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Neil Bania and Laura Leete

Considerable theoretical and empirical progress has advanced our understanding of the role and value of the volunteer, resulting in improved estimates of volunteer labor valuation. Yet this task still involves conceptual and methodological challenges. Conceptually, costs and benefits accrue to the organization, the volunteer, and to society. Depending on one’s purpose, the focus may be on one or more of these concepts. To date, researchers have pursued three approaches: opportunity cost, replacement cost, and organizational value. Methodological challenges result from a lack of consensus on how to define volunteerism. There is still no comprehensive assessment of methodological differences for counting volunteer hours and researchers have not clearly documented which approaches yield the most accurate estimates. More generally, on-going analysis of volunteer hours in national datasets is largely missing and research that directly measures either the replacement value or the organizational value of volunteers is in its infancy.

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Bruce A. Seaman

Coherent pricing strategies are important to for-profit firms, but can also be vital to nonprofit organizations. This is clearly true for the arts, education, and hospital and health-care sectors, but can also extend to nonprofits providing vital social services to low-income and otherwise vulnerable populations. By clarifying both static and dynamic pricing strategies that have been successfully used by for-profits, and examining their current application and potential expansion within the nonprofit sector, the striking similarities as well as ongoing distinctions between the two sectors are clarified. Especially in a political climate threatening to be less generous to nonprofits committed to diverse missions, understanding how to generate more earned revenue via shrewd price discrimination, tying/bundling, and yield management and peak-load pricing strategies is vital. Classic research results are incorporated with current theoretical and empirical developments to provide a comprehensive picture of pricing in the nonprofit sector.

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James Alm and Daniel Teles

State and federal tax policy in the United States generally favors nonprofit organizations, and particularly nonprofits classified as 501(c)3 nonprofit charities. This favorable tax treatment comes from two types of tax policies. First, nonprofits are exempt from paying a variety of taxes, including the federal corporate income tax (CIT) and many state and local taxes. Second, individuals are encouraged to donate to nonprofit charities through favorable policies in the federal income tax, state income taxes, and the inheritance tax. In this chapter we present some basic material on the tax treatment of nonprofit organizations and then examine what we know and what we do not know about state and federal tax policy toward nonprofit organizations.

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Jack Quarter and Laurie Mook

In this chapter, Jack Quarter and Laurie Mook present a social economy framework for understanding the extraordinary variety of organizations that are guided by social objectives – non-profits, co-operatives, and social enterprises. The framework highlights the similarities and differences of social economy organizations, and how they interact with the other sectors of society. Prioritizing social objectives affects how these organizations function; it places constraints on the disposition of surplus earnings and who can benefit from the assets, which are used to create social wealth, not individual wealth. Social economy organizations also face common issues, including the need to build awareness of their role and impact, and to prepare a workforce to manage multiple bottom lines. In brief, the social economy – social economy businesses, community economic development organizations, public sector non-profits, and civil society organizations –is an integral part of a mixed economy and serves in many ways as its social infrastructure.

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Laurie Mook and Femida Handy

One challenge faced by nonprofit organizations is capturing and reporting the creation of social value. Social accounting is one way of doing this. The framework of social accounting can be applied to any type of organization, but is particularly relevant for organizations that prioritize their social objectives. This chapter outlines the development of social accounting, which grew out of a critique of traditional accounting, and focuses on models for nonprofit organizations. It details one particular model, the Expanded Value Added Statement (EVAS) which reports on the economic and social value added (or destroyed) by the organization and how that is distributed to multiple stakeholders. A case study is used to construct an EVAS for Literacy Volunteers of Rochester, and show how non-monetary items, for instance volunteer contributions, can be included in an accounting framework. Limitations and challenges to adopting social accounting are also addressed.

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Daniel Tinkelman and Daniel Gordon Neely

This chapter reviews the literature on revenue interactions, in particular whether government funding ‘crowds in’ or ‘crowds out’ private donations. At an economy-wide level, we conclude that total giving in the US is independent of the growth in other revenue forms. At the ‘cause’ level, the results are mixed. While standard theoretical models predict full crowd-out of private donations by government funding, modifying key assumptions of the model leads to support for incomplete crowd-out and even crowd-in in certain cases. Finally, at the organization level the picture is mixed. Most of the 54 empirical studies reviewed find very little crowd-in or crowd-out. Recent innovations in methodology and expanding studies to countries outside the US have the potential to improve our understanding of nonprofit revenue interactions.

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Patrick Rooney, Richard Sansing and Jon Bergdoll

This chapter provides an overview of private foundations and an in-depth discussion of the minimum distribution requirements for foundations. We conduct simulations under several scenarios to determine the effects of either higher payout requirements generally and/or a 2 percent supplemental payout during periods of economic downturns. These would help offset the macroeconomic and microeconomic losses during recessions. We conclude that foundations could easily sustain themselves with a supplemental 2 percent payout during recessions and that a permanent increase in rates would most likely lead to a decline in the value of the corpus over simulations of 50 and 100 years, but the likelihood of closure (asset values falling below $5000) is essentially zero for payout rates of 15 per cent or less over the next 50 years and 9 percent or less over the next 100 years. Finally, the excise tax needs to be either eliminated completely or fixed at 1 percent forever.

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David L. Sjoquist and Rayna Stoycheva

We explore what we know and don’t know regarding the economic effects of the property tax exemption for nonprofits. We first review how the eligibility criteria differ across states and estimates of the magnitude of the tax benefit. We then consider the following questions: Do nonprofits use this cost advantage to increase the public good or for their self-interest? Does the exemption affect the choice of for-profit versus nonprofit status, of owning versus renting, where to locate, the nonprofit capital-labor ratio and capital-land ratio and its size? Does it affect the nonprofit share of the market? Does the loss of government revenue get capitalized into the value of property? Finally, we consider efforts to remove the exemptions through legal action and through PILOTs and the trend for local governments to provide additional subsidies to encourage them to locate within the jurisdiction.

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Sharon M. Oster

One of the key characteristics of nonprofit organizations is how many different products and services are typically offered by even relatively small nonprofits. While for-profit organizations typically diversify their offerings only after achieving some scale and experience in the core business, nonprofits typically diversify early and often. This chapter explores the factors which drive this diversification, comparing product extensions for mission reasons and those principally to support the budget. We consider some of the challenges of managing a nonprofit with a wide range of product services and goods, including issues of focus and cost accounting. Finally, we look at the special case of the earned-income venture, started explicitly to raise funds to support the core mission of nonprofits. What form do these ventures take and what challenges can arise in their management?

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Martin F. Grace

Nonprofits have different missions and may have different objective functions. This is, in part, why individual nonprofits exist. This chapter provides background to the theory underlying risk management. Second, a brief overview of the risk management process is provided. Third, the strategic benefits of risk management are discussed. In addition to minimizing the cost of risk, the proper use of risk management can provide new opportunities or preserve opportunities in the event of a serious problem. Fourth, two short case studies of non-profits using various risk management techniques are provided. Finally, the last section provides conclusions and directions for future research.