Once that prayer is said, your nonprofit business is born.
Businesses that are granted nonprofit status are eligible for tax breaks that can slice out everything from property taxes to income taxes, beefing up their bottom line. However, as some local nonprofits will say, making the balance sheets hit the black every year is not an easy task.
“You just don’t know,” Reno Salvation Army community relations director Carole Miller said of that organization’s struggle to provide community resources with donated and grant-generated revenues. “You schedule these things and hope for the best. We do go on faith, it is a church.”
More than 560 corporations have applied for state tax exemptions since the beginning of 2009 as they attempt to go the nonprofit route in Nevada, according to Richard Reed, a tax compliance supervisor with the Nevada Department of Taxation. Reed handles the requests for tax exemptions filed by businesses wanting to become nonprofits.
Of the 561 that applied for state tax exemptions since January, 400 were approved, Reed said.
“I do hear a lot more than individuals are trying to squeeze every dollar that they can,” Reed said.
Despite the high ratio of businesses approved for nonprofit status in Nevada, denials are up by about 5 percent, he added.
Those getting denied are mostly out-of-state businesses looking to take advantage of Nevada’s tax structure while their charitable work continues to benefit their home states.
“Many companies are coming in from other states and wanting to get Nevada’s tax exemptions,” he said. “We want people to spend their money here.”
According to a study released earlier this month by Stanford University, the number of nonprofits across America has exploded. The IRS approved more than 50,000 new organizations as 501(c)3 nonprofits in 2008, according to the study, en route to approving 99 percent of the applications for public charity status.
“It has also approved more than 50,000 organizations for every year of the past decade, leading to a massive growth in the nonprofit sector,” the study also stated. “The number of 501(c)3s has grown by more than 50 percent in just a decade.”
According to both Reed and Miller, nonprofits have little mandatory accountability to the state even though they process money through the local economy.
“There is no reporting to the state,” Miller said. “We don’t report to them at all. … We keep documentation through. I’m not sure everyone requires the documentation that we do.”
Reed said nonprofits generally only receive a visit from a state auditor when something strange shows up on their books.
“Seldom do we go out and randomly audit a nonprofit,” Reed said.
State tax exemptions must be renewed every five years and, according to Reed, and about 98 percent of these are approved for renewal.
And despite the existence of national studies like recent the Stanford University report, northern Nevada has not assessed the economic impact of nonprofits on the area, leaving the amount of money they funnel through the community a mystery.
“I think people would be surprised,” said Julia Ratti, president of Strategic Management Services, a local development and consulting service for nonprofits, about the potential results of such a study.
Ratti put the number of nonprofits across America in the millions while saying that the local numbers were closer to the thousands.
And while many nonprofits take in little or no money, others have revenues and expenditures in the millions. This money can come in through state or federal grants, local donations or gifts from wealthy benefactors. Many local charities have said their donations have been down this year, including the Salvation Army, which is currently searching for funds to fuel its annual holiday food drive.
As donors tighten their budgets and governments struggle with deficits, Ratti says nonprofits cannot depend entirely on one revenue source.
The consultant added that she has seen nonprofits shutter their doors because they relied on government grants to pay their employees and to keep the lights on.
“The healthiest nonprofits are the ones with the most diverse income structure,” said Ratti, who is also a member of the Sparks City Council.
In the 2007-2008 fiscal year, the United Way of Northern Nevada and the Sierra spent 38 percent of its budget helping people become financially stable and independent, according to its annual report. The Nevada chapter brought in more than $2.5 million, according to the same report.
“These (nonprofits) are paying employees who are paying their mortgages and shopping and spending money,” Ratti said.