We love reading end-of-the-year Top 10 lists. So, we thought it might be fun and hopefully thought-provoking to publish a Top 10 list of the events of the decade affecting the nonprofit sector. Please add your additions in the comments. And have a happy holiday season!
Here's our list (in chronological order):
- September 11 Terrorist Attacks (2001)
- Senate Finance Committee Staff Discussion Draft on Charitable Reforms (2004)
- Hurricane Katrina (2005)
- Pension Protection Act (2006)
- Muhammad Yunus and Grameen Bank win Nobel Prize (2006)
- An Inconvenient Truth (2006)
- Warren Buffet gift of $31 billion to the Bill and Melinda Gates Foundation
- Election of President Barack Obama (2008)
- Redesigned Form 990 (2008)
- Global Financial Crisis (2008-09)
- Formation of Kiva (2005)
- Nonprofit Integrity Act of 2004 (particularly for California nonprofits)
- The rise of social media certainly deserves mention even though I did not include one representative event
The events of September 11th sparked increased attention on international charity and disaster relief. Investigations post-9/11 revealed accusations and in extremely rare cases, actual use, of charitable organizations funding terrorist entities. This prompted the initial version of the Treasury Department’s “Anti-Terrorist Financing Guidelines” which was later updated in response to the strong opposition from the nonprofit sector regarding its accuracy, practicality, and (negative) effect on U.S. involvement in international charity. Additionally, there was an outpouring of donations in the aftermath of September 11th but questions were raised whether the meaning of “charitable class” within the Internal Revenue Code would require an organization to engage in intense fact-inquiries to determine "need" before providing relief to victims. In response, Congress passed the Victims of Terrorism Tax Relief Act in 2002 which allowed relief payments to victims of the 9/11 attacks without a specific assessment of the individual’s financial need so long as the payments were made in good faith.
Senate Finance Committee Staff Discussion Draft on Charitable Reforms
On June 21, 2004, the U.S. Senate Committee on Finance, led by Chairman Senator Charles Grassley, released a Staff Discussion Draft that proposed a series of reforms focused on transparency and accountability. Among such proposals were (1) a five-year review of tax-exempt status by the IRS, (2) application of private foundation self-dealing rules to public charities, (3) only de minimus compensation to private foundation trustees, (4) mandatory audits for organizations with over $250,000 of gross receipts, (5) board composition of no less than three and no more than 15 members, (6) donor advised fund reforms, (7) elimination of Type III supporting organizations, and (8) revision of the Form 990 (and related forms). The proposals became the basis of important dialogue in the nonprofit sector and resulted in the convening of the Panel on the Nonprofit Sector. The Panel published several highly influential reports to Congress and to the sector that adeptly argued against some of the Staff Discussion Draft's ill-advised proposals and resulted in a number of reforms and recommended best practices.
In response to Hurricane Katrina, Congress passed the Katrina Emergency Tax Relief Act of 2005 which enacted several tax provisions to give relief to the victims of the affected areas, promote charitable contributions to aid these victims, and avoid one consequence that had occurred in the aftermath of September 11th – the downturn in giving to charities other than those specifically providing relief to the victims of the event. One notable provision was an increase in the deductible cash donations amount from 50 to 100 percent of one’s adjusted gross income for donations to Katrina relief efforts. The largest recipient of donations for Katrina relief efforts, the American Red Cross, met heavy criticism for its management of the funds and its poor governance practices. As a result, the organization embarked on a comprehensive governance reform process.
Pension Protection Act
Signed into law in August 2006, The Pension Protection Act of 2006 enacted a number of charitable reform provisions addressing concerns raised by the Senate Finance Committee Staff Discussion Draft and incorporating recommendations of the Panel on the Nonprofit Sector. Many of the reforms focused on Type III supporting organizations and donor advised funds. Additionally, the Act mandated revocation of tax-exempt status for failure to file Form 990 for three consecutive years, a new federal annual reporting requirement for charitable organization with an annual income of less than $25,000, and increased penalties for self-dealing (private foundations) and excess benefit transactions (public charities). The Act also provided incentives for charitable giving, for example, in allowing individuals over 70 ½ years of age to transfer up to $100,000 tax-free from Individual Retirement Accounts (IRA) to charitable organizations in both 2006 and 2007. In addition, the Act targeted donor abuses by limiting charitable deductions of clothing and household items to those in “good used condition,” disallowing charitable deductions for property that is not used for the organization’s exempt purpose, and requiring receipts for cash contributions to charitable organizations regardless of the amount.
Muhammad Yunus and Grameen Bank win Nobel Prize
Muhammad Yunus founded the idea for Grameen Bank (“Village Bank”) in 1976 in his native country, Bangladesh, to provide collateral-free, small loans to impoverished villagers for self-employment, housing, and education. The Grameen Bank exists under special legislation that establishes it as independent bank and is owned mainly by the borrowers of the bank. Women comprise 97% of the borrowers and Grameen boasts an impressive 96.68% loan recovery rate. As a bank system “based on mutual trust, accountability, participation, and creativity" rather than conventional banking principles, along with a few similar organizations (ACCION is noteworthy), it stands apart as a unique institution in the fight against poverty. Its success has acquired international attention both before and after Yunus and the Grameen Bank were jointly awarded the Nobel Peace Prize in 2006 "for their efforts to create economic and social development from below." Yunus and the Grameen Bank continue to inspire other nonprofit organizations such as the San Francisco Bay Area-based Kiva, a person-to-person microlending organization.
An Inconvenient Truth
In the 2006 documentary An Inconvenient Truth, director
Davis Guggenheim captured former Vice President Al Gore, a long-time champion
of the environment, on his campaign addressing the climate crisis. The
documentary was based off of a slideshow presentation that Gore had given
across the U.S. and worldwide on global warming. Not only did the documentary
become one of the highest grossing documentaries to date in the United States
and receive numerous awards including an Academy Award for Best Documentary
Feature and a Special Award from the HUMANITAS Prize, it had a profound effect
in educating millions of viewers worldwide about important energy issues and
served as a call for change on all levels, from Capitol Hill to the individual
responsibility to reduce one’s carbon footprint. An Inconvenient Truth still
serves as a well-known platform for many leaders, organizations, and
individuals to continue these discussions and make efforts to stop global
Warren Buffet gift of $31 billion to the Bill and Melinda Gates Foundation
In June 2006, Buffet announced his gift worth $31 billion at the time (approximately 85% of his fortune) to the world’s largest foundation, the Bill and Melinda Gates Foundation. This gift was unprecedented in its amount. The Washington Post estimated that it far exceeded the donations of past great philanthropists like Andrew Carnegie ($7.6 billion in today's dollars). It was also unusual in character because Buffet had opted to put this money into another foundation rather than follow the more commonly seen route of creating a new one in his own name. Many viewed this gift in excitement as an inspiration to other major and minor donors alike to make other remarkable donations, and as a sign of a promising future for the global heath and American education purposes of the Gates’ Foundation. Others viewed this gift with apprehension due much in part to the fact that Buffet’s gift essentially doubles the assets of Gates’ Foundation, an amount larger than the next nine largest foundations combined. Other concerns came from charitable organizations outside of health and education that will never see this money, and the gift reinvigorated criticism of the Gates’ Foundation centralized control as well as uneasiness that the government will take too much of a back seat given that the Gates’ Foundation must spend the estimated $1.5 billion that will come in each year from Buffet by year-end.
Election of President Barack Obama
The National Council of Nonprofits called Barack Obama "America's first nonprofit President." Barack Obama's early career as a community organizer for Developing Communities Project, a Chicago-based public charity, is described in the following article published in The Nation: Obama's Community Roots. The article quotes President Obama as saying: "It's a consequence of working with this organization and this community that I found my calling. There was something more than making money and getting a fancy degree. The measure of my life would be public service."
President Obama's successful campaign has certainly influenced the use of social media by many nonprofits. See "What nonprofits can learn from Obama's win." And his calls to service have increased attention on volunteerism. On April 21, 2009, President Obama signed into law the Edward M. Kennedy Serve America Act.
Redesigned Form 990
The redesigned Form 990 in 2008 was the first major redesign since 1979 to reflect how the “growing sector operates in the 21st century." The IRS stated that the changes were made based on three guiding principles: transparency, promotion of compliance, and minimization of organizations’ burdens in preparing/filing the form [chuckle - GT]. The overall result is an expanded, more comprehensive information return with more narrative than financial data. Among the controversial changes were those focused on governance and required disclosures of governance policies. The redesigned Form 990 provided a meaningful snapshot into the IRS’s concerns and where future legislative reforms may occur. Forms 990 are posted publicly by Guidestar, so increased scrutiny on governance, policies, compensation, and transparency will continue to come from all parties concerned with the organization - the IRS, state regulators, donors, employees, volunteers, media, charity ratings organizations, and the general public.
Global Financial Crisis
The global financial crisis of the past few years has created a greater need for services provided by nonprofits while reducing donations and other sources of revenues. In the fall of 2008, NYU Professor Paul Light predicted that as many as 100,000 mostly smaller nonprofits would disappear during the recession based on an extrapolation of small business failure rates during the past two recessions. He has since revisited his prediction, but the winnowing of the sector is clearly underway, and the upcoming year may be harsher than the previous one. While large numbers of nonprofits are reducing services, laying off staff, and operating in the zone of insolvency, the crisis also has created opportunities for nonprofits looking to innovate and improve and new nonprofits and for-profit social enterprises to compete in the marketplace.
More on the honorable mentions to follow...
- Emily Chan & Gene Takagi