The federal and state governments reward nonprofit organizations for the good work they do by not requiring them to pay taxes. The trade-off is that all of their funds must be allocated for the purpose stated in their charter. Nonprofit organizations can accumulate profits, but they can’t distribute them to the founders or owners, or use them to increase employee salaries beyond the norm.
- The cost of branding agencies largely depends on how much work needs to be done within the project. For instance, if you need a company name, a new logo and have many platforms that this design needs to be distributed on, a top branding company could cost you anywhere from $23,000 to $250,000 or more.
- Like any business brand, a nonprofit must make its audience aware of the organization and the causes it supports. Promoting a cause and services. Donors, volunteers, and groups the nonprofit works with need to know about the work the organization is doing. Nonprofits rely on donations in order to pursue their charitable.
- The top priority from years past – acquiring new donors – has been eclipsed by the need for nonprofits to engage the community, retain current donors and promote general brand awareness, according to the website Nonprofit Marketing Guide.
Each type of nonprofit organization has government regulations that it must follow to retain its nonprofit status. The federal government delegates most of the responsibility for regulation and oversight of nonprofit organizations to the state governments. Currently, nonprofit organizations have little or no impact on the political landscape, but will that soon change?
Types of Tax-Exempt Organizations
The most common type of tax-exempt organization is a nonprofit 501(c)(3) organization, but there are many types of tax-exempt entities, including:
- Social clubs
- Business leagues
- Veterans’ associations
- Labor unions
- Political parties
- Advocacy organizations
State Governments Follow the Government Regulations for Nonprofits
The laws that govern nonprofit entities vary from state to state. Nonprofit organizations must follow the laws of their states and other states in which they operate. This rule also applies to fundraising efforts. Nonprofits need to pay attention to the laws of other states when seeking donations from out-of-state donors.
The board of directors has the final say on making decisions for the organization. There are only two authorities higher than the board that have the authority to override board decisions. They are the Attorney General and a state court of law.
The Purpose of the Charter Documents
One of the first duties that a new nonprofit board of directors takes on is to write the charter documents and bylaws. The articles of incorporation state the name and location of the organization and the names and addresses of the founding members. The articles also state that the nonprofit organization is being formed for the exclusive purpose of charitable, religious, educational or scientific purposes. The articles will also spell out that no one should profit from the organization and indicate how assets would be distributed in the event that the organization dissolves.
Attorneys that specialize in nonprofit law are the best resource to review the charter wording for new nonprofits to make sure that the organization qualifies as a tax-exempt organization. Attorneys can help the founding members understand the things they can and can’t do to avoid legal concerns.
Founding board directors and all directors who come after them have duty of care, duty of loyalty and duty of obedience. As part of these duties, board members need to manage the organization’s money and other assets responsibly.
Government Regulations for Public Charities and Nonprofit Organizations
Whether you’re a brand new organization or a multinational nonprofit, Snowball has the fundraising tools you need! For one thing, Snowball boasts one of the easiest and fastest online giving processes available to nonprofits anywhere. When a first-time donor fills out a simple donation form, their information is automatically stored in a. Reason 2: Brand Affects Your Bottom Line. Nonprofits are entities with bottom lines that need funders and donors to help them work toward their mission. Competition among nonprofits for dollars and attention is real. The more clear brand is, the easier it is to communicate.
Two types of nonprofit organizations qualify as tax-exempt under section 501(c)(3) of the IRS code. Organizations can qualify as tax-exempt by incorporating as a public charity or charitable nonprofit. There are some important similarities and differences between them.
Public charities get their funding from investment income and large donors. Public charities are subject to an excise tax on any investment earnings, and they are subject to stricter rules than charitable nonprofits. Nonprofit entities get their funds from grants, donors, service income, government contracts and fundraising.
While there are many benefits to being a public charity or nonprofit organization, there are a few things that the government doesn’t allow such organizations to do. Nonprofit organizations cannot participate in electioneering, which means that they can’t do anything to improve or damage a politician’s chance of winning an election. Nonprofit organizations also have limited power to advocate for policies that affect their cause, and they can’t dedicate any substantial part of their activities to lobbying. Activities like electioneering and lobbying put nonprofit organizations at risk of receiving a penalty or having their 501(c)(3) status revoked.
Nonprofit organizations are not allowed to divert undue benefits to any person or organization. This includes inurement and excessive compensation. Inurement is when an insider takes the nonprofit’s money or assets without justifying that it pertains to the organization’s mission. A nonprofit is guilty of offering excessive compensation when it pays employees amounts over a customary wage for those positions.
Regulations for Conducting Business with Nonprofit Organizations
While federal and state governments play a central role in setting regulations for nonprofit organizations, 501(c)(3) entities have other rules to which they must pay attention. Nonprofit organizations frequently conduct business with other businesses like landlords, marketers, caterers and many other types of vendors that are required to pay taxes. Some businesses mistakenly believe that their interactions with nonprofits might be different than those with their other business partners, but in reality, the tax-exempt status doesn’t affect normal business transactions.
How Might the Johnson Amendment Change the Future of Nonprofits?
The provision in the 501(c)(3) code that prohibits nonprofit organizations from endorsing or opposing political candidates is called the Johnson Amendment, which dates back to 1954. It was named after its sponsor, Lyndon B. Johnson, who was a U.S. senator at the time.
President Trump has announced that he plans to work toward repealing the Johnson Amendment to allow churches and other nonprofit organizations to speak freely about the candidates they support. Currently, churches and other nonprofit organizations can publish and promote their views on social and political matters, but they can’t openly endorse any particular candidate.
A repeal of the Johnson Amendment would have serious implications for political campaigns. In essence, the donations that the public makes to their favorite charitable organizations could be used to support political candidates. This would also mean that large religious sects would have a much stronger influence on the outcome of major political contests.
President Trump will not be able to abolish the Johnson Amendment without significant help from Congress. To repeal an amendment, he would need for two-thirds of both Houses of Congress to propose a new amendment to repeal it. Another way that he could accomplish this is to get two-thirds of the state legislatures to call a constitutional convention, where the new amendment would then need to be ratified by three-quarters of the states.
Concluding Thoughts about Government Regulations of Nonprofits
Nonprofits Need Branding Too Much
Nonprofit organizations are like every other type of organization in that the type of IRS filing guides the activities that they can and cannot perform. As long as they follow the federal, state and local laws for their type of organization, they will remain fully compliant with tax laws.
As for the future, the Johnson Amendment is now more than a half-century old. The near future may decide if it will last for another half century.
Making the case for branding your nonprofit.
In the past, branding was seen as belonging only to the for-profit world. The idea of branding has been an uncomfortable one for nonprofits to stomach and many of them have regarded it with fear, perhaps because it has always been associated with 'sleazy' marketing techniques and limited to for-profits and their business models. But in our modern times, that is no longer the case and nonprofits can stand to benefit from jumping into the branding scene.
Let's start with an example of excellent nonprofit branding.
To begin, you might think that your nonprofit marketing strategies already address branding, or have already incorporated it. But branding, while working closely with marketing, is its own entity.
Marketing is what gets the word out there about your organization, branding is what people will have to identify you with. Marketing is the brain and body. Branding is the face and heart of your nonprofit. It's all about consistency and even more about repetition, and we open this article with an outstanding real-life example: Children's Miracle Network Hospitals, which implements a business model focused around cause related marketing, one of the many avenues nonprofits can pursue to fund themselves.
Who is Children's Miracle Network Hospitals?
Nonprofits Need Branding Too Good
Taken straight from their website:'Since 1983, Children’s Miracle Network Hospitals has raised more than $5 billion—most of it $1 at a time—for 170 children’s hospitals across the United States and Canada, which, in turn, use the money where it’s needed the most. These donations have gone to support research and training, purchase equipment, and pay for uncompensated care, all to save and improve the lives of as many children as possible. Our mission: To increase funds and awareness for local children’s hospitals.'
Why is their branding campaign so strong?
As mentioned, Children's Miracle Network Hospitals has capitalized on the cause-marketing model. For their program they partner with large corporations such as Costco, Sam's Club, and Rite Aid across the United States and Canada to run their Miracle Balloon Paper program for specific months during the year.
How it works: A customer walks into a partner store, for example Costco, and as they check out the cashier asks them if they would like to participate in the program (for local children's hospitals) by buying a Miracle Balloon for just $1. If the customer decides to make a contribution they receive a balloon and get the chance to sign it. It is then hung from the ceiling, placed on the windows, or clearly displayed in other visible areas in the store.
Why does this make their brand so strong?: Branding is all about repetition, about making impressions, and continually reaffirming that impression. The more users see you brand, the more likely they will remember it. The Miracle Balloon Paper is 100% identical to their balloon logo. This means that customers are connecting with their nonprofit through their brand by signing the paper balloon, seeing it hung and displayed in their partner store. Talk about free marketing!
Nonprofits Need Branding Too Slow
So what makes branding important?
We broke things down into three reasons why your nonprofit should, at the very least, consider branding. If you want to take it further, we even outlined some finer details in our article about creating your nonprofit brand.
Shifting perceptions.
In earlier years, branding was considered by nonprofits to be too cold and uniform. Nonprofits feared that branding would cause their organization to disappear behind a logo. However, with the increased number of nonprofit organizations in the United States in the past decade alone, perspectives have shifted. Nonprofits have become more interested in using branding to help separate them from the masses of similar organizations vying for support.
Where for-profits use branding as a way to generate more revenue for whatever products or services they offer, nonprofits can use branding as a way further their cause and increase donations. Remember that donors will be more likely to donate to a well-known nonprofit simply because they recognize their logo.
Visibility.
A brand, in its most general sense, is a marker that the public can recognize as being you. Brands are the name, logo, and visual graphics your nonprofit employs, but it is also more than that. Your brand is what represents your organization and tells others who you are and what you stand for, your mission, your cause.
Visibility through your brand works through trust; they go hand in hand. Your brand will create trust among the public that you are a credible organization and that you are true to your word and to your cause. This trust is what will motivate the public to give to your nonprofit.
So in short, your brand is your logo and your attitude. It is crafted to differentiate you from other nonprofits and allows you to make a specific and individual impression. It is a visual, mental, and emotional way that the public can have access to your nonprofit. It is your voice. One easy way to generate more visibility is by using Google's nonprofit program.
It works internally and externally.
Externally, branding plays a large part in networking your nonprofit. It can create new partnerships and relationships with other nonprofits (both large and small) and with businesses, like CMNH did by partnering with Costco, Sam's Club, and Rite Aid. These organizations will be more inclined to working with your nonprofit as your brand will be one of the ways your nonprofit will show proven success.
Internally, branding not only works to drawn in the public but also works within your organization. It influences a nonprofit at its operational level, driving how your nonprofit works on an everyday basis. Having a well-established brand will bring unity to your nonprofit, creating focus and keeping everyone on the same page by reminding them about your cause.