NONPROFITS IN WASHINGTON

Transcription

1 NONPROFITS IN WASHINGTON RECENT STATISTICS AND POLICY DEVELOPMENTS December 2013 Putnam Barber Nancy Bell Evans Center on Nonprofits and Philanthropy Evans School of Public Affairs University of Washington Research assistance: Daniel de Zeeuw (MPA 14) Editorial assistance: Chantel Gibson The Association of Nonprofits for Washington State

2 Nonprofits in Washington has been published many times since the first version was prepared for the Washington State Department of Trade and Economic Development in In recent years, it has become a cooperative project of the Nancy Bell Evans Center on Nonprofits and Philanthropy at the Evans School of Public Affairs, University of Washington, and Washington Nonprofits, Washington s statewide nonprofit association. Nonprofits in Washington is largely based on information about the numbers and characteristics of nonprofit organizations available from the National Center for Charitable Statistics (NCCS) at the Urban Institute. The Internal Revenue Service (IRS) extracts a great deal of data from the annual filings of tax exempt organizations and provides that information to the NCCS which, in turn, publishes summaries online and maintains a database for more intensive research. Additional details in this report are derived from the files of the Corporations Division of the Office of the Washington Secretary of State. The 2013 edition of Nonprofits in Washington was written by Putnam Barber, senior advisor at the Nancy Bell Evans Center. Research support was provided by Daniel de Zeeuw, MPA candidate at the Evans School of Public Affairs. The text was readied for publication by Chantel Gibson, research and conference specialist at the Nancy Bell Evans Center, and Kay Sterner, academic professional writer at the Evans School of Public Affairs. Advice, data, and assistance were provided by Alison McCaffree, executive director, and Rick Anderson, senior policy staff, Washington Nonprofits; Megan Farwell, MPA/MSW 13, University of Washington; Pam Floyd, director, Corporations Division of the Office of the Secretary of State; Mark Hugh, CPA; Chuck McLean, Guidestar; Nancy Long, executive director, 501 Commons; Chuck McLean, Guidestar; and Tom Pollak, National Center for Charitable Statistics. Sources for the data in the report and a discussion of related issues can be found in the Data Notes at the end of this report. Highlights Numbers of nonprofit organizations grew from 8,783 public charities and private foundations in 2003 to 18,077 in Revenues of public charities grew from $19 billion in 2003 to $32 billion in King County donations ranked ninth in the U.S. with $1.4 billion in recorded giving in 2008, according to the Chronicle of Philanthropy. Eastern Washington led the state in donations with an estimated 8.1% of available income; Adams County households ranked first among the 39 counties in Nonprofit employment is between 200,000 and 300,000, based on various estimates. Growth in numbers comes from small organizations: There were 3,617 organizations with revenue less than $50,000 in 2003 and 11,229 in Growth in revenue comes from big organizations: Just 15 healthcare organizations contributed 71% of the growth in revenue between 2004 and Health and education are the biggest services, with the largest number of organizations (1,121) providing educational services and the highest revenues ($21 billion) going to health services organizations

3 Introduction Over the years, the numbers of nonprofit organizations, their revenues and assets, the size of the nonprofit workforce, and the breadth and variety of the programs and services they provide statewide have all grown. The changes from year to year have not always been upward the financial crisis affected many nonprofit organizations in Washington. The data presented in this report give some impression of the impact of that continuing challenge. This report has two parts. Part 1 draws upon the annual reports from nonprofits filed with the Internal Revenue Service. The National Center for Charitable Statistics at The Urban Institute in Washington, DC, compiles these reports in a database which provides the data for the presentation of the numbers and characteristics of recognized tax exempt entities located in Washington. Part 2 is based on information from the files of the Secretary of State s office in Olympia supplemented by a variety of other reports that cast light on the nonprofit corporations and their activities. PART ONE Tax Exempt Organizations in Washington State Information is available about federally recognized tax exempt organizations because many of them file detailed annual reports with the IRS, made available for study by the National Center for Charitable Statistics (NCCS). These organizations are exempt from federal corporate income taxes because they have demonstrated to the IRS that they are organized and operated for one of the exempt purposes Congress has defined in the Internal Revenue Code (IRC). In 2013 the IRS listed 34,665 Washington state organizations as exempt from federal corporate income taxes. Among all states, Washington ranked 18th in number of tax exempt organizations, between Minnesota and Maryland. The 2013 total included 24,108 organizations recognized under section 501(c)(3) of the IRC ( public charities and private foundations in the IRS terminology) and 8,307 organizations in other categories. As of July 2013 the major classifications in Washington s total of all federally recognized exempt organizations were the following: Public charities (501(c)(3)) 23, % Private foundations (501(c)(3)) 1, % Social welfare organizations (501(c)(4)) 1, % Agricultural, horticultural and labor educational groups (501(c)(5)) 1, % Business leagues (501(c)(6)) 1, % Social and recreational clubs (501(c)(7)) 1, % Others 2, % Total 32, % The 501(c)(3) category includes the kinds of organizations people think of first when they hear the word nonprofit. Most of these organizations are public charities, meaning they accomplish their purposes with program service revenues, grants and contracts from government agencies, contributions from donors, and, occasionally, grants from philanthropic foundations. In general these are the groups that provide health care, education, human services, research, arts, entertainment, cultural or environmental preservation, and other valued activities for the residents of Washington communities and, for that matter, people around the world. A smaller group within the 501(c)(3) classification consists of private foundations, typically grantmaking philanthropies that operate with funds from investment income or contributions from a few individuals or firms. Counting nonprofit organizations is not straightforward; these numbers include all the Washington-based organizations in the IRS files that have been recognized as tax exempt. This broadest and most inclusive measure of the numbers for Washington will be examined first in this report. Greater detail will also be derived from the more complete information that is available about larger organizations. For several reasons, however, even these detailed records reveal only part of the story. Major nonprofit organizations serving Washington communities may have their corporate headquarters in other states, and therefore do not appear in the Washington roster at all. Churches are automatically defined as tax exempt by the IRC, so many do not apply for IRS 1

4 recognition and are not included in the lists. Further, some Washington-based organizations provide the bulk of their services in other states or nations, while their information is still included in the Washington statistics. There is, unfortunately, no practical way of overcoming these complications of the data on which this report depends. Reports of Active Nonprofits In this report, we concentrate on what we have called active nonprofits. There are fewer such organizations than the totals in the NCCS files would suggest. NCCS files often include information that has not been updated recently. Many filings arrive at the IRS long after the period to which the information applies. In addition, nonprofits that cease operating frequently neglect to inform the government. The law requires the IRS to remove organizations from the roster when they fail to file any sort of report for more than three years. To sharpen the focus, the NCCS provides a way to select only organizations that have filed an annual report within the past two years. Of the public charities and private foundations in the list above, 18,077 (74%) had done so. When discussing this group, this report refers to them as active nonprofits. Geographic Distribution Nonprofits in the Pacific Northwest Compared to its neighboring northwest states, Washington has the most active nonprofits. Washington Oregon Idaho Public Charities 16,938 11,543 3,399 Private Foundations 1, Others 7,617 4,810 1,931 Total 25,696 17,090 5,561 Figure 1. Nonprofit Corporations 32,663 Federally Recognized Tax Exempt Organizations 25,696 Active Organizations (Filed in Last 2 Years) 18,077 Active 501(c)(3) Organizations 6,846 Active 501(c)(3) Organizations with more than $50,000 in annual revenue In relation to its state population, though, Oregon has a greater concentration of active nonprofits, with 4.4 for every 1,000 residents. In comparison, Washington has 3.7 and Idaho 3.5 for every 1,000 residents. Nonprofits across Washington State Though the larger and better known organizations are located primarily in major urban areas, Washington s 16,938 active public charities can be found in every part of the state. King County addresses are associated with 6,190 organizations (36.5%); the greatest concentration of organizations is, as might be expected, found in the county with the largest population (2013 estimate: 2,032,019). Garfield County (population: 2,905), with just 11 public charities, had the smallest number, followed by Wahkiakum (3,879) and Columbia (3,699), with 13 and 16 respectively. The per capita distribution shows a different pattern. Across the state as a whole, there are roughly 2.5 public charities for every 1,000 people. The per capita count varies considerably, though, from place to place. In these terms, the counties with smaller populations often have a higher density of local organizations. Garfield and Columbia Counties, for example, have 4.85 and 3.92 public charities for every 1,000 residents. Wahkiakum and King Counties are almost equal, with 3.27 and 3.21 respectively. Among the counties with the lowest numbers of public charities per capita, high-population counties like Snohomish (1.92) and Clark (1.80) stand out. In both cases, the proximity of another metropolitan area where many services are readily available may explain the relative lack of local organizations. The comparatively inaccessible islands of San Juan County lead the state in the density of nonprofits serving their population, where there are public charities for every 1,000 residents. Figure 3 shows how these relative numbers of public charities are distributed across the state as a whole. 2

5 Figure 2. Numbers of Active Public Charities Figure 3. Nonprofit Density: Relative Number of Nonprofits per Capita 3

6 Historical Trends Since the first Nonprofits in Washington report in 1994, there has been dramatic growth in the count, by any measure, of nonprofits serving Washington communities. Figure 4. Active 501(c)(3)s in Washington, ,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, Private Foundations Public Charities Figure 5. Count of 501(c)(3) Public Charities by Total Revenue, ,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, Revenue Greater than $50,000 Revenue Less than $50,000 4

7 As Figure 4 shows, though, the rate of growth in number of public charities increased after 2008 as the then-new rules requiring regular reporting by exempt organizations came into effect. In spite of the fact that the rolls in following years were reduced as substantial numbers of automatic revocations for failing to file took place, the total increased as organizations that had not previously reported started doing so. The numbers of exempt organizations in other categories grew somewhat, but not at the strongly increasing rates of public charities. The number of active private foundations rose as well from 1,010 in 2005 to 1,148 in 2011 and then declined to 1,092 by Financial information for 501(c)(3)s with less than $50,000 in revenue is difficult to interpret. Organizations with revenue below that floor are not required to include any financial information in their annual reports to the IRS. As Figure 5 shows, the number of active public charities with $50,000 or more in annual revenue did not change much over the past few years. The largest number (6,942) was reported in 2012 and the lowest (5,166) at the start of this series, in The total has declined slightly in the most recent year; the figure for 2013 is 6,848. The more detailed analysis in the following paragraphs focuses on the active public charities and private foundations that report more than $50,000 in annual revenues. Finances of Public Charities Figure 6 tracks the assets (upper line) and revenues (lower line) of active public charities with more than $50,000 in revenues from 2003 to July reports in Both measures of these organizations finances declined from 2005 to 2006 and again from 2008 to 2009, as the national recession affected donations, government contracts, and program service revenues. Assets have grown since 2009, albeit at different rates. Total revenue, though, declined again from 2010 to Figure 6. Total Revenue and Assets of 501c3 Public Charities With Revenue Greater Than $50,000 $60 $50 Billions of Dollars $40 $30 $20 $10 $ Public Charity Total Revenue Public Charity Total Assets During this span of years, there have also been significant changes in the requirements for the reporting of data by exempt organizations. As a result, the full effect of financial conditions on the services provided by organizations in Washington communities is subject to a good deal of uncertainty. It will take a few more years, and the examination of more detailed information as it becomes available, to tell the complete story of the impact of the recession on Washington s nonprofits. 5

8 One thing is clear: The growth in total revenue for active public charities over this span of years has largely been a result of revenue gains by very large health care organizations. As Figure 7 shows, the increase in revenue for just 15 such organizations accounts for nearly three-quarters of the increased revenue experienced by Washington s active public charities over the most recent decade. These 15 health care organizations, plus the international development charity World Vision, make up one-tenth of 1% of all the active public charities in the state, while receiving 57% of the total revenues of the group. The implication of these two trends is clear: The growing numbers of smaller nonprofit organizations serving Washington communities have not experienced significant recovery in their revenue potential in recent years. Some illustrations of the way community service organizations in the Puget Sound area have been coping with these difficult economic conditions can be found in the publication Resilient Nonprofits and its follow-up, Nimble Nonprofits, published by the Nancy Bell Evans Center. Figure 7. Growth of Top 15 Health Care Organizations Information about the finances of organizations in broad service categories, discussed below, gives some further indication of how the financial turmoil of the past few years has affected different subgroups of nonprofit organizations to differing degrees. Employment Many nonprofits are significant employers in the labor markets where they operate. There is, though, no direct count of the number of Washingtonians who work for nonprofits in the state. Two research groups have made estimates based on the data that are available. Using data from employers collected by the Department of Labor, for example, the Center for Civil Society Studies at the Johns Hopkins University estimates that nonprofit workplaces included 10.1% of total employment in the United States in If that percentage applied in Washington, it would lead to an estimate that nonprofits employed nearly 300,000 Washingtonians in Additional analysis by the Johns Hopkins center based on employers reports found that nonprofit workplaces in Washington employed at least 211,000 people in The IRS Form 990 does not ask for the number of employees of nonprofit organizations. Using the average cost per employee in each service category, a 2008 NCCS study came to a roughly similar estimate of approximately 250,000 people employed at that time by nonprofits in Washington state. 6

9 Program Services Figure 8. Program Service Areas NTEE Category Number Total Revenue Total Assets Arts, Culture, and Humanities % $665,521, % $2,108,231, % Environmental Quality, Protection, and Beautification Education 1, % $2,762,352, % $8,586,690, % % $150,782, % $430,227, % Animal Related % $155,592, % $173,925, % Health % $20,978,376, % $25,830,057, % Mental Health, Crisis Intervention % $569,042, % $604,425, % Diseases, Disorders, Medical Disciplines % $178,339, % $163,095, % Medical Research % $845,825, % $1,307,212, % Crime, Legal Related % $172,449, % $107,374, % Employment, Job Related % $522,901, % $491,120, % Food, Agriculture, and Nutrition % $211,986, % $84,505, % Housing, Shelter % $300,468, % $1,287,772, % Public Safety % $9,812, % $35,911, % Recreation, Sports, Leisure, Athletics % $213,676, % $308,840, % Youth Development % $176,787, % $339,103, % Human Services Multipurpose and Other % $2,175,825, % $3,579,359, % International, Foreign Affairs, and National Security % $1,356,848, % $979,609, % Civil Rights, Social Action, Advocacy % $31,761, % $78,170, % Community Improvement, Capacity Building % $157,787, % $340,206, % Philanthropy, Voluntarism, and Grantmaking Foundations Science and Technology Research Institutes, Services % $468,645, % $1,570,229, % % $117,618, % $211,075, % Social Science Research Institutes, Services % $32,726, % $71,379, % Public, Society Benefit Multipurpose and Other % $29,497, % $32,136, % Religion Related, Spiritual Development % $174,940, % $233,236, % Mutual/Membership Benefit Organizations, Other % $22,130, % $94,918, % Unknown % $7,664, % $7,834, % Total 6, % $32,489,362, % $49,056,648, % The IRS and NCCS identify the primary program emphasis of each public charity using the National Taxonomy of Exempt Entities (NTEE) a list of 26 general categories. The breadth and variety of services that nonprofits provide is suggested by the range of activities named in the table. (A similar table for each of Washington s counties is on the website of the Nancy Bell Evans Center at the Evans School of Public Affairs, University of Washington.) Figure 8, like other data in this report, includes only the active public charities reporting $50,000 or more in annual revenues. The differences in the characteristics of the enterprises offering different services show up sharply when nonprofits are classified in this way. A few of the service areas include nearly two-thirds of the organizations; these five categories are the ones that include more than 5% of the active public charities in Washington: Education 1, % Human Services 2, % Arts, Culture, and Humanities % Health % Religion, Spiritual Development % 7

10 As shown in Figure 8 the revenue of the four kinds of health-related organizations $22.6 billion makes up 69.5% of the total for all the active public charities. Only two other categories have more than 5%: education 8.5% and human services 6.7%. These three categories hold the largest proportions of assets as well: 56.9%, 17.5%, and 7.3%, respectively. These patterns are shown graphically in Figure 9. Figure 9. Major Service Area Revenues $665,521,341 $2,762,352,919 $10,776,514,144 $3,767,067,774 $22,588,424,965 Arts, culture, and humanities Education Health Human services Other Focusing on service areas shows the predominance of human service organizations and the wide variety of other organizations among active public charities of all sizes. Among the organizations with substantial representation in the list, though, very different revenue patterns exist. In the health category, the average annual revenue for each organization is $33.1 million; in education, including the many small private schools, the average is, in contrast, $2.4 million. Human service agencies average $2.7 million. A similar pattern exists in the assets column, with the difference that educational organizations have, on average, more assets at $7.7 million each, while human service agencies average $4.4. The assets of health organizations (mostly, of course, hospitals and clinics with substantial buildings) average $41.0 million. The presence of philanthropic organizations may appear odd in a list of public charities. The explanation is that community foundations, supported as they are by large numbers of active donors, are classified as public charities by the IRS; private foundations (not included in these figures) are those that operate with income from endowments or large gifts from individuals or corporations. Sources of Support In addition to the distinctions among the services they provide and the variety of communities they serve, nonprofit organizations also differ importantly in the types of revenue that support their work. Figure 10 uses the same service categories as Figure 8 but ranks them from the highest to lowest degree of reliance on contributions, gifts, and grants. (The data for Figure 10 are derived from reports filed in 2011, the most recent year for which this detail is available.) Organizations with an international focus are more than five times as reliant on gifts, grants, and contributions as other organizations while have almost no program service revenue and a very limited amount of other revenue often interest on savings or unrelated sales. At the other end of the scale, health organizations (primarily hospital systems) are more than twice as reliant on program service revenue as other organizations and receive only a small portion of their revenue in the form of contributions. (That small proportion is, however, a large amount of money about $850 million in 2011 for the 363 organizations in this category.) In some NTEE groupings, government contracts represent a large proportion of the program service revenue; in others, such as the arts, program service revenue is primarily the proceeds of ticket sales and admissions charges. The large proportion of other revenue received by mutual benefit organizations is likely to be insurance premiums 8

11 of various sorts; the available data do not, though, allow close examination of this revenue stream. (The calculations used to create Figure 10 relate the proportion of total revenue from each source received by organizations in each service category to the average fraction of total revenue from the same source for the other 25 categories combined.) Figure 10. Reliance on Types of Revenue in NTEE Groups International, Foreign Affairs, and National Security Food, Agriculture, and Nutrition Medical Research Civil Rights, Social Action, Advocacy Philanthropy, Voluntarism, and Grantmaking Environmental Quality, Protection, and Beautification Public, Society Benefit - Multipurpose and Other Religion Related, Spiritual Development Crime, Legal Related Community Improvement, Capacity Building Animal-Related Diseases, Disorders, Medical Disciplines Public Safety Arts, Culture, and Humanities Human Services - Multipurpose and Other Housing, Shelter Social Science Research Institutes, Services Science and Technology Research Institutes, Services Unknown Youth Development Mental Health, Crisis Intervention Recreation, Sports, Leisure, Athletics Employment, Job Related Education Mutual/Membership Benefit Organizations, Other Health 0% 100% 200% 300% 400% 500% 600% Series3 Other revenue Series2 Program revenue Series1 Gifts, grants, and donations (includes dues) 9

12 The Financial Record for Private Foundations In July 2013 there were 1,140 private foundations with addresses in Washington state. Of these, 1,092 (96%) were active, meaning they filed an annual information return with the IRS in the previous two years. After increasing by nearly 25% between 2003 and 2008, the number of active foundations has varied only slightly between 2008 and 2013; the total in 2013 was just 50 higher than the number reported in the earlier years. The current assets of the Bill & Melinda Gates Foundation and Trust total $68.5 billion; the 1,090 other active private foundations collectively hold $7.1 billion in assets. Most of these foundations are quite small: 210 have less than $50,000 in assets and just 160 have more than $5 million. The total assets of the smaller foundations grew by 64%, from $4.9 billion in 2003 to $8.0 billion in Since then, though, the assets of these foundations declined to a low of just under $6.8 billion in 2012 and recovered to $7.1 billion in July of this year. Figure 11. Assets of Private Foundations (With and Without the Gates Foundation) Billions of Dollars Total Assets Total Assets without Gates As shown in Figure 11, the record for the much larger total including the assets of the Bill & Melinda Gates Foundation and its associated Asset Trust has been volatile. The dramatic increase in 2008 is due to the decision by Warren Buffett to donate a substantial amount of his holdings of Berkshire Hathaway stock to the Gates Asset Trust each year, on the understanding that the Gates Foundation will in turn use those funds in its grant program. Grant-making decisions and fluctuations in the stock market have resulted in large changes from year to year since. The impact of the Great Recession is visible in the decline in total assets of the smaller foundations discussed above. The impact of the financial crisis and uncertainties of 2008 appears even more strikingly in the record of gifts and contributions received by those organizations before, during, and after the financial markets froze. Reported gifts to these foundations increased dramatically to $798 million in 2007 and fell by 65% to $280 million in the following year. More recently, the upward trend has re-appeared, with growth from $318 million in 2010 to $648 million in 2011 (the most recent year for which this detail is available). Foundation Grants to Washington Organizations The 2012 edition of Trends in Northwest Giving by Philanthropy Northwest reports on giving by foundations to organizations in Washington in The total amount of grant support $520 million decreased by 6% between 2008 and 2010 because of a decline in giving to state organizations by the Bill and Melinda Gates Foundation. If the changes in Gates Foundation grant making are not included in the totals, the total amount given actually increased by 2% over the two-year period. 10

13 PART TWO Washington Nonprofit Corporations On April 30 of this year, there were 58,495 nonprofit corporations in the roster maintained by the Corporations Division of the Office of the Secretary of State; in the spring of 1994 that count stood at 31,835. The increase over that two-decade span is 85%. The number of nonprofit corporations is larger than the number of exempt organizations discussed in Part 1 for a variety of reasons, the most important of which is that there are many nonprofit corporations ( taxable nonprofits ) which do not qualify for recognition as tax exempt under the IRC. Churches are not required to seek recognition as exempt organizations or provide information returns with the IRS, but they may nevertheless file incorporation papers with the State of Washington to qualify for property tax exemption. It is also true that many nonprofit corporations have so little income ($5,000 or less per year) that they are not required to seek exemption from federal corporate taxes. Figure 12. Active Nonprofit Corporations 58,495 Registered Nonprofit Corporations 32,663 Federally Recognized Tax Exempt Organizations Most nonprofit corporations in this state are organized under the provisions of Chapter of the Revised Code of Washington (RCW); other chapters that provide for specialized sorts of nonprofits but relatively small numbers of organizations have been formed under those rules. The principal feature of a nonprofit corporation is that it cannot be set up with a requirement to pay over excesses of revenue over expenses ( profits ) to any private person (for example, an owner or stockholder). Also, if a corporation ceases operations, any remaining assets must go to another nonprofit corporation and cannot be distributed to members, staff, or other individuals. Mutual benefit (24.06 RCW) nonprofit corporations, such as country clubs and chambers of commerce, are permitted to distribute assets to members if they have any excess available after paying all creditors before ceasing operations. In general, registration as a nonprofit corporation (or a similar kind of organization) is a pre-requisite for application for recognition as an exempt organization by the IRS. Registration with the Secretary of State provides only a confirmation that these Washington-based corporations do not allow distribution of profits to owners, shareholders, or other insiders. No other information about their purposes or activities is collected in the reports from nonprofit corporations. The nonprofit corporations registered with the Secretary of State are found in every part of the state. Figure 13 shows the numbers of nonprofit corporations in each county. The largest numbers are found in the densely populated areas along the I-5 corridor, as might be expected, but nonprofits are found throughout the state in less densely populated areas as well. Figure 13. State Nonprofit Corporations: Counties by Number 11

14 State Nonprofit Corporations: Historic Look From 2005 to 2010, the number of nonprofit corporations increased by an average of 9% each year. The effect of the financial recession that began in 2008 can be seen in the later years in Figure 14, where two years of declines followed those years of solid growth. The most recent data from the Corporations Division show the numbers rebounding to the largest total ever recorded in It is no surprise that many nonprofit corporations have experienced financial difficulties in recent years. Unpublished data from the Secretary of State s office suggests, though, that the principal cause of the change in the rate of increase in the number of nonprofits has been a decline in the number of new corporations being formed, rather than a sharp increase in the number of organizations ceasing operations. Resilient Nonprofits and Nimble Nonprofits, two reports from the Nancy Bell Evans Center, report strategies that have been used by several organizations to deal with the changes in the economic climate and their own financial situation. Figure 14. Number of Nonprofit Corporations How America Gives Project: Washington Counties In the Chronicle of Philanthropy s study, How America Gives, Washington ranked 15th among the states in the total amount its residents donated in 2008 the most recent year for which the detailed information required for this analysis is available. Among counties, King County ranked 9th of the 3,115 in the nation, contributing $1.4 billion of the $3 billion in total contributions reported from Washington. San Juan County lead the state in the dollar amount given per person at $945 while, using the Chronicle s calculated generosity index (median gift divided by estimated household income), Adams County lead the state at 8.1% and was, by this measure, 195th among all the counties in the nation. In general, the southeastern counties rank highest on this measure of household contributions. In spite of its impressive standing among counties in terms of the total amount contributed, King County comes in at number 2,042 well below the median in the ranking of counties in terms of the generosity index. (See Data Note.) 12

15 Events in Recent Months Noteworthy developments of 2012 and 2013 that are related to nonprofits and their work include the following: Kim Wyman elected Secretary of State After serving for 12 years as the Thurston County auditor, Kim Wyman was elected to replace retiring Secretary of State Sam Reed in November. She has appointed a new Charities Advisory Council to assist with the charitable education programs conducted by her office; its members include Judy Andrews, Adam Borgman, Jim Daly, Mary Giannini, Carrie Green, Nola Grier, Stuart Grover (Chair), Moonwater, Alma Navarro, Mike Plymale, Pam Toal, and Tamara Watts. The chief of the Corporations Division, Pam Floyd, was asked to remain in the position and continues to oversee the Charitable Solicitations Program and Nonprofit Corporations programs. Bill Basl goes to Washington The long-term staff director of Washington s Commission on National and Community Service was selected to become director of AmeriCorps for the Corporation for National and Community Service. He was a Vista volunteer in Walla Walla in 1972, and the founding director of the Washington Service Corps prior to the creation of the Commission, which oversees community service volunteer programs in communities throughout Washington. Debbie Schuffenhauer (the former deputy) is the new head of the program. Washington Nonprofits and Philanthropy Northwest organize first legislative reception Secretary of State Kim Wyman hosted the event in her office early in the session with 15 members of the legislature and Governor and Mrs. Inslee attending. This reception was designed to bring nonprofit and philanthropic leaders side by side with our state's legislators to highlight the importance of working together to solve problems. Remarks were given by Carol Lewis of Philanthropy Northwest, First Lady Trudi Inslee and Alison McCaffree of Washington Nonprofits. Washington Nonprofits becomes a member of the National Council of Nonprofits Washington s statewide association of nonprofits was accepted as a full member by the national group that includes similar associations from 36 states across the country. Criteria for membership include broad representation of nonprofits in the home state, active public policy programming, and an engaged leadership. Nancy Bacon has joined the staff as learning manager and Christine Johansen as membership manager. Rick Anderson continues as senior policy coordinator and Alison McCaffree as executive director. Four state legislators join Nonprofit Caucus Senators David Frockt (District 46) and Andy Hill (District 45) and Representatives Maureen Walsh (District 16) and Tina Orwall (District 33) are the co-chairs of a newly formed nonprofit caucus that watched over legislation of interest to nonprofits during the 2013 session. Washington Nonprofits Rick Anderson staffs the caucus. Regional survey assesses breadth of nonprofit association services in five states As one element of the northwest capacity building project supported by the M. J. Murdock Charitable Trust, participating nonprofit associations have each conducted a survey of in-state nonprofits using a common bank of questions. Washington Nonprofits will publish results in a report later this year, and information from Alaska, Oregon, Idaho, and Montana will also be available. 501 Commons expands its services In October, 501 Commons integrated the programs of NPower Northwest to its existing range of management consulting services. 501 Commons now offers financial/bookkeeping services, HR support, and ongoing IT support, including website and database maintenance. In December a website update added many more resources and functions to the Statewide Nonprofit Resource Directory, which includes best practice information and vetted listings of nonprofit consultants and service providers. Also added were the Idea Encore Library and "Nonprofit Networking" (an discussion list) which 501 Commons assumed when Seattle's Alliance for Nonprofits ceased operations in June of During 2012, the Executive Service Corps of Washington, a 501 Commons program, expanded to include over 400 skilled volunteers around the state. Successful nonprofit conferences In addition to regional meetings organized locally in Vancouver and Spokane, Washington Nonprofits hosted the 19th annual state nonprofit conference in Bellevue in May. Governor Jay Inslee and First Lady Trudi Inslee addressed the closing session, recognizing the more than 550 attendees for their services to Washington communities and 13

16 encouraging them to join together to ensure that their voices are heard in policy discussions. As in previous years, the conference was organized in cooperation with the Nancy Bell Evans Center on Nonprofits and Philanthropy at the Evans School of Public Affairs, University of Washington, and the Seattle University Master of Nonprofit Leadership program. The 20 th annual statewide nonprofit conference will take place on May 14, 2014, in Bellevue. David Harrison retires from the Evans School of Public Affairs After 27 years of teaching in the Master of Public Administration program and organizing countless projects connecting students and programs of the Evans School with community service organizations in Seattle and beyond, David Harrison retired in June He received the Lifetime Achievement Award at the 2012 Washington State Nonprofit Conference and his career was celebrated by over 200 former students, colleagues, and friends at a farewell celebration at the Burke Museum in May Department of Revenue continues to look for missed sales tax revenue As in prior years, the Department of Revenue continued to seek out smaller nonprofit taxpayers that should be collecting sales tax on the physical fitness or amusement and recreation services they provide, such as adult sports, dance, and gun clubs. Similar to previous years, the 2013 Legislature did not consider any proposals affecting nonprofits as organizations, though of course the state s budget has many elements that impact the work of nonprofits. New small tax exemptions benefit nonprofits In 2013 the Legislature passed a handful of small tax exemptions that benefited nonprofits, including a use tax exemption for items purchased at fundraisers, expanded exemptions for blood and tissue banks, a sales tax exemption for dancing activities, and a deduction for payroll costs shared among affiliated organizations. In addition, the three-year sunset on a 20% B&O tax surtax expired as of July 1, 2013, reducing the B&O tax rate paid on services by many organizations. Charitable Solicitations Like many other states, Washington law requires organizations making charitable appeals to the public to register with the Secretary of State. In the spring of 2013, there were 6,362 such organizations with addresses in Washington state; an additional 3,762 organizations based in other states were also registered to solicit donations from Washingtonians. The Charities Program in the Secretary of State s office allows organizations that are not required to register primarily churches and volunteer groups with less than $50,000 in annual revenue a way to be identified as exempt through the Secretary of State s website to avoid the suggestion that their fundraising is questionable. There has been a rapid increase in the numbers of these identified but not registered organizations in recent years, from 2,613 in 2011 to 4,841 in This increase is largely due, no doubt, to the fact that the threshold in the state s law for exemption for entirely volunteer organizations was recently raised from $25,000 to $50,000. Urban Online Giving In Most Generous Online U.S. Cities, a report from the donorrelations management company Blackbaud, King County is identified as ranking number one in the nation on another fundraising scale. In 2011 and 2012, donors in the Seattle area gave the highest per capita amount in the nation using Blackbaud to make gifts online. Four other Washington cities were also included among the 265 for which it reported online giving results. Bellevue was 11th in the 2012 totals; Vancouver 65th; Tacoma 90th; and Spokane 117th. Seattle s 2012 result $37.18 per person represented an increase by 35% over the previous year and followed substantial increases in each of the years since As Figure 15 shows, the other Washington cities had less dramatic increases suggesting that considerable potential for greater online support for nonprofits work exists throughout the state. Figure 15. Average Online Donation per Person 14

17 Nonprofits in Washington This 2013 edition of the series Nonprofits in Washington has presented an up-to-date summary of the size, characteristics, and finances of nonprofit organizations active in the state. Each state is different, of course. Education appears more prominently in states, mostly eastern, with larger numbers of substantial nonprofit colleges and universities. Washington s largest universities are all part of state government and not included among nonprofit organizations in the official data. Health, on the other hand, represents a larger proportion of Washington s nonprofits than is found in other states because there are relatively few private or government-operated hospitals serving Washington communities. At a more general level, though, Washington s nonprofits fit well within the broad outlines of the way nonprofit organizations serve communities all across America. They provide needed community services, cooperate with government to address difficult challenges, offer a vehicle for the articulation of people s values, and add richness and variety to life in every part of the state. This report has drawn on two sources of administrative data to sketch the characteristics of the nonprofits that are active today in Washington state. Though these two sources of information are compiled for different purposes by different governmental units, the patterns they reveal are to a large extent parallel and serve to confirm the overall impression that nonprofit organizations are active in every part of the state, have weathered the economic difficulties of the past few years with more stability than might have been expected, and continue to be an essential part of everyday life for everyone in the state in rich and varied ways. Nonprofit Support Organizations 501 Commons Institute of Public Service at Seattle University Nancy Bell Evans Center on Nonprofits and Philanthropy, Evans School of Public Affairs, University of Washington Nonprofit Alliance (Port Angeles) The Nonprofit Network of Southwest Washington Shunpike United Ways of Washington Washington Attorneys Assisting Community Organizations Washington Nonprofits Whatcom Council of Nonprofits Northwest Nonprofit Resources (Spokane) For more resource listings such as nonprofit centers, programs, and associations or regional support and training, visit the Nancy Bell Evans Center webpage. 16

18 Data Notes For page 1 The National Center for Charitable Statistics (NCCS) is a service of the Center on Nonprofits and Philanthropy at The Urban Institute in Washington, DC. The Internal Revenue Service provides NCCS with information derived from the reports it receives on various versions of Form 990. NCCS uses this information to create two sets of data files. The Business Master File (BMF) includes a limited number of data fields from all organizations that are currently recognized as tax exempt and has been lightly screened to guard against recurrent errors (such as reporting dollar amounts rounded to the nearest $1,000). The Core Data includes a larger number of data fields, but is based on a less current set of filings. In both cases, the NCCS includes a field that allows the user to restrict the organizations selected for study to those whose data are based on a report received by the IRS within the 24 months preceding the date the information was received from the IRS. In preparing the tables and graphs used in Nonprofits in Washington, we have generally limited the selection to these more recent filers; they are identified as active in the titles and in the text. The public pages provided by NCCS offer a great deal of detailed information about exempt organizations and related topics at The subsections of the Internal Revenue Code for all tax exempt organizations are listed by Guidestar with brief explanations at The most recent reports from NCCS do not include counts of Internal Revenue Code 4947 trusts; these organizations were included provided by NCCS in earlier years and, as a result, larger total numbers of exempt organizations appeared in reports for those years. The various types of Form 990 are listed by the Internal Revenue Service with brief explanations and links to additional information at File%3F-(Filing-Phase-In). Form 990-N is used by organizations with less than $50,000 in annual revenue The rules requiring regular filing to maintain tax exempt status and the introduction of new versions of Form 990, including the 990-N, have led to significant changes in the kinds of data about smaller organizations available to NCCS from year to year since the mid-2000s. Information about the e-postcard (990-N) filed by organizations with less than $50,000 in annual revenues is online at Organizations-Form-990-N-(e-Postcard). For page 2 Population estimates for Idaho, Oregon, and Washington are found at For Washington counties, the Office of Financial Management publishes Washington State County Population Projections for Growth Management by Age and Sex: : For page 6 The 15 health care organizations mentioned in the text are Providence Health & Services Washington ($3,618,345,347); Group Health Cooperative ($3,098,908,115); Peacehealth ($1,637,731,131); Swedish Health Services ($1,599,404,602); Multicare Health Systems ($1,375,240,436); Franciscan Health System ($1,168,872,747); Virginia Mason Medical Center ($892,338,285); Seattle Children s Hospital ($863,927,902); Fred Hutchinson Cancer Research Center ($470,606,324); Overlake Hospital Medical Center ($426,023,134); Harrison Medical Center ($363,614,620); Seattle Cancer Care Alliance ($358,084,282); Yakima Valley Memorial Hospital Association ($324,329,352); and Kadlec Regional Medical Center ($296,237,550) the organizations most recent reported total revenue is shown in the parentheses. World Vision ($1,055,753,031) is the only additional exempt organization based in Washington with more than $1 billion in revenue. The 15 health care organizations plus World Vision organizations represent one-tenth of 1% of the number of 501(c)(3)s in Washington, yet receive 57% of the total revenue of the organizations in that group with more than $50,000 in revenue. No financial information is available for the 11,231 organizations with less than that amount of revenue. 17

19 The data used to make Figure 6, Total Revenue and Assets of Public Charities with Revenue Greater than $50,000, were adjusted to remove divisions of Providence Health Care that operate in other states, but were reported with Washington s data in some years and to include PeaceHealth in every year. Nimble Nonprofits is available online at The Johns Hopkins University report on nonprofit employment is available online at The Urban Institute estimates are included in Katie L. Roeger, Amy S. Blackwood, and Sarah L. Pettijohn. The Nonprofit Almanac For page 7 Nancy Bell Evans Center website with county NTEE data is located at For page 9 The information for Figure 10, Reliance on Types of Revenue, and the information on gifts, grants, and contributions to private foundations comes from the Core Data file for 2011 (i.e., for organizations filing a Form 990 within the preceding 24 months). For page 10 Philanthropy Northwest s Trends in Northwest Giving report for 2012 is available online at For page 11 Information on the current number of Washington State Nonprofit Corporations and of registered fundraising organizations is provided by the Corporations Division of the Office of the Secretary of State. Information for and about nonprofit organizations and the requirements of the Charitable Solicitations Act (RCW 19.09) is available online at The map showing the numbers of nonprofit corporations in each county was created using the ZIP codes of the registered agents as reported to the Corporations Division by nonprofit corporations. Registered agents are required as part of a corporate filing to provide an address within the state where the corporation may be contacted if necessary and other methods fail. Since registered agents may be law offices or other service bureaus, they may not be located in the same county as the principal office of the corporation itself and, of course, are more likely to be located in urbanized areas where services of that type are routinely provided. For page 12 For How America Gives, the Chronicle of Philanthropy obtained comprehensive tax records from the IRS for 2008, the most recent year for which such data are available, to examine income levels and the sums claimed in charitable contributions for taxpayers in each ZIP code. The IRS releases total amounts donated, but to protect privacy, the agency does not provide data about the specific charities people supported. Because of discrepancies in the data for people with income below $50,000, The Chronicle of Philanthropy s study includes only taxpayers who reported incomes of $50,000 or more. Readers can use the online edition of this report to find detailed breakdowns, by income level, showing the percentage of income donated by people in various income brackets for each ZIP code. The report is online at Gives/621/. For page 14 Blackbaud has published the data on mobile giving for all 265 cities in Most Generous Online U.S. Cities online at 18

20 The Nancy Bell Evans Center works to enhance the understanding and vitality of the nonprofit and philanthropic sector through research, education, and community engagement. The Center's faculty and affiliates conduct research on a variety of topics including nonprofit and philanthropic accountability and certification, charitable solicitations and regulation, nonprofit resiliency, financial accountability and performance management, and public private partnerships. The Center also convenes members of the academic, nonprofit, and philanthropic communities to stimulate thinking on current issues, share research and best practices, and promote increased dialogue and collaboration. Bringing together nonprofits from throughout the state, Washington Nonprofits facilitates communications and networking, convenes regional and topical groups to share information to improve performance, and encourages nonprofits to become engaged in sector-wide policy issues. Washington Nonprofits connects with other regional and national organizations to strengthen nonprofit organizations and to increase public understanding for the work nonprofits do throughout the state. Founded in 2009, Washington Nonprofits officially launched services in October By the summer of 2012, Washington Nonprofits had grown to include over 300 members and was recognized as an emerging statewide association by the National Council of Nonprofits. 203 Parrington Hall Box Seattle, WA nbec@uw.edu State Avenue NE, #303 Olympia, WA info@washingtonnonprofits.org