In the nonprofit world the invisible dark matter consists of the smaller organizations underneath the radar of researchers and the IRS - informal, unincorporated or so small they are not required to file IRS forms - or the 350,000 religious congregations exempt from filing requirements.

How many? Unknown, but soon more knowable.

Regrettably, nonprofit organizations lack reliable or timely access to economic performance information, unlike virtually every other industry in the U.S. While the departments of Commerce, Agriculture and Labor collect statistics in specific industries, the economic activity of nonprofits organizations is tracked once a year through IRS Form 990, filed four and a half months after the end of the fiscal year, and tabulated on a national level a year or two later.

The new Nonprofit Almanac 2007, prepared by the National Center for Charitable Statistics at the Urban Institute and based largely on 990 filings, provides a comprehensive update on the scale and scope of the nonprofit sector, including

 The U.S. had 1,397,263 official tax-exempt nonprofits in 2004 (One organization for every 214 Americans, a ratio both higher and lower than some people thought).
 These organizations had revenues of $1.3 trillion and assets of $2.9 trillion.
 822,817 are IRS Code §501(c)(3) public charities, and 102,881 are §501(c)(3) private foundations.
 505,128 (65%) of the recognized public charities do not report to the IRS, leaving 299,033 “active filers”

These 505,128 non-filers represent the unknown matter. No one knows how many are still active, or whether they ever did much after obtaining their 501(c)(3) letter. The July 1, 2006, fee increase for filing the Form 1023 application - from $500 to $750 for most organizations - may decrease the number of hopeful but never-quite-airborne organizations.

The major revelation about the size of the dark matter will come from the new federal requirement that every public charity with annual revenues of $25,000 or less must file an annual notice electronically with the IRS that indicates its
 legal name;
 mailing address;
 web site address;
 taxpayer identification number;
 name and address of a principal officer;
 evidence of the continuing basis for the organization’s exemption from filing Form 990; and,
 upon termination, notice of that termination.

This requirement is effective for tax years beginning after August 17, 2006 (organizations are being informed of this requirement through notices mailed to their last known address). While there are no monetary penalties for failure to file the notice, failure to file the annual notice for three consecutive years will result in revocation of tax-exempt status.

If the experience at the state level with nonprofit corporations is any indication, expect a mass revocation and disruption in the dark matter of the nonprofit universe. In Minnesota, which has an annual filing requirement with the Secretary of State, 4712 organizations were statutorily dissolved on January 1, 2006. Unfortunately, at least 100 of these organizations were very much alive, with employees, offices, active boards and a desire not to be dissolved.

Cars are the primary mode of transportation in this state, but people in the nonprofit sector know first hand that a healthy transportation system must be multi-modal in order to serve a population where only some can or should operate cars – not to mention the obvious environmental reason to increase energy efficiency. For this reason nonprofits were early and strong advocates for light rail in the Twin Cities, first the Hiawatha Line and now the Central Corridor Line between Minneapolis and St. Paul.

Some of the leading nonprofit energy and transportation advocates include Fresh Energy (formerly Minnesotans for an Energy Efficient Economy), Transit for Livable Communities, Alliance for Metropolitan Stability and the Neighborhood Energy Connection (sponsor of the amazingly creative HourCar service – I recommend visiting www.hourcar.org to learn more).

The Central Corridor project would build the second light rail line in the Twin Cities along University Avenue between Minneapolis and St. Paul. This area is home to 816 nonprofits, making it a virtual “Nonprofit Main Street.” MCN and many of its members will be following the Central Corridor planning very closely to preserve a great place for accessible community services and will lobby for adequate federal and state funding.

Down the line there will be other transit lines as well: North Star from Big Lake to Minneapolis, Red Rock from Hastings to St. Paul, Southwest Corridor along Hwy 394 to Minneapolis, Rush Line from Hinkley to St. Paul and even high speed rail from St. Paul to Chicago. One helpful connection will be Eighth District Congressman Jim Oberstar, the new chair of the U.S. House Transportation Committee.

This neccessary task came up again last Friday when the Office of the Minnesota Legislative Auditor released an evaluation report examining state grants to nonprofit organizations, and making recommendations.

MCN supports most of the report’s recommendations for improving the state’s fragmented system of contracting with outside organizations, which are very similar to those presented a year ago by Drive to Excellence Grants Management Steering Committee, of which MCN was an active member (represented by Marcia Avner , MCN Public Policy Director).

Unfortunately the media reports were well wide of the mark. The StarTribune and Pioneer Press described the Legislative Auditor’s report, but their headlines and focus implied that the underlying issue was a lack of accountability on the part of nonprofits, as opposed to the primary problem being the fragmentation and disorganization within state government.

Most inflammatory was WCCO-TV in its story, which opens with stock footage of piles of cash. Gripping!

Naturally, the legislative auditor job is to identify weaknesses in state government – though in this case the coverage suggested both a bigger problem and points at nonprofits – leaving a suggestion that nonprofits are where the problem is located.

We held a strategy discussion today with MCN members to discuss the nonprofit sector’s response — and our position on legislation to be introduced. Overall MCN supports the suggested reforms, even though they only apply to a small portion of the funds that the state expends with outside parties, and we know that eternal vigilance is the price of liberty.

For more information see MCN supports reform of state grants process.

The number of organizations and total economic activity have continued to grow, Making Minnesota’s nonprofit sector rank at or near the top of every measure of charitable giving, volunteering, civic engagement and nonprofit activity. Surely if there is a location where the nonprofit sector can take its place as a full participant in a state’s economy, public policy and civic leadership, it is Minnesota!

Like other organizations, MCN has also grown over this time. To take a look at MCN’s first Web site (dated 11/10/96) take a look at this link from the Internet Archive’s Wayback Machine.

Ten years after MCN’s first Web site, we are starting several blogs as an additional way to share information about developments in Minnesota’s nonprofit sector.

Let me know what you think — additions, corrections and suggested deletions are welcome! jon@mncn.org.