NONPROFITS IN WASHINGTON
RECENT STATISTICS AND POLICY DEVELOPMENTS
November 2014
Putnam Barber
Nancy Bell Evans Center on
Nonprofits and Philanthropy
Evans School of Public Affairs
University of Washington
Research assistance: Daniel de Zeeuw (MPA ’14)
Editorial assistance: John Compton (MPA ‘11)
The association of nonprofits
for Washington State
Introduction
Nonprofits in Washington is largely based on information about the number and characteristics of nonprofit
organizations available from the National Center for Charitable Statistics (NCCS) at the Urban Institute. This
information is drawn from the annual filings of tax-exempt organizations and organized for research purposes by
the NCCS. Additional details in this report are derived from the files of the Corporations Division of the Office of
the Washington Secretary of State.
The website of the NCCS (http://nccs.urban.org) offers statistical summaries about American nonprofits as well
as research reports and policy discussions on a wide range of related topics. Publication of Nonprofits in
Washington would not be possible without the research tools developed by NCCS and access to detailed
information about organization based in Washington state. The Nancy Bell Evans Center is grateful to NCCS and
the Urban Institute for the support given to this project.
The 2014 edition of Nonprofits in Washington was written by Putnam Barber, senior advisor at the Nancy Bell
Evans Center. Research support was provided by Daniel de Zeeuw (MPA ’14). The text was readied for
publication by John Compton (MPA ‘11), research specialist at the Nancy Bell Evans Center. Advice, data, and
assistance were provided by Alison McCaffree, executive director, , and Rick Anderson, senior policy staff,
Washington Nonprofits; Pam Floyd, director of the corporations division of the Office of the Secretary of State;
Professor Mary Kay Gugerty, Evans School of Public Affairs, University of Washington; Mark Hugh, CPA; and Tom
Pollak, National Center for Charitable Statistics.
Highlights
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By all measures, the number of nonprofits active in Washington state changed very little between 2013
and 2014.The rapid increase in the number of reported nonprofits observed a few years ago appears to
have reached a plateau.
The number of organizations with $50,000 or more revenue per year has been relatively stable since
2000. The growth in numbers was primarily a result of increasing numbers of smaller organizations.
The largest number of nonprofit organizations are found, as might be expected, in the larger urban
centers of the state.
The highest concentrations of nonprofit organizations on a per capita bases are found in more isolated
and rural areas. The islands in San Juan County have the highest per capital number – 11.3 public
charities for every 1,000 residents.
Both assets and revenues of public charities were reported to have the highest recorded current dollar
amounts in 2014 filings.
The impact of financial growth by large-scale health-care organizations, while still substantial, was of
lesser importance in the change from 2013 to 2014 than it had been in the previous decade.
Revenues from program activities made up three-quarters of the total received by public charities.
Contributions, gifts, and grants accounted for another fifth. All other forms of revenue made up less
than 5% of the total.
Newly available data from 2012 reports shows that large public charities (with over $200,000 in revenue
per year) spent about 45% of their budgets on personnel and 55% on other expenses of all types.
The new data also shows that these larger organizations employed nearly 300,000 people during the
reporting year, a substantially higher count than estimates of the nonprofit workforce for earlier years.
The number of out-of-state organizations raising funds from Washington residents increased by 6% over
the previous year, while the number of in-state registrants declined slightly.
Figure 1. Categorization of Public Charities
Churches and other
Unregistered Groups
A Note on the Data
There are many sources of information about nonprofit organizations. None, however, supports
a complete presentation of the number, finances, characteristics, or activities of every
organization and group that that can be described as a “nonprofit.”
Part 1 presents summaries drawn from the reports filed with the Internal Revenue Service by
federally recognized “exempt organizations” – i.e., nonprofits that have successfully sought
exemption from federal corporate income taxes. The NCCS at the Urban Institute receives copies
of the information filed with the IRS and readies it for use in the preparation of reports like this
one and by scholars investigating the dynamics of nonprofit organizations. Because exempt
organizations report different information depending on classifications in the IRS regulations, and
because greater detail is available when there has been time for the data to be processed by
NCCS, subsections of this report use information about different sub-sets of exempt
organizations and filings from both the year 2012 and the year 2014.
Part 2 is based on information provided by the Corporations Division of the Office of
Washington’s Secretary of State using the limited information filed with the division annually.
Nonprofits that solicit contributions from residents of the State of Washington register and
report annually to the Corporations Division as well. In order to qualify for exemption from
federal corporate income taxes, an organization must be registered as a nonprofit corporation
(or similar entity) in some state, but not all nonprofit corporations qualify for exemption under
the Internal Revenue Code.
Part 2 also summarizes other information about nonprofits in Washington state, the laws that
affect their operations, and on the ways residents of the state support them with donations.
For more information about these data and their limitations, see the Data Notes section at the
end of this report
PART 1: Tax-Exempt Organizations in Washington State
In June of 2014, the Internal Revenue Service (IRS)
listed a total 32,611 Washington state organizations
as exempt from federal corporate income taxes.
Washington ranked 15th among the states with a
total just below Massachusetts and above Missouri.
The 2014 total included 24,248 organizations
recognized under section 501(c)(3) of the Internal
Revenue Code (“Public Charities” and “Private
Foundations” in the IRS terminology) and 8,363
organizations in other categories. The overall
number of exempt organizations increased less
than 1% between 2013 and 2014— there were 94
more 501(c)(3) organizations while the total in the
other categories declined by eight. In the 2014 report, the number and percentage in each of the major
classifications among Washington’s federally recognized exempt organizations were:
Public charities (501(c)(3)) 22,976
Private foundations (501(c)(3)) 1,131
Social welfare organizations (501(c)(4)) 1,826
Agricultural, horticultural and labor educational groups (501(c)(5)) 1,395
Business leagues (501(c)(6)) 1,438
Social and recreational clubs (501(c)(7)) 1,032
Others 2,813
Total
32,611
70.45%
3.47%
5.60%
4.28%
4.41%
3.16%
8.63%
100.00%
The 501(c)(3) category includes the kinds of organizations people think of first when they hear the word
“nonprofit.” Most of these organizations are public charities. They accomplish their exempt purposes
with fees and other revenue from services, grants and contracts from government agencies,
contributions from donors, and, occasionally, grants from philanthropic foundations. In general, these
groups provide health care, education, human services, research, arts, entertainment, cultural or
environmental preservation, and other valued activities for the residents of Washington communities
and, for that matter, people around the world. A smaller group within the 501(c)(3) classification
consists of private foundations, typically grant-making philanthropies operating with investment income
or contributions from a few individuals or firms.
These organizations, however, are only part of the story of charitable activity in Washington state.
Major nonprofit organizations serving Washington communities may have their corporate headquarters
in other states, and hence not appear in the Washington roster at all. Churches are automatically
defined as tax-exempt. Thus many do not apply for IRS recognition and are not included in the lists.
Furthermore, some Washington-based organizations provide the bulk of their services in other states or
nations but their information is included in the Washington statistics. There is, unfortunately, no
practical way of overcoming these complications in the data on which this report depends.
The first part of this report summarizes information that is available from the most recent (June 2014)
report from the National Center for Charitable Statistics for 501(c)(3) organizations in Washington state
1
– called “Public Charities” and “Private Foundations” by the Internal Revenue Service. More detailed
information, available for larger 501(c)(3)s and from earlier (2012) reports, is included to give a more
complete picture of the activities of these nonprofit organizations in Washington state.
Reports of “Active” Public Charities and Private Foundations
This section of the report concentrates on “active” 501(c)(3)s – the organizations that have filed an
annual report with the IRS within the past 24 months. Of the public charities and private foundations
mentioned earlier, 18,114 (70.4%) had filed such a report within two years of the 2014 report date. The
number of these active organizations increased by just 58 between the August 2013 and June 2014
reports.
Geographic Distribution
Comparing the Pacific Northwest States
Compared to its neighboring northwest states, Washington has the largest number of active exempt
organizations. Oregon, though, has a larger number of active organizations in relation to its population.
Montana also has more active organizations per capita than Washington, while Idaho and Alaska have
fewer organizations and lower per capita ratios.
Active Public Charities
Active Private Foundations
Other (Non-501(c)(3))
Total
Nonprofits per 1000 persons
Washington Oregon Idaho Montana Alaska
17,032 11,680 3,442
2,375 1,098
1,081
694
218
15
8
7,599
4,844 1,918
1,664
521
25,712 17,218 5,578
4,054 1,627
3.7
4.4
3.5
4.0
2.2
Across Washington State
Though the larger and more familiar nonprofits are located primarily in major urban areas, Washington’s
17,033 active public charities can be found in every part of the state – see Figure 2. The largest number
of organizations is, as expected, found in the county with the largest population— in King County (2014
population estimate: 2,044,449) there are 6,204, or 36.5%, of the state’s active public charities. Garfield
County (population: 2,256), with just 11 public charities, had the smallest number, followed by
Wahkiakum (4,042) and Columbia (4,032), with 16 and 17 respectively. Across the state as a whole,
there are roughly two and a half active public charities for every 1,000 people.
As shown in Figure 3, the per capita statistics for counties vary widely. In these terms, the counties with
smaller populations often have the higher density of local organizations. Garfield and Columbia
Counties, for example, have 4.9 and 4.2 public charities for every 1,000 residents, and Wahkiakum has
4.0. King County, in contrast, has just 3.0. Among the counties with the lowest numbers of public
charities per capita, high-population counties like Snohomish (1.7) and Clark (1.8) stand out. In both
cases, the proximity of another metropolitan area where many services are readily available may explain
the relative lack of local organizations. The relatively inaccessible islands of San Juan County lead the
state in the density of nonprofits serving their population, where there are 11.3 public charities for
every 1,000 residents. The map shows how these relative numbers of public charities are distributed
across the state as a whole.
2
Figure 2. Numbers of Active Public Charities
Figure 3. Nonprofit Density: Relative Number of Nonprofits per Capita
3
Historical Trends
As Figure 4 shows, the total number of active 501(c)(3)s in Washington state has been relatively stable
for the last few years, in contrast to the significant growth that occurred between 2007 and 2011.
Several changes in the reporting requirements in those years resulted in changes in the available
statistics during a period that also saw significant economic turmoil. The number of active private
foundations rose just slightly—from 1,010 in 2005 to 1,148 in 2011— and then declined to 1,081 by
2014. The numbers of exempt organizations in other categories grew somewhat, but not at the
recorded rates of public charities. (A log scale is used on the right-hand side in Figure 4 so that the
slope of the line represents the percentage change from year to year while allowing both the private
foundation data— using the scale on the left— and the public charity data to be shown in one figure.)
Figure 4. Active 501(c)(3)s in Washington, 2003-2014
Financial information for 501(c)(3)s with less than $50,000 in revenue is not available. Organizations
with revenue below that floor are not required to include any such information in their annual reports
to the IRS. In 2014 there were 11,770 active public charities in that group. As Figure 5 shows, although
the total number of active public charities has grown since 2008, the number with $50,000 or more in
annual revenue has not changed much since that year. The number grew from 6,889 in 2008 to 6,942 in
2012 and has declined in the most recent years. The figure for 2014 is 6,401.
4
Figure 5. Count of Public Charities by Total Revenue 2003-2014
Since no financial information is available about public charities with less than $50,000 in income, the
more detailed analysis that follows focuses on the larger active public charities for which details are
available.
Finances of Public Charities
Figure 6 tracks the assets (red bars) and revenues (blue bars) of active public charities with more than
$50,000 in revenue from 2003 to June reports in 2014. Total assets declined from 2005 to 2006 and
again from 2008 to 2009, as negative economic conditions affected donations, government contracts,
and program service revenues. Revenues and assets have both grown since 2009, albeit at differing
rates. Total revenue reached the sum of $32.5 billion in the 2014 reports while total assets rose to
$60.1 billion.
Since 2000, the increases in the total revenue for the public charities operating in Washington have
been due in large measure to increases in the revenues of a small number of large health-care
organizations. As reported in the 2013 edition of Nonprofits in Washington, the 15 largest nonprofit
health-care providers accounted for slightly more than 70% of the reported growth in total revenue
between 2004 and 2013 ($8 billion to $17.1 billion) while the revenues of the large number of other
active public charities increased over the same span by 29% (from $11.6 to $15.2 billion). While the
largest health-care organizations continued to grow between the 2013 and the 2014 reports, the
increase ($1.5 billion) in their share of the total increase for all public charities during the year ($2.8
billion), at 56%, was lower than in the previous years. With the passage of the Affordable Care Act, of
course, the future finances of the health-care sector are subject to considerable uncertainty. Future
reports on nonprofit activity in Washington state will, no doubt, continue to reflect changes in these
patterns.
5
Figure 6. Total Revenue and Assets of 501(C)(3) Public Charities with Revenue Greater than $50,000
More detailed information is available for the organizations that filed a “full” Form 990 for their
operations reported in 2012. More recent data are not available with this level of detail. These
organizations had annual revenues of $200,000 or more. The following sections report details for this
group of relatively large nonprofits based in Washington.
Sources of support
Detailed financial information is available for 3,195 Washington state 501(c)(3)s from reports filed in
2012. The active public charities that filed the more detailed Form 990 in 2012 reported that nearly 75%
of their revenue came from program services, such as fees for medical services, admissions and
subscriptions for museums and theaters, and sliding scale payments from clients at social service
agencies. Contributions, gifts, and grants accounted for another 21%. As the summary below shows, all
other sources of revenue combined came to less than 5% of the total.
Program service revenue $23,590,915,566
Contributions, gifts, grants $6,534,612,375
Investment income
$362,508,323
Net from sale of assets (not inventory)
$246,846,988
Net income from sales of inventory
$128,873,847
Net income from fundraising activities
$26,201,428
Net rental income
$51,948,520
6
74.92%
20.75%
1.15%
0.78%
0.41%
0.08%
0.16%
Royalties
$14,306,630
Net income from gaming activities
$2,022,559
Miscellaneous revenue
$529,570,558
Total $31,487,806,794
0.05%
0.01%
1.68%
100.00%
Nonprofit organizations also differ broadly, of course, in the type of revenue that supports their work.
Using the broad service categories present in the NCCS data files, it is possible to compare the mix of
revenue sources for organizations in different fields of service. The result is shown in Figure 7.
Figure 7. Reliance on Types of Revenue in NTEE Groups
7
Organizations with an international focus are more than five times as reliant on gifts, grants, and
contributions as the other types of organizations while having almost no program service revenue and a
very limited amount of “other” revenue—often interest on savings or “unrelated” sales. At the other
end of the scale, health organizations (primarily hospital systems) are more than twice as reliant on
program service revenue as other organizations and receive only a small proportion of their revenue in
the form of contributions. That small proportion is, however, a large amount of money: about $867
million in 2012 for the 281 organizations in this category. In some fields of service, government
contracts and reimbursements (often Medicare and Medicaid) represent a large portion of the program
service revenue. In others, such as the arts, program service revenue is primarily the proceeds of ticket
sales and admissions charges. The “other revenue” received by philanthropic organizations is largely
interest and capital gains, of course. For mutual benefit organizations, other revenue is likely to be
insurance premiums of various sorts.
These differences in the sorts of revenue among fields of service suggest the variety that exists among
nonprofit organizations. Boards of directors and managers must deal with the specific challenges related
to their principal sources of revenue, which can be quite different. Gifts from individuals may actually
increase for social service agencies, for example, when economic conditions deteriorate and community
needs become more intense. Reimbursements under government programs like Medicare and
Medicaid come with complex administrative requirements, but are likely to be more predictable than
grants, contracts, or other forms of revenue from clients or patrons.
Highlights of Expenses
Reliable details of expenses are also available in the 2012 reports from organizations with more than
$200,000 in revenue (see Figure 8). This group of moderate to large organizations reported contributing
about $2.6 billion (9%) of their total expenses to other organizations (including governments) or to
individuals in 2012. Personnel and a variety of other operating expenses each accounted for
approximately half the remaining expenses. The “other fees” include accounting, legal, investment
advising, management consulting, and similar costs. The available information on other sorts of
expenses does not provide much detail. The reporting form allows each organization to list many
relatively small expense amounts in whatever categories it uses for its own purposes; the available
reports group the result under the general title “Other Expenses.”
Figure 8 – Expenses of Active Public Charities: 2012
$200,000 to $1 million
Expense
Grants to U.S. organizations
Grants to U.S. individuals
Other grants
Benefits to/for members
Salaries and wages
Other compensation
Pensions and benefits
Payroll taxes
Office expenses
Occupancy
Travel & conventions
Fundraising fees
Other fees
All other expenses
Total
Amount
Total
$1 million and over
%
Amount
67,470,113
8.6%
20,363,645
2.6%
16,423,801
2.1%
2,482,066
0.3%
198,816,692 25.3%
76,171,117
9.7%
22,626,240
2.9%
25,497,057
3.2%
18,325,643
2.3%
48,439,257
6.2%
24,183,453
3.1%
2,182,079
0.3%
50,190,683
6.4%
211,433,567 26.9%
784,605,413 100.0%
1,028,211,721
3.8%
553,637,208
2.0%
867,308,272
3.2%
13,535,025
0.0%
9,668,050,740
35.4%
425,430,880
1.6%
1,837,933,155
6.7%
815,994,429
3.0%
1,295,549,949
4.7%
802,116,529
2.9%
252,392,568
0.9%
12,633,790
0.0%
3,222,924,051
11.8%
6,506,638,378
23.8%
27,302,356,695 100.0%
8
%
%
1,095,681,834
3.9%
574,000,853
2.0%
883,732,073
3.1%
16,017,091
0.1%
9,866,867,432 35.1%
501,601,997
1.8%
1,860,559,395
6.6%
841,491,486
3.0%
1,313,875,592
4.7%
850,555,786
3.0%
276,576,021
1.0%
14,815,869
0.1%
3,273,114,734 11.7%
6,718,071,945 23.9%
28,086,962,108 100.0%
Because the information provided is limited in scope (the familiar division into program, fundraising, and
management and general is not shown), the amount shown for “Professional Fundraising” reflects only
contracts with fundraising firms; it does not include costs which may have been categorized as
fundraising on the other expense lines. It is interesting to note that in three of the expense categories in
Figure 8, the organizations with less than $1 million in revenues spend a higher proportion of their
expenses than the larger ones. For benefits to members, for other (non-wage) compensation, and for
fundraising fees they expend proportionally about six times (from the much smaller total) as much as
the larger organizations. In contrast, they spend much less proportionally on salaries (and related
payroll expenses), office expenses, and other fees. The amounts are not large, but the disparity
indicates that larger organizations have larger regular payrolls, are less likely to be member-based, and
are more likely to manage their fundraising activities internally than to rely on outside contractors.
The average of expenses for the 1,869 organizations in the $200,000 to $1 million range comes to
$424,653; the median organization in this group reported $402,276 in expenses. The 1,326
organizations with total revenue over $1 million averaged $20,730,719 in expenses, with a median of
$8,863,036. This large difference between the average and the median is another indication of the
strong effect on statistics about public charities of the small number of very large organizations.
Recalling the extent to which very large hospital systems influence these reports of finances prompts an
examination of those organizations separately. It turns out that the six largest health care organizations
account for nearly a quarter of the total of all expenses for this group of moderate to large sized
nonprofits and more than half (55%) of the “other fees” paid by all the organization combined. In
contrast, these large organizations reported no expenditures for professional fundraising contractors
and a smaller proportion on grants, “other” compensation, and travel than the rest of the organizations
in the group.
Employment
During the year 2012, 3,169 Washington public charities with total revenue greater than $200,000
reported a total of 297,906 full- and part-time employees within the covered calendar year. Total
personnel costs for these organizations came to $13 billion for an average of $43,875 per employee. The
median organization among these public charities reported nine employees; the average number (again
reflecting the influence of very large organizations on this statistic) was 97. In addition, they reported
using 4,078 independent contractors who received a fee totaling $100,000 or more in the covered year.
The Employment Security Department reported total non-farm employment in Washington state totaled
2,951,000 persons in December 2012. Though the methods of collecting the statistics are not the same
for the nonprofit data from the IRS and total employment from the state, these numbers suggest that
the proportion of the labor force in nonprofit work in Washington— roughly 10%— matched or
exceeded the estimates for nonprofit employment in the nation as a whole. Earlier editions of
Nonprofits in Washington used estimating techniques developed by labor-force analysts (but not reports
from nonprofit employers) to report a smaller nonprofit labor force; a result which is not confirmed by
the IRS data presented here.
9
Program Services
In IRS reports, organizations are linked to one of 25 broad service areas to describe their primary focus.
The five service areas listed here include nearly 80% of all the organizations; only these five categories
include more than 5% of the active public charities in Washington in the 2014 reports:
Human Services
Education
Arts, Culture, and Humanities
Health
Religion, Spiritual Development
2,234
1,116
726
675
414
35.3%
17.6%
11.5%
10.7%
6.5%
The revenue of the health-related organizations makes up 72.9% of revenues for all the active public
charities. Only two other categories have more than 5%: education – 7.8% – and human services –
10.4%. These three categories hold the largest proportions of assets as well: 65.4%, 14.3%, and 10.3%
respectively. These patterns are shown graphically in Figure 9.
Figure 9 – Total Assets of Active Public Charities (Total Revenue Greater than $50,000)
Focusing on the full list of service areas in Figure 10 shows the predominance of a variety of human and
community service organizations among active public charities. The combined total for organizations in
related fields is 2,235. Among the organizations with substantial representation in the list, very different
revenue patterns exist. In the health category, the average annual organizational revenue is $41.9
million; in education, including the many small private schools, the average is, in contrast, $2.7 million.
Overall, the eight categories of human and community service agencies average $1.8 million. A similar
pattern exists in the assets column, with the difference that educational organizations have, on average,
more assets at $7.8 million while human service agencies average $2.8. The assets of health
organizations (mostly, of course, hospitals and clinics with substantial buildings) average $58.7 million.
10
The breadth and variety of services that nonprofits provide is suggested by the range of activities named
in Figure 10. This figure, like other data in this report, includes only the active public charities reporting
$50,000 or more in annual revenues. (A similar figure for each of Washington’s counties is on the
website of the Nancy Bell Evans Center at the University of Washington.)
Figure 10 – Revenue and Assets by Service Area: 2014
Program Service Area (NTEE code)
Arts, Culture, and Humanities
Education
Environmental Quality, Protection, and Beautification
Animal-Related
Public Charities
726
11.5%
1,116
17.6%
196
3.1%
174
2.7%
Hospitals and Clinics
Mental Health, Crisis Intervention
Diseases, Disorders, Medical Disciplines
Medical Research
Health-related total
350
153
134
37
674
5.5%
2.4%
2.1%
0.6%
11%
Crime, Legal Related
Employment, Job Related
Food, Agriculture, and Nutrition
Housing, Shelter
Public Safety
Recreation, Sports, Leisure, Athletics
Youth Development
Human Services - Multipurpose and Other
Human Service total
130
108
109
313
32
583
160
800
2235
2.1%
1.7%
1.7%
4.9%
0.5%
9.2%
2.5%
12.6%
35%
International, Foreign Affairs, and National Security
Civil Rights, Social Action, Advocacy
Community Improvement, Capacity Building
Philanthropy, Voluntarism, and Grantmaking Foundations
Science and Technology Research Institutes, Services
Social Science Research Institutes, Services
Public, Society Benefit - Multipurpose and Other
Religion Related, Spiritual Development
Mutual/Membership Benefit Organizations, Other
Unknown
Total
180
33
281
170
41
10
58
414
11
14
6,333
2.8%
0.5%
4.4%
2.7%
0.6%
0.2%
0.9%
6.5%
0.2%
0.2%
100.0%
Total Revenue
713,564,164
3,030,309,687
146,953,106
167,965,361
1.8%
7.8%
0.4%
0.4%
26,800,258,299 69.2%
608,822,768 1.6%
178,837,219 0.5%
649,741,108 1.7%
28,237,659,394
73%
250,049,443
579,780,922
241,332,506
338,918,020
10,845,486
234,987,682
185,736,309
2,221,389,887
4,063,040,255
0.6%
1.5%
0.6%
0.9%
0.0%
0.6%
0.5%
5.7%
10%
1,290,294,656 3.3%
25,841,237 0.1%
179,720,466 0.5%
464,831,785 1.2%
117,879,825 0.3%
27,834,071 0.1%
32,516,177 0.1%
188,433,993 0.5%
26,991,906 0.1%
7,125,182 0.0%
38,720,961,265 100.0%
Total Assets
2,041,288,516
3.4%
8,649,104,369 14.3%
415,035,597
0.7%
201,191,732
0.3%
37,774,656,475
684,341,608
143,627,059
1,014,153,164
39,616,778,306
62.3%
1.1%
0.2%
1.7%
65%
195,572,936
533,514,162
92,637,854
1,350,090,736
37,593,156
325,169,886
352,142,523
3,365,573,074
6,252,294,327
0.3%
0.9%
0.2%
2.2%
0.1%
0.5%
0.6%
5.6%
10%
906,955,254
1.5%
29,146,102
0.0%
353,543,792
0.6%
1,542,457,172
2.5%
189,067,287
0.3%
68,088,459
0.1%
35,663,987
0.1%
220,708,304
0.4%
109,391,301
0.2%
8,196,661
0.0%
60,638,911,166 100.0%
The presence of philanthropic organizations may appear odd in a list of public charities. The explanation
is that community foundations, supported as they are by large numbers of active donors, are classified
as public charities by the IRS. Private foundations (not included in these figures) are those that operate
with income from endowments or large gifts from individuals or corporations. Information about the
organizations classified as private foundations by the IRS appears in the next section.
The Financial Record for Private Foundations
In June of 2014, IRS files included 1,131 private foundations located in Washington state. Of these,
1,081 (96%) were “active,” meaning they had filed an annual information return with the IRS in the
previous 24 months.
11
The number of active foundations in Washington increased by nearly 25% between 2003 and 2008, but
since 2008 this number has varied only slightly; the total number of foundations in 2014 was just 10
more than the 2008 count.
The combined assets of the Bill & Melinda Gates Foundation and its associated asset trust total $73.6
billion. This organization dominates the average for the philanthropic sector in Washington state. The
1,079 other active private foundations collectively hold $7.5 billion in assets. Most of these foundations
are quite small— 200 reported less than $50,000 in assets and just 173 have more than $5 million. As
foundations experienced high rates of growth in the early 2000s, the total assets of the smaller
foundations grew by 64%, from $4.9 billion in 2003 to $8 billion in 2008. Since then, however, the assets
of these foundations have declined to a low of just under $6.8 billion in 2012 and recovered to $7.5
billion in June of this year.
As shown in Figure 11, the record for the much larger total including the assets of the Bill & Melinda
Gates Foundation and trust has been volatile. The dramatic increase in 2008 is due to the decision by
Warren Buffett to donate a substantial amount of his holdings of Berkshire Hathaway stock to the Gates
Asset Trust each year, on the understanding that the Gates Foundation will in turn use those funds in its
grant program. Grant-making decisions and fluctuations in the stock market have resulted in the
changes from year to year since.
Figure 11. Assets of Private Foundations (with and without the Gates Foundation)
12
The impact of the Great Recession is visible, of course, in the decline in total assets of the smaller
foundations discussed above. The impact of the financial crisis and uncertainties of 2008 appears even
more strikingly in the record of gifts and contributions received by those organizations before, during,
and after the financial markets froze. Reported gifts to these foundations increased dramatically to
$798 million in 2007 but then fell by 65% to $280 million in the following year. More recently, the
annual totals for gifts to smaller foundations have fluctuated: $318 million in 2010, $648 million in 2011
and $397 million in 2012 (the most recent year for which this detail is available).
PART 2: Washington Nonprofit Corporations
Though the federally recognized exempt
organizations discussed in Part 1 must be
organized as nonprofit corporations (or
similar entities), not every nonprofit
corporation is eligible for federal tax
exemption. The difference is clear from the
tally provided by the Corporations Division
of the Office of the Secretary of State—on
April 30 of this year, there were 58,240
nonprofit corporations in that roster; in the
spring of 1994 that count stood at 31,835.
The increase over that two-decade span is
85%.
Nonprofit Corporations registered
with the Washington Secretary of
State Corporations Division
Tax-Exempt Organizations
501(c)(3)s
Nonprofit corporations do not
automatically receive any tax exemptions
or preferences in the Washington state
revenue code. Several sections do provide for exemptions from property taxes for specified types of
organizations; other sections provide for exemptions from collecting or paying sales tax and other taxes
for a more limited list. Important features of Washington’s tax laws also facilitate various kinds of
fundraising activity by charitable nonprofits.
The nonprofit corporations registered with the Secretary of State are found in every part of the state.
The largest numbers are found in the densely populated areas along the I-5 corridor, as might be
expected, but nonprofits are found throughout the state in less densely populated areas as well. 38% of
the corporations are located in King County (including Seattle) and Bainbridge Island; another 29% are
located along the I-5 corridor between the Canadian border and Thurston County (including Bellingham,
Everett, Tacoma, and Olympia). 10% are located on the Olympic Peninsula (including the Shelton area
near Olympia) while 6% each are located in North Central counties, South Central counties, Spokane city
and County, and the balance of Eastern Washington.
State Nonprofit Corporations: Historic Look
From 2005 to 2010, the number of nonprofit corporations increased by an average of 9% each year. The
effect of the financial recession that began in 2008 can be seen in the later years in Figure 13, where two
years of declines followed those years of solid growth. The most recent data from the Corporations
Division show the numbers rebounding to the largest total ever recorded in 2013 and receding slightly in
2014 to 58,240. Data provided by the Corporations Division suggest that the principal cause of the
13
change in the pattern of increasing numbers of nonprofits has been a decline in the number of new
corporations being formed, rather than a sharp increase in the number of organizations ceasing
operations. The pattern has continued from 2013 to 2014— the decline of 245 in the total closely
parallels the decline in the number of new corporations registered (from 4,078 to 3,845).
Figure 13. Number of Nonprofit Organizations
Changes in Property Tax Rules for Washington Nonprofit Corporations
On June 12, 2014, new rules about property taxes for nonprofits took effect, having been adopted as
Senate Bill 6405 by the Legislature during its 2014 Session.
Under the new rules, facilities that are exempt from property taxes may be used for non-exempt
purposes for up to 50 days per year; on 35 of these days, the payment received may not exceed the
maintenance and operations costs of the area used, while on the remaining 15 days, the facility may be
rented for “pecuniary gain” by the taxpayer or used for non-exempt business purposes. Such uses for
up to 50 days per year will not compromise the tax-exempt status of the facility.
Previously, only certain kinds of facilities were permitted to allow non-exempt uses, for fewer days, and
under more restrictive conditions. The rules now apply to all tax-exempt nonprofit facilities and permit
organizations to rent their premises for a price that adds to their own operating revenues on 15 days
each year, not just for limited usage by others on a cost-reimbursable basis.
The rules that apply to fundraising events have not changed: such events must be consistent with the
exempt purposes of the organization or conducted by a nonprofit; they must be limited and of short
duration; and the nonprofit that owns the property must receive at least 51% of net proceeds. If a
fundraising event does not return at least 51% to the property owner, it may be held and counted
against the 15 days allowed for commercial activities and pecuniary gain.
One thing hasn’t changed, though. As the accounting firm Clark Nuber warns in its September 2014 notfor-profit newsletter, property taxes for the past three years – plus interest – may be due if a taxexempt property is sold. Exceptions include property that has been held for more than 10 years and
14
property sold to another organization that is eligible to use the property under an exemption from
property taxes.
Charitable Solicitations
Like many other states, Washington law requires organizations making charitable appeals to the public
to register with the Secretary of State. In the spring of 2014, there were 6,199 such organizations with
addresses in Washington state and an additional 3,997 organizations based in other states were also
registered to solicit donations from Washingtonians. The number of out-of-state registrations increased
by 235 from 2013 to 2014, while the number of Washington-based organization making fundraising
appeals declined by 163. In addition to these officially registered fundraisers, the Charities Program in
the Secretary of State’s office allows organizations that do not register – primarily churches and
volunteer groups with less than $50,000 in annual revenue – to be identified as exempt from
registration on the Secretary of State’s website in order to avoid the suggestion that their fundraising is
questionable. There has been a rapid increase in the numbers of such organizations in recent years,
from 2,613 in 2011 to 5,455 in 2014. This increase is likely due to the fact that the threshold in the
state’s law for exemption for entirely volunteer organizations was recently raised from $25,000 to
$50,000.
Urban Online Giving
In “Most Generous Online US Cities,” a 2013 report from the donor-relations management company
Blackbaud, King County is identified as ranking number one in the nation in per capita online giving using
the firm’s software. Four other Washington cities were also included among the 265 for which
Blackbaud reported online giving results. Bellevue was 11th in the 2013 totals; Vancouver 77th; Tacoma
88th; and Spokane 123rd. The Seattle area’s 2013 result – the average of 201,502 gifts was $53.54 per
capita – represented an increase by 44% over the previous year and followed substantial increases in
each of the years since 2009. The other Washington cities also saw increases – suggesting the potential
for online support for nonprofits’ work exists throughout the state.
Recent Survey of Nonprofits in the Northwest and Alaska
The nonprofit associations in the five northwest states recently conducted parallel surveys of the
nonprofits in their states as part of an ongoing project of the M. J. Murdock Charitable Trust. The survey
was designed and the results were analyzed by TCC Group, a national consulting organization with a
focus on nonprofit organizations.
The majority of respondents to this survey were smaller: 82% of the 1,085 Washington-based groups
reported annual budgets of less than $500,000, reflecting the pattern for nonprofit organizations across
the nation. Though the number of respondents from all five states represented a small proportion of
the total numbers of nonprofits in those states, the 2014 “Pacific Northwest Nonprofit Survey” offers an
opportunity to compare key operating characteristics of organizations across the region. In four of the
five states, for example, earned income (program service revenue) was reported to be the predominant
source of revenue – only for Idaho did state and federal grants rank first (with earned income second).
15
Nonprofits in Washington
This 2014 edition of the series Nonprofits in Washington reports on increasingly stable nonprofits serving
Washington communities with more revenue and greater financial and other assets. The share of the
most recent growth due to increases in revenue for health-care organizations is still large, but it has been
proportionally smaller since 2013 than in earlier years – perhaps reflected early adjustments to the
impact of the Affordable Care Act. Future year’s reports will cast more light on that subject. It is still true
that nonprofits providing health care services represent a larger proportion of Washington’s nonprofits
than is found in other states. There are relatively few private or government-operated hospitals serving
Washington communities. Education, on the other hand, appears more prominently in other states,
mostly Eastern, with larger numbers of substantial nonprofit colleges and universities.
The increased levels of revenue and assets are welcome, of course, but they are not so large as to
suggest that the large number of small nonprofits providing human services, education, and other
community benefits are able to completely meet the needs and fulfill the aspirations reflected in their
missions. In this respect, Washington’s nonprofits fit well within the broad outlines of the way nonprofits
organizations serve communities all across America. They work with limited resources to provide needed
community services, cooperate with government to address difficult challenges, offer a vehicle for the
articulation of people’s values, and add richness and variety to life. This report has drawn on
administrative data to sketch the characteristics of the nonprofits that are active today in Washington
state. A sketch based on that sort of data can, though, only hint at the ways nonprofit organizations
represent an essential part of everyday life for everyone in the state in rich and varied ways. Readers
must supplement the information found in these pages with more personal information about the
nonprofit organizations that play important parts in their everyday lives and do the important work of
building healthy communities.
16
Data Notes
Page 1
Classification of exempt organizations – An organization can be tax-exempt for many reasons. Usually,
organizations are exempt from some taxes and not from others. This section describes organizations
that are exempt from federal corporate income taxes as defined in the Internal Revenue Code. They are
exempt from federal tax because they have demonstrated to the IRS that they are organized and
operated for one of the “exempt purposes” Congress has defined. Information is available about these
organizations from reports filed with the Internal Revenue Service (IRS) which the National Center for
Charitable Statistics (NCCS) makes available for study. The principal types of exempt organizations are
defined in section 501(c) of the Internal Revenue Code (IRC). 501(c)(3) are the “religious, charitable,
scientific, …literary, or educational” organizations (often called charities). The IRC distinguishes between
“public charities” and “private foundations” based on the sources of their revenue. Public charities are
supported by large numbers of donors, fees for service, and sometimes grants or contracts, usually from
multiple funders. Private foundations typically operate with funds from an endowment or with current
support from a family or a business. The rules for private foundations require more disclosure, impose a
small tax on investment income, and require a minimum level of expenditure each year. Public charities
and private foundations are both recognized as exempt from federal corporate income taxes under
section 501(c)(3). For the complete text of section 501(c) of the IRC, see
http://www.law.cornell.edu/uscode/text/26/501
Page 2
“Active Public Charities” – The NCCS files include information about some organizations that have not
been updated recently. Many filings arrive at the IRS long after the period to which the information
applies. Nonprofits that close down frequently neglect to inform the government that they are no longer
operating. The law requires the IRS to remove organizations from the roster when they fail to file any
sort of report for more than three consecutive years. To focus more closely on current information, the
NCCS provides a way to select only those that have filed a report in the 24 months before the date of
publication of the data.
Washington Nonprofits has posted an interactive map of reporting public charities for each
Congressional District. The maps allow examination of the organizations operating in various parts of
the state and the principal services they provide. Choose “Nonprofit Maps” on the “Public Policy” tab at
http://www.washingtonnonprofits.org to see the maps and options for exploration.
The source for population estimates – 2013 estimates by state from the Bureau of the Census:
http://factfinder2.census.gov/bkmk/table/1.0/en/PEP/2013/PEPAGESEX; 2013 estimates by county:
http://www.census.gov/popest/data/counties/totals/2013/index.html
Page 4
Reports filed by exempt organizations – Exempt organizations use four versions of the IRS Form 990 to
report – usually annually. Larger organizations file on the “full” 990; those with annual revenues
between $50,000 and $200,000 file the Form 990-EZ; and those with annual revenues of less than
$50,000 file Form 990-N (which contains no financial information). Private foundations of all sizes used
Form 990-PF.
17
Causes in changed in the count of exempt organizations in the 2000s – In the first years of the 21st
century, Congress and the IRS made several changes in the reporting requirements for exempt
organizations that altered the characteristics of the reporting population in significant ways. Filing was
made mandatory for all organizations (previously, only those with more than $25,000 in annual
revenues were included). Organizations that failed to file at least once in three consecutive years were
automatically dropped from the roster, leading to a large number of revocations of organizations that
were (presumably) not actually operating. Further, the contents of the annual report (Form 990) were
changed for each of its versions, and revenue thresholds requiring use of the more complex versions
were moved upward, altering the ranges of data that could be used for year-to-year comparisons.
Page 5
“Active public charities with more than $50,000 in revenues” – IRS regulations permit organizations
with less than $50,000 in revenue to file a Form 990-EZ (or even the full Form 990 intended for
organizations with revenue greater than $200,000). As a result, the reported financial data and other
statistics for organizations with less than $50,000 in revenue include an unknown number of
organizations providing those details. Most organizations under that threshold file a Form 990-N, which
contains only identifying information (and serves primarily to affirm that the organization continues to
operate). Using totals that include both the organizations filing Form 990-N and the other, more
detailed, versions of the Form 990 would result in misleadingly low averages and other counts, since the
totals would include all filing organizations while the details would reflect only the small number of
organizations that filed the longer forms
The source of the longer discussion on the influence of large health care organizations on financial
statistics – The 2013 edition of Nonprofits in Washington is available online at
http://evans.uw.edu/centers-projects/nbec/nonprofits-washington; see Figure 7 on page 6 of that
report.
Page 6
Reasons for the smaller number of 2012 organizations – The smaller number is due to the threshold for
completing the more complicated full version of the Form 990 – commonly revenues over $200,000 per
year – and to screening of this data set by the NCCS to limit the number of organizations filing in that
year for earlier periods.
Page 7
Calculations in Figure 7 – The calculations used to create Figure 7 relate the proportion of total revenue
from each source received by organizations in each service category to the average proportion of total
revenue from the same source for the other 24 categories combined.
Page 8
“Functional expenses” – Part 9 of Form 990 requires the reporting organization to provide details of
expenses in multiple categories and for three broad functional areas of organizational work: “Program
service expenses,” “Management and general expenses,” and “Fundraising expenses.” The instructions
advise use of “any reasonable method” to allocate an expense among the three areas when it is not
possible to attribute it based on financial records. The data provided online by NCCS from the 2012 “full
990” filers does not include the breakout of expenses into these three areas, only the total for each
category. See page 10 of http://www.irs.gov/pub/irs-pdf/f990.pdf
18
Page 9
Count of employees – This total comes from the “full 990s” available for 2012 from NCCS and thus
includes only organizations with more than $200,000 in revenue. There are, of course, a large number
of organizations with less than $200,000 in revenue, which suggests that the total workforce is larger
than the reported 297,000; there is no reliable source from which to collect statistics or estimated for
the number of employees of these smaller organizations.
Source of workforce statistics – Washington’s Employment Security Department publishes workforce
estimates at https://fortress.wa.gov/esd/employmentdata/reports-publications/economicreports/washington-employment-estimates
The estimate of the national 10% average is included in the Nonprofit Almanac (Urban Institute, 2012)
on page 35.
Page 10
“Broad service areas” – The IRS and NCCS use “National Taxonomy of Exempt Organizations” (NTEE)
coding to identify the primary service activity of each organization. The history and design of the NTEE
coding system are explained at http://nccs.urban.org/classification/ntee.cfm
Page 11
For a brief explanation of “private foundations” in the tax code, see the note to Page 1 above.
Page 13
On “nonprofit corporations” – Washington’s nonprofit corporation statute is chapter 24.03 in the
Revised Code of Washington. The text is available online at
http://app.leg.wa.gov/rcw/default.aspx?cite=24.03. The number of nonprofit corporations is larger than
the number of exempt organizations discussed in Part 1 for a variety of reasons, the most important of
which is that there are many nonprofit corporations (“taxable nonprofits”) which do not qualify for
recognition as tax-exempt under the Internal Revenue Code. Churches are not required to seek
recognition as exempt organizations or provide information returns with the IRS but they may
nevertheless file incorporation papers with the State of Washington to qualify for property tax
exemption. It is also true that many nonprofit corporations have so little income ($5,000 or less per
year) that they are not required to seek exemption from federal corporate taxes.
Page 14
On changes in property tax rules – Information for this section was provided by Mark Hugh, CPA. The
Washington State Department of Revenue explains the various exemptions and preferences available to
nonprofits on its website at
http://dor.wa.gov/Content/FindTaxesAndRates/PropertyTax/IncentivePrograms.aspx (scroll down) and
http://dor.wa.gov/content/doingbusiness/businesstypes/industry/NonProfit/default.aspx# The
Department of Revenue published a Special Notice on June 17 describing the effect of SB 6405 –
http://dor.wa.gov/Docs/Pubs/SpecialNotices/2014/sn_14_ExemptNonprofits.pdf. The text of the bill
can be found at http://apps.leg.wa.gov/documents/billdocs/201314/Pdf/Bills/Session%20Laws/Senate/6405.SL.pdf
19
The Clark Nuber not-for-profit newsletter discussion of the property tax “clawback” rules is available
online at http://origin.library.constantcontact.com/download/get/file/1109406134085167/NFP+Article+-+Property+Tax+Clawback+final.pdf
Page 15
Charitable solicitations rules – The Washington State Charities Program is described on the Secretary of
State’s website at https://www.sos.wa.gov/charities
Blackbaud Online Giving Report – USA Today summarized the report in “Seattle top city for online
donations 3rd year in a row” at http://www.usatoday.com/story/news/nation/2014/06/21/seattleblackbaud-ranks-top-cities-for-online-based-donating-in-2013/11098073/ The detailed city-by-city list is
available (as a Microsoft Excel file) at http://www.blackbaud.com/mostgen
“Pacific Northwest Nonprofit Survey” – The 2014 report is available online at
https://www.nonprofitoregon.org/sites/default/files/uploads/file/Murdock-report-v5.pdf.
20
Nonprofit support organizations
501 Commons
http://www.501commons.org
Institute of Public Service at Seattle University
https://www.seattleu.edu/artsci/publicservice
Jefferson County Nonprofit Alliance
http://www.jccfgives.org/our-services
Nancy Bell Evans Center on Nonprofits and Philanthropy
Evans School of Public Affairs, University of Washington
http://evans.uw.edu/centers-projects/nbec
The Nonprofit Network of Southwest Washington
http://nonprofitnetworkwa.org
Northwest Nonprofit Resources (Spokane)
http://www.nnr.org
Shunpike
http://www.shunpike.org
United Ways of Washington
http://www.unitedway-wa.org
Washington Nonprofits
http://www.washingtonnonprofits.org
Wayfind: Attorneys Supporting Communities
http://www.wayfindlegal.org
Whatcom Council of Nonprofits
http://www.wcnwebsite.org
For more resource listings such as Nonprofit Centers, Programs and Associations or Regional Support
and Training, visit the Nancy Bell Evans Center webpage.
Community Impact Project
Washington Nonprofits is working with First Lady Trudi Inslee to grow strong crosssector networks within communities across Washington. The Community Impact
Project helps nonprofits working collaboratively within communities to demonstrate
and communicate impact on complex social problems. CIP aligns state and local policy
and budget decisions so that the frontline work of nonprofits connects to state
initiatives and policy decisions.
In 2013-2014, Washington Nonprofits organized three First Lady "community impact
visits" in Thurston, Whatcom, and Spokane Counties. Leveraging the influence of the
First Lady and her interest in nonprofit effectiveness, these visits have convened a wide
range of local leaders and officials around the topics of education, health and food
security. Together, we are building effective platforms for collaborative action.
The Nancy Bell Evans Center (the Center) works to
enhance the understanding and vitality of the
nonprofit and philanthropic sector through
research, education, and community engagement.
The Center's faculty and affiliates conduct research
on a variety of topics including nonprofit and
philanthropic accountability and certification,
charitable solicitations and regulation, nonprofit
resiliency, financial accountability and performance
management, and public private partnerships. The
Center also convenes members of the academic,
nonprofit, and philanthropic communities to
stimulate thinking on current issues, share research
and best practices, and promote increased dialogue
and collaboration. The faculty advisors for the
Nancy Bell Evans Center are Assistant Professor
Rachel Fyall, Nancy Bell Evans Professor of
Nonprofit Management Mary Kay Gugerty,
Associate Professor Just Marlowe, and Associate
Professor David Suarez; Putnam Barber is Senior
Advisor to the Center.
203 Parrington Hall • Box 353055
Seattle, WA 98195-3055
[email protected] • 206.221.4629
http://evans.uw.edu/centersprojects/nbec/nancy-bell-evans-center
Bringing together nonprofits from throughout the
state, Washington Nonprofits hones the skills of
staff and boards, convenes regional and topical
groups to share information to improve
performance and connects organizations to larger
networks in ways that make communities better
able to tackle their most pressing issues.
Washington Nonprofits strengthens the capacity of
nonprofits to advocate for their mission and
encourages nonprofits to become engaged in
sector-wide policy issues. Washington Nonprofits
collaborates with other regional and national
organizations to strengthen nonprofits and to
increase public understanding for the impact
nonprofits have throughout the state. Founded in
2009, Washington Nonprofits officially launched
services in October 2011. By the summer of 2014,
Washington Nonprofits has grown to include over
415 members and has programming in every region
of the state. Washington Nonprofits is recognized
by the National Council of Nonprofits as
Washington State’s nonprofit state association;
underscoring WN’s success in serving nonprofits
across all sizes, sub-sectors and geography. Alison
McCaffree serves as the executive director.
120 State Avenue NE, #303
Olympia, WA 98501
[email protected] • 253.330.8850
http://www.washingtonnonprofits.org