Taxation and Representation

The New York Times recently published an article called “Tax Exemptions of Charities Face New Challenges” about local, state, and even federal governments questioning the tax-exempt status of nonprofit institutions. The article claims the tax-exempt status of charities costs local governments $8 billion to $13 billion annually. I’ve always found estimates like this very dubious. It doesn’t take into consideration any of the benefits nonprofits provide. Besides, if local governments all flipped a switch and took away the tax exemptions tomorrow, it’s not clear that they would get all that money. It’s not like the private sector always pays taxes either. For the promise of more jobs and sales tax revenue, large corporations can negotiate tax abatements and even tax payer funded financing and capital improvements. One retailer, Cabela’s, relies so heavily on this strategy they had to put a disclaimer in their annual report, according to this article.

The New York Times story centered around a court case in Minnesota where a daycare center was deemed not charitable enough and will now have to pay property taxes. However, there are plenty of examples closer to home. With Massachusetts facing a budget crisis, tax-exempt nonprofits are getting closer scrutiny. State legislators are considering imposing a 2.5 percent annual assessment on universities with endowments of more than $1 billion, like Harvard’s which has reached $35 billion.

But it’s more than just an issue of budget shortfalls. As nonprofits strive to be more “business-like” and create more consistent revenue streams with earned income, there is growing confusion over what it means to be a nonprofit. What does this have to do with marketing? Well it’s really a branding question. What does the nonprofit brand mean? How is a nonprofit daycare center or hospital different from its for-profit counterparts? Lots of questions, no simple answers.

For example, I pay what I consider to be a ridiculous amount of money (even with insurance) for mostly adequate medical services. Until I got a fundraising letter in the mail, I did not know the clinic where my doctor practices is a nonprofit. At that point, it was too late for them to define their brand with me. Corporations spend billions on their brands and yet brand identity isn’t really determined by a color, or slogan, or ad campaign. It’s the sum of experiences your audience has each time they encounter your brand – each client, employee, donor, etc. Ultimately, you don’t define your brand, your audience does. So what can an organization do? Set an easy-to-understand target and make sure everything it does is consistent with that brand identity. That's easier said than done. Marketing is hard work.

There is still a question of whether the nonprofit community can, or even should, have a cohesive brand identity. How much does a small, volunteer-run, start-up have in common with a large, hundred-year-old hospital or university? I’m keeping my eye on the Massachusetts Nonprofit Network. One of the stated goals of this new organization is “Build the public image of the nonprofit sector … to increase the valuing of our sector and its clients by the general public, policy-makers, and the state legislature.” It will be interesting to see how that effort unfolds.

A Tale of Two Universities

I am an alumna of two universities – Indiana University and University of Michigan. Now that I'm making a career in the philanthropic sector, I have a new perspective on the correspondence I receive from these institutions. I collect fund raising appeals the way I used to collect surveys when I was heavy into market research. I think Michigan is doing a much better job of cultivating me as a future donor. Here’s why:

Indiana: To entice me to send a donation, IU sent me address stickers. I like them and I use them, just like the ones I get from the Paralyzed Vets and WWF. I don’t send money.

Michigan: I just got a letter containing a “printer’s proof” of the Investor’s Report which contains the names of everyone who gave $100 or more. Guess what, there’s still time for me to make a donation before the final printing! And, there’s a matching gift challenge. That’s clever.

Indiana: IU sends me mail addressed to me and my dead, ex-husband. I think he was added to my record several years ago when we attended an alumni event in Bloomington. I never understood why they have to put his name on every piece of mail. He never went to school there. I sent back one of their reply forms asking them to remove him, but it did no good. I think I occasionally get a glossy publication from the business school, but the vast majority of the mailings are fundraising appeals. The IU Foundation used to call me. I worked at the Foundation for a while, so I always tried to be nice to the students calling me. They haven’t called in years. If they did, they might learn why I don’t give anymore.

Michigan: U of M sends me a wide variety of correspondence, both from the University and from the School of Business, via mail and email. I also get emails from the local alumni chapter. They send fundraising appeals, but also alumni news and occasionally very targeted communications that are extremely relevant to me – like an email from the dean of the business school explaining our ranking in U.S. News and World Report. That’s news every MBA wants to know.

Indiana: I went to an alumni event one year at IU. It involved a football game and a very nice dinner reception. It was fun, but it didn’t enhance the value of my degree. Let’s be honest - no one in Indiana cares about football and there’s no way they could have gotten a block of basketball tickets for non-season ticket holders. It’s certainly not why I went to school there.

Michigan: The U of M business school puts on a reunion every year that includes a one-day conference with great speakers. Last year Dr. Maya Angelou gave the keynote. I used to attend every year when I lived closer. Oh yeah, there’s also an opportunity to go to a football game if you like.

What’s So Mysterious About Web 2.0?

Every time I see an event listed about “Web 2.0,” especially if it’s “Web 2.0 for Non-Profits” I think I should be there. I seem to believe that there is some great and secret knowledge out there about how to use the Web that I’m missing. Granted, I’m not an expert or I’d be giving these presentations, but every time I go to one I mostly discover that there is no magic answer and I already know more than I thought.

Such was the case with yesterday’s “Web 2.0: New online tools that are transforming Nonprofits” presentation at Nonprofit Net. (For those not familiar with Nonprofit Net, it’s a volunteer-run organization in Lexington, MA with a seminar series for small non-profits.) The presenter was clearly knowledgeable, but did not understand his audience. My guess is he’s used to talking to techies. The presentation was fairly academic and philosophical, answering questions like “What about Web 2.0 is evolutionary vs revolutionary?” Audience members who came hoping for concrete suggestions they could take back and implement were largely disappointed.

I did pick up a couple of interesting pointers. For instance, he suggested that parent organizations with regional chapters could use RSS to aggregate news from each of the chapters on their website. That’s clever. He also mentioned an open source CRM system for non-profits called CiviCRM. That could come in handy. Lastly, he mentioned a “Grassroots Use of Technology” conference on June 28, 2008 in Lowell. That may be too techie for me, but I’ll keep an eye on it and I may go.

Just because yesterday’s presentation didn’t have a lot to teach me, doesn’t mean I don’t have a lot to learn. Today’s marketing majors are taking college courses in “Social Media.” I need to keep up. Here is an article I found on del.icio.us about it (Web 2.0 props to me for finding it) and here is an article about Web 2.0 Nonprofit Success Stories. And the journey continues …