but that are not foundations. These include United Ways, Jewish federations, congregations, and a number of other types of organizations. There were responses from 386 grant makers.
The respondents form a convenience sample. There is no margin of error or measure of statistical significance using this sampling technique, as it is not a random sample of the population studied. However, given the long-running nature of GuideStar’s economic surveys and the strong relationship between findings in those studies in prior years and actual results once tax data about charitable giving are available, the method employed here is a useful barometer of what charities experience and what total giving will look like. In the future, the NRC surveys are expected to occur in early winter, spring, and fall every year.
“The Nonprofit Fundraising Survey: November 2010” (PDF), which includes responses broken down by types of nonprofits and budget size, can be downloaded at no charge from the Gain Knowledge area of the Foundation Center’s web site.
http://www.pnnonline.org/charities-seeing-slight-but-not-enough-recovery-in-giving
November 30th, 2010 |
Nonprofit organizations have seen a slight turnaround in giving so far this year that mirrors the slow economic recovery, a new survey from the Nonprofit Research Collaborative (NRC) finds. But the small rebound hasn’t been enough to help many nonprofits that are grappling with staff and service cuts even as demand for their services has increased.
The national survey showed that 36 percent of charities reported an increase in donations in the first nine months of 2010, compared with only 23 percent in the same period of 2009.
Thirty-seven percent of charities reported a decrease in giving, a dramatic change from 2009′s 51 percent. Among those experiencing a decline in giving, the main reason cited was fewer individual donations and smaller amounts. Lower amounts received from foundations and corporations also contributed to the overall lower giving amounts at these charities. Giving remained unchanged at 26 percent of nonprofits in 2010 vs. 25 percent in 2009.
“We are beginning to see some positive signs, but despite that giving still has a long way to go to return to the levels it was at three or four years ago,” said Patrick M. Rooney, executive director of the Center on Philanthropy at Indiana University, which spearheaded the collaboration. “One-fifth of charities in the survey said their budgets for 2011 will be lower than for 2010, forcing many of them to look at cuts in services, salaries and staff.”
Among the 20 percent of nonprofits anticipating reduced budgets next year, 66 percent say they will have to reduce programs, services or operating hours, 59 percent expect to cut or freeze staff salaries or benefits, and 49 percent are planning layoffs or hiring freezes.
“The Nonprofit Fundraising Survey: November 2010” is the first product of a collaboration involving six organizations that serve the nonprofit sector: the Association of Fundraising Professionals, Blackbaud, the Center on Philanthropy at Indiana University, the Foundation Center, GuideStar USA Inc., and the Urban Institute’s National Center for Charitable Statistics.
“For the first time in two years, there is cause for cautious optimism about the nonprofit sector in this economy,” said Bob Ottenhoff, president and CEO of GuideStar. “Nonetheless, in this latest study, as in all prior years, nonprofits also are reporting increased demand for their services. Even as giving increases, philanthropic dollars fall short of the amounts needed to help people in our country and abroad.”
Demand for services increased at 78 percent of human service nonprofits and 68 percent of charities overall in 2010. Charities will be hard-pressed in 2011 to secure funding for growing needs, especially as individual and foundation donors are cautious about boosting support and other sources of funding — including government contracts for services — are cut.
“Younger, less well-established nonprofits have been especially hard hit by the recession,” noted Lawrence T. McGill, vice president for research at the Foundation Center. “Many foundations, seeking to maximize more limited resources, have steered their grantmaking toward organizations they believe have the best chance to weather the economic storm.”
Other Key NRC Survey Findings:
■In four of eight subsectors, the share of organizations reporting an increase in contributions was about the same as the share reporting a decrease. The four with nearly equal percentages of organizations with giving up and giving down are: arts, education, environment/animals, and human services.
■International organizations were the most likely to report an increase in contributions, reflecting donations made for disaster relief.
■In three subsectors — health, public-society benefit, and religion — a larger share of the organizations reported declines than reported increases.
■The larger an organization’s annual expenditures, the more likely it reported an increase in charitable receipts in the first nine months of 2010 compared with the same period in 2009.
■Most organizations were guardedly optimistic about 2011. Forty-seven percent plan budget increases, 33 percent expect to maintain their current level of expenditures, and 20 percent anticipate a lower budget for 2011.
The Collaborative and Survey Methodology
By working together, the Nonprofit Research Collaborative can reduce the number of surveys nonprofits are asked to complete, collect information more efficiently, and analyze it in more useful ways to create the benchmarks and trends that nonprofits and grant makers use to guide their work. Each partner has at least a decade of direct experience collecting information from nonprofits on charitable receipts, fundraising practices, and/or grantmaking activities. Survey participants will form a panel over time, allowing for trend comparisons among the same organizations. This approach provides more useful benchmarking information than repeated cross-sectional studies.
The first NRC survey, based on questions that GuideStar used for its annual economic surveys, was fielded between October 19 and November 3, 2010. It received 2,513 responses. More than 2,350 charities completed the questions, as did 163 foundations. The analysis for grant makers includes responses from charities that make grants but that are not foundations. These include United Ways, Jewish federations, congregations, and a number of other types of organizations. There were responses from 386 grant makers.
The respondents form a convenience sample. There is no margin of error or measure of statistical significance using this sampling technique, as it is not a random sample of the population studied. However, given the long-running nature of GuideStar’s economic surveys and the strong relationship between findings in those studies in prior years and actual results once tax data about charitable giving are available, the method employed here is a useful barometer of what charities experience and what total giving will look like. In the future, the NRC surveys are expected to occur in early winter, spring, and fall every year.
“The Nonprofit Fundraising Survey: November 2010” (PDF), which includes responses broken down by types of nonprofits and budget size, can be downloaded at no charge from the Gain Knowledge area of the Foundation Center’s web site.
http://www.pnnonline.org/charities-seeing-slight-but-not-enough-recovery-in-giving
Subscribe to:
Posts (Atom)