North Carolina Nonprofits Could Soon Pay Sales Tax

The North Carolina state Senate passed a measure Thursday that would cap sales tax refunds, a measure that critics say could cost hospitals, universities, and other charities millions of dollars.

According to a report in The Charlotte Observer, the Senate bill would cap sales tax refunds at $7.5 million initially, with that number going down to $100,000 beginning in July 2017. The state House did not include such a cap in their version of the bill, so its fate will be decided when the two chambers enter negotiations. The measure has strong support from Sen. Phil Berger (R-Rockingham), the president pro tem of the Senate who argued that nonprofit hospitals and other large organizations are nothing more than businesses organized as nonprofits. Berger framed the bill as a way to invigorate the state's economy.

“Our compromise plan incorporates feedback from folks across the state, provides much-needed tax relief to North Carolina families of all incomes and propels our state from the bottom of national rankings to the 6th best business tax climate in America,” Berger said in a statement.

On the other hand, the N.C. Hospital Associate has come out strongly against the cap estimating that it would eventually force the state's numerous nonprofit hospitals to pay $220 million a year in sales taxes. The N.C. Center for Nonprofits also estimates that the bill would affect about 250 of its 1,600 members. Don Dalton, a spokesman for the Center, said in a statement that hospitals would also be forced to cut back on services.

“Our hospitals are already facing $780 million per year in decreased payments every year for the next 10 years for serving Medicare patients,” Dalton said. “The State has not yet chosen to expand Medicaid or provide alternative coverage options for the state’s poor. Hospitals will continue to serve these uninsured patients without adequate compensation.”

How Much Surplus Do You Need?

What could possibly be bad about a nonprofit having a large surplus of cash? According to Lesley Rosenthal, author of "Good Counsel," there's a perfectly good reason why it's not necessarily a good thing to have too much money in reserve.

Rosenthal wrote that, while it's always a good thing to have some money saved up, nonprofits need to make sure there isn't too much. This is because a large surplus could indicate that the organization is not doing as much good as it could or should.

This raises another question: How much surplus is appropriate? Rosenthal explained that this question can be answered by weighing financial and legal matters. She suggested four things to consider with your counsel:

• Insurance deductibles: Some organizations may carry insurance policies with sizable deductibles, where the policy does not cover attorneys’ fees or losses until they reach a certain size. Counsel should help the finance team understand whether coverages include or exclude defense costs, and whether these costs are necessary.
• Self-insurance: Some large nonprofits may self-insure for medical, casualty, and workers’ compensation claims. Organizations with self-insured exposure must establish liability funds to cover known claims as well as incurred but not reported claims and the costs of the defense.
• Pending threatened litigation: Counsel should be sure to update the finance staff on the status of these potential litigation matters, especially those for which insurance coverage or defense may not be available, and help calculate the material potential financial impact on the organization against which reserves should be held.
• Compliance with matching fund requirements: Counsel should coordinate with finance and fundraising staff about the terms of governmental or foundation grants that require matching funding. Together they should establish appropriate levels of reserves to make sure that matching obligations are met.

Lollapalooza Deal Puts Nonprofit At Risk

Lollapalooza is one of the most popular music festivals in the world but it's making one Chicago, Ill.-based nonprofit sing the blues.

The Washington Post reported today that a deal struck with Lollapalooza promoters has put the future of the Chicago Park District's nonprofit arm, the Parkways Foundation, at risk. The foundation  received 45 percent of its revenue from Lollapalooza. This stands to change after C3 Presents, the Austin, Tex.-based promoter of the festival, agreed for the first time to pay annual city and county amusement taxes and liquor taxes. The new deal also extends the festival's stay in Chicago's Grant Park through 2021. The Foundation's second largest contributions come in the form of grants and donations from private corporations such as the Kraft Foods Foundation.

At past festivals, C3 would make contributions to the Parkways Foundation in lieu of taxes. Now that they have agreed to pay these taxes, those contributions will no longer exist. The loss of this significant revenue caused the nonprofit to discuss its options. One of those options, according to The Washington Post, is whether the organization should continue to exist.

The Parkways Foundation took in $2.6 million from Lollapalooza last year, but it also experience significant loss of personnel. Ten people have left the board since 2010, and longtime executive director Brenda Palm left in December. Jay Terry has filled that position since her departure.

Lollapalooza, which has included groups from Nine Inch Nails to Kanye West, has made its home in Chicago since 2005. It was originally formed in 1991 by Jane's Addiction singer Perry Farrell as a farewell tour for his band.

You can read the full article in The Washington Post.

Nonprofits Get Hotel Tax Revenue

Nonprofits in Crystal Lake, Ill. are going to be seeing an influx of revenue thanks to some local hotels and motels.

The TribLocal reported today that local nonprofits were awarded a portion of hotel and motel tax funds that are collected by the city each year.  The City Council distributed the money Feb. 21 among the 10 groups that submitted proposals.  Each of the organizations received a portion of the funds requested, with the total money doled out adding up to $292,167.

The revenue that the city collects from hotels comes from a 5-percent tax on overnight stays at hotels and motels.  The funds are invested in the community towards programs and events that promote overnight stays in the city.  Here is a breakdown of the money received by the nonprofits:

• The Raue Center for the Arts got the largest amount of money at $150,000.  The group has received over $422,000 the last three years.
• The Lakeside Legacy Foundation got more than $35,000 after receiving $20,000 the previous year.
• The Historic Downtown District of Crystal Lake also received $35,000, the same amount they got last year.
• The McHenry County Youth Sports Association was awarded $52,000.  Last year they had requested $80,000, but they lowered their initial request to $60,000 this year.

You can read a full report of the funds distributed in The TribLocal.

Ways To Increase Revenue

Finding consistent streams of revenue can be a challenging task for a nonprofit. Donors come and go, and sometimes special events don't go as planned. Organizations must constantly find new ways to increase their revenue if they are going to survive in this competitive market. Here are some tips that were gathered at the 2011 Bridge Conference:

-Find creative ways to increase operating dollars. For example, the National World War II Museum offers free admission to vets. It is able to do this because it launched an online "$10 For Them" campaign, which resulted in more than $100,000 in one fiscal year.

-Go beyond Recency Frequency Monetary Value (RFM). Make sure you are getting donors who have responded in the past.

-Know what you have in your database(s). Run a quarterly merge/purge so that your messaging is reaching the biggest and best targets.

-Review your past results. What can you learn from your previous successes and failures?

-Don't try to beat your previous efforts. Instead, improve on them.

Revenue for Top 100 Nonprofit Organizations Down 4%

Note: This is a summary of a story from an older episode of the Nonprofit Times TV.  To view the full story, click here for the video.

100 of the United State's largest nonprofits experienced a 4% drop in revenue last year, according to the NPT Top 100 Listing for 2010. At the top of the list was the YMCA, which raised $5.8 billion, a respectable number but still less than it had raised in previous years. Rounding off the top 5 were Catholic Charities USA, United Way Worldwide, Goodwill Industries, and the American Red Cross.
A rebound from the stock market and investments did make revenues at NPOs slightly higher than expected this year. Still, revenue needed to make the NPT 100 declined considerably when compared to previous years. To showyou just how much revenue declined, take a look at this statistic: revenue was $179 million last year. This year?  It came out to a little more than $150 million. Overall, that was a 16% loss of revenue.  Wow. We can only hope that the next year will bring a better result for these esteemed organizations.
 
To see the complete list of organizations in the 2010 NPT Top 100 List, visit nptimes.com.