This week, a guest column by Robert Reich entitled “What ‘charity’ should really mean” appeared on the Christian Science Monitor's website. In his column, Reich challenges the idea of tax-deductible donations to arts organizations, arguing that these deductions primarily support the lifestyles of the wealthy.
Reich’s article highlights that we have serious a public perception problem. Either we are not doing enough work to share the arguments we use to demonstrate our value to those outside the bubble of our field, or we need to develop a new set of tools and arguments that will speak to those outside the field in a more meaningful way. We began delving into this issue with a group of chief executives last May at our Summit at Sundance, and I feel confident knowing that there is a very strong group of cultural leaders who are out in the field applying the ideas discussed at this convening. However, if we are to succeed in proving our value to the extent that it warrants a tax benefit, we must, as a field, come together to develop compelling arguments that prove our relevance to those who haven't “drunk the Kool-Aid.”
Beyond the perception of who the arts are for, there are real economic questions at play in the debate over tax exemptions for charitable organizations. Last year, Dan Caplinger of The Motley Fool posited that large nonprofits place a burden on municipalities because of tax revenue loss and use of city services, noting that “tax-exempt nonprofits need to consider whether the benefits they give local townspeople truly outweigh the costs. If not, then voluntarily making payments in lieu of tax may be the best solution for everyone.” While payments in lieu of tax may negate the purpose of the nonprofit model, where surpluses are reinvested in the organization to support its public service, we do need to consider how nonprofits can demonstrate that we are worthy of the benefits and status we receive.
Maybe some organizations do need to explore new models, for example the low-profit limited liability company (L3C). But for the rest of us, how can we overcome misconceptions that our work only serves the wealthy donors, whose likenesses appear splashed across the society pages at our galas and opening night parties or whose names grace our facilities and programs? How can we take the story further to show the impact of the money raised at those very parties? How can we challenge ourselves to make sure that every program, event and initiative genuinely serves our communities, and to share that impact externally?
Dan Pallotta does a great job of explaining why it takes substantial investment to yield substantial value in a TED talk from earlier this year. Neil Edgington provides a framework for thinking about revenue generation as financing, rather than fundraising, and offers several ways nonprofits can effectively position their work to garner support. Edgington states that, “With solid results to point to, you can confidently ask other people to invest in your successful work. At the end of the day, if your nonprofit is creating positive community value then you should confidently be asking for the money necessary to make that value grow.”
I received Reich’s piece in an email with the subject, “We ignore these things at our peril,” and I couldn’t agree more. This issue isn’t new, and it isn’t going to magically resolve itself. We can no longer dismiss views like Reich’s. Instead, we need to embrace these perspectives – to understand why we aren’t viewed as worthy of our tax status we must ask ourselves if what we are doing is really serving the public good or only an elite few. It is our responsibility to prove our value and to be prepared to defend what we do.
Read more: Marc Vogl responds to Reich in "To Be (a charity) or Not To Be, That is the $40 billion question"