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Updated: September 26, 2022 Commentary

Businesses and nonprofits need to work together — the stakes are high

Nonprofits and businesses have been working more closely than ever during the last few years — advocating for changes to federal policies like the Paycheck Protection Program, collaborating on community-focused projects and navigating challenges unseen in generations.

Mary Alice Scott

In many ways, nonprofits and for-profit businesses are facing similar challenges, particularly workforce shortages and increasing costs of goods due to inflation. But unlike for-profit businesses, nonprofits are much more limited in how they can make up those costs. While a business may be able to offset salary increases by raising prices or reducing hours, nonprofits often don’t have the same flexibility. Clients rely on their services and programs to be ready and available. Nonprofits are businesses, just with a fundamentally different business model than what is typically seen in the for-profit world.

If a restaurant is unable to find enough workers, it may be able to eliminate lunch service or cut back on slow afternoon hours. But if a nonprofit is forced to reduce services, it could be a life or death situation. Closures and service reductions of domestic violence shelters, food pantries, and services for the elderly mean that those in need will have to go without support. The stakes are too high for that to be acceptable, and yet these are the realities Maine’s nonprofit now face.

The immediate crisis of the pandemic has shifted into a “new normal,” yet persistent difficulties remain. Inflation and an impending recession are increasing the need for nonprofit services, right when government relief has seemingly dried up. Food pantries are seeing higher demand for services now than they did even in March or April of 2020.

Just like early 2020, the communities most affected by the current economic crisis are those who were on the edge to begin with. The parallels between the business and nonprofit communities continue, here, as well. Black-owned businesses struggled to access federal programs like PPP, communities of color have been devastated by COVID and its after-shocks, and the nonprofits in those communities are seeing the need for their services skyrocket.

Now the question for both sectors is, What’s next?

Nonprofits need the government to keep up with the economic realities of running an organization in the current economic climate. Nonprofit workforce shortages are quickly reaching a crisis point, and without more flexible funding programs (like those described below), the impact in our communities could be catastrophic.

A big distinction between 501(c)(3) charitable nonprofits and the for-profit business community is their tax status. In 2020 and 2021, a universal charitable deduction allowed individuals (even those who do not itemize on their tax returns) to receive a $300 deduction on their federal taxes for donating to charitable nonprofits. Organizations across the country saw $300 donations increase.

Another federal program that benefited businesses and nonprofits was the Employee Retention Tax Credit (ERTC), which allowed organizations to keep employees on their payroll. Now, both the ERTC and the Universal Charitable Deduction have expired.

Both programs would help charitable organizations access much-needed flexible spending for nonprofits who need to raise wages, account for inflation, and increase their services during an economic downturn. Opponents sometimes view these programs as “too expensive” because they don’t see the bigger picture when it comes to the benefits nonprofits provide.

Because of the unique tax status of charitable nonprofits, they’re often viewed as a drain on the tax rolls, rather than what they are: a necessity, which alleviates government spending and builds relationships within communities.

In order for nonprofits to successfully serve out their missions and lift up our community, they must be recognized as true partners within the economy. They need business allies who recognize the value in well-paid and happy staff, government support that keeps up with the current economic climate, and a community that sees the importance in interconnectedness of each of these pieces.

Mary Alice Scott is the Public Affairs Manager for the Maine Association of Nonprofits

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