Are There Too Many Nonprofit In The United States and Does The United States Need Any New Tax Exempt Organizations?

The profit community plays an essential role in improving communities in the United States and around the world. I am strongly against any eliminations and/or restrictions on the number of nonprofits granted tax exempt status.

I have written a number of posts on “Should You Start a Nonprofit in Today Economy?” This is an important question that many in the nonprofit sector are asking today. There are a variety of opinions on this issue as discussed in my previous posts.

Now the questions that are being asked “Are there too many nonprofit in the United States and does the United States need any new tax exempt nonprofits?” Let’s take a good look at this discussion.

A recent discussion that was posted on a Linkedin group discussion forum, Don Griesmann’s wrote an excellent post on “2010 New Year Resolution-No New Nonprofit unless.”

I basically agree with his post with very little exceptions. Don believe that unless an organization meet the requirements on his “unless List” it should not really consider starting and applying for nonprofit status nor should it be given the given the privilege of nonprofit tax exemption status. I support his concept in theory but not in reality. I do not want any barrier to the nonprofit start-up and development or the tax exemption process. However, I do support his “unless list” because it is a guideline that spelled out what is required and necessary for a nonprofit to survive and thrive so that it can achieve its mission. If taken as stated, it will eliminate those organizations that are not serious nor really able to committed doing what is necessary for success.  Although I agree with Don Griesmann’s “Unless Criteria List” only for the purpose of discussion and information for new nonprofits, I do not wish to give IRS or any other government agencies any more legal authority to regulate and monitor nonprofit organization.

I totally disagree with those that believe there are too many nonprofit, my reasons were articulated in my post on “Start and Maintaining a Nonprofit Organization in tough Economic Times” in my blog post.  In tough economic times we should not be trying to discourage or make it more difficult to start new nonprofits nor make it even more difficult through rules and regulations to maintain its tax exempt status. I think that the people in their own communities should and will make the determination as to whether there are enough nonprofit in their communities by their actions and support. No one should be given the authority to determine or pick and chose which organizations and services are important or relevant to a certain community or group!

One of the main arguments for restriction is that there is a limited amount of funding to go and therefore said funds should be allocated only to organization that can show success. This reasoning basically eliminates newer and smaller organizations and does not take into account that approximately over 80% of all donations to charitable organization come from individuals. These individual will make their own determination as to whom they want to support.

Furthermore many of the proponents of restricting the number of nonprofits have overlooked to some very important considerations as to why we should not restrict nonprofit growth such at employment and finances.


  • In 2005, nonprofits employed 12.9 million individuals, or approximately 9.7 percent of the U.S. economy. This is greater than the number of people employed by the financial activities sector.
  • Employees of nonprofit organizations account for 8.1 percent of wages paid in the U.S. in 2006.12
  • In 2006, the nonprofit sector accounted for 5.0 percent of GDP.


  • In 2005, the total expenses of all reporting public charities – public charities required to file Form 990s with the IRS –totaled nearly $1.1 trillion. Total revenues were estimated also at $1.1 trillion.
  • Most nonprofits are small. More than 73 percent of reporting public charities reported annual expenses of less than $500,000 in 2005. Less than 4 percent of reporting public charities had expenses greater than $10 million.
  • The total combined assets of all nonprofits are estimated at $3.4 trillion for 2005.
  • Reporting public charities held $2 trillion of total assets.

The above employment and finances were taken from the fact sheet listed below.

The facts that some experts use to suggest why there are already too many nonprofits in my opinion are just facts. Facts can be analyzed, interpret and utilized in many ways and in particular to benefit the user.  Please find facts which some experts use to support their position that there are too many nonprofit.

According to the Independent Sector Fact Sheet

There are over 1.9 million nonprofit organizations in the United States. The Internal Revenue Code defines over 27 categories of organizations exempt from federal income taxes, including private country clubs, labor unions, business associations, fraternal organizations, and many others. The majority of these organizations – about 1.5 million of them are public charities–Public charities are the face of the nonprofit sector in the United States, and they include most nonprofits in social services, health care, education, and the arts. (Religious congregations are also treated as public charities, though they are not required by law to seek approval and register with the IRS.) These organizations make up the independent sector.

The independent sector includes 501(c)(3)s (public charities, private foundations, and religious congregations) and 501(c)(4)s (social welfare/advocacy organizations). Together these organizations are sometimes referred to as the independent sector to emphasize their unique role in society, distinct from government and business.

There are approximately 1.4 million 501(c)(3) organizations, including hospitals, museums, private schools, religious congregations, orchestras, public television and radio stations, soup kitchens, and foundations.

Whereas other types of nonprofit organizations benefit the private, social, or economic interests of their members, 501(c)(3) organizations must benefit the broad public interest.

A new study by a Stanford group shows that over 50,000 new nonprofits are recognized by the IRS as tax exempt organization each year. The total number of independent sector groups has approximately doubled in the last 15 years. Obtaining 501(c)(3)tax exempt status is a valuable thing. It entitles organizations not only to tax exempt status, but also permits donors to claim tax deductions for their gifts.

One of the argument raise on reasons for limiting the numbers of organization giving 501(c) (3) tax exempt status is lost revenue to IRS.

In 2008 Americans donated more than $300 billion to 501(c)(3) organizations, costing the United States Treasury an estimated $50 billion in foregone tax revenue.

I discuss the above argument in my December post.

There is a great deal of focus on the fact that fact that the IRS approves more than 50,000 applications for 501(c)(3) status every year and rejects only a very, very small number of applicants. Obtaining recognition by the IRS as a public charity is not that difficult and especially for a skilled professional! The IRS offer online and off-line help in the application filing process. It’s not the intention of the IRS to deny exempt status to organizations that meet the requirements as state in the application for tax exempt recognition.

There are some who propose various reform measures to strengthen the oversight of the tax exemption determination process. These individuals or groups want to eliminate the numbers of successful filing and/or because of some organizations that have been granted tax exempt status are viewed as bizarre or eccentric by some observers. I  personally have some real concerns and strong objections with reform measures to strengthen the determination process for the purpose to disqualifying or eliminating the number of successful filing solely to keep the numbers down or because some organization have bizarre or eccentric purposes. What may have been deemed bizarre or eccentric missions a short time ago may be seen as normal today or tomorrow!

The reforms as proposed could and will lead to some serious discrimination practices against certain groups that have already being giving protected rights under the U.S. Constitution. Presently there is litigation pending and various challenges in court relating to IRS and other governmental agencies regulatory and enforcement practices against certain charitable groups and in particular one religious group.

If an organization meets the requirements as specified in under IRS 501(c) (3) for recognition as a tax exempt organization then it should be given the same rights and privilege accorded to all others organization under the statue. We should not have personal believes, biases and prejudice entered into the 501(c) (3) Tax Exemption process.

The Nonprofit World Responds

A massive, 7.0 magnitude Earthquake struck Haiti near the capital of Port-au-Prince on Tuesday, January 12th. The lives of approximately 3 million people have been shattered by the devastating earthquake in Haiti. In spite of the tough U.S. economy more than $305 million was donated to 32 U.S. nonprofit groups within eight days after the massive earthquake struck Haiti.

Many groups are raising large sums for relief efforts in Haiti online and through text messages. It has been estimate that this will be the most funds every raised by donations giving through text messages. People gave to various nonprofit organizations that were helping in the fund raising relief efforts. Many individuals and groups gave to multiple relief organizations. Nonprofits of every kind and of all sizes help in the fund raising relief efforts.  The unprecedented help give by nonprofit of all types support the argument that we should not set a limitation on the numbers of nonprofits giving tax exempt status.

Your help is urgently needed! Relief agencies are continuing to rush aid to survivors of this deadly disaster. You can donate to your charity at: Network For Good is a fund raising portal that has been around for some time collecting funds for creditable nonprofit organizations. The above list only represent a small numbers of the organizations that you can made a donation and feel comfortable  that your donation will reach the people in need.

You should take a look at: The DOs and DON’Ts of Disaster Donations!

Hope for Haiti! Do what you can with what you got!

Keep on extending that hand!

Quotes of the Moment

“Every set-back is a set-up for a comeback”- Joel Osteen

“If I were asked to give what I consider the single most useful bit of advice for all humanity, it would be this: Expect trouble as an inevitable part of life, and when it comes, hold your head high. Look it squarely in the eye, and say, I will be bigger than you. You cannot defeat me.” – Ann Landers

“When written in Chinese, the word ‘crisis’ is composed of two characters. One represents danger and the other represents opportunity.” — John F. Kennedy

“Nobody made a greater mistake than he who did nothing because he could do only a little.” – Edmund Burke

“Every tomorrow has two handles. We can take hold of it with the handle of anxiety or the handle of faith”- Kahil Gilbran

“Faith consists in believing when it is beyond the power of reason to believe.”-Voltaire

If you know of any nonprofit organizations doing great work offering hope for the hopeless, please sent me an email. The organizations may get mention in a later post or may even get listed as a resource on my web site. Please take a look at my newsletter for other tips, resources and valuable information.

If you know of resources that you think would be helpful to other, please forward their contact information so that we can share it. Keep checking back here for more information, ideals and comments as we moved forward in these tough times.

See you soon!


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