Wise Giving Wednesday: The Increasing Number of New Charities in the U.S.

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calendar icon Jul 17, 2020

In 2014, the IRS introduced a new, simpler application form for charitable tax-exempt status – the IRS Form 1023-EZ.  Some were apprehensive about making it easier to obtain charitable-exempt status in view of the existing 1.2 million charities in the United States. Instead of a 28-page application form, the three-page EZ version was now available for groups with annual gross receipts of $50,000 or less.  (In fairness, the IRS has a seven-page eligibility worksheet that must be reviewed to determine if the EZ Form is applicable.) As reported in The Chronicle of Philanthropy, for the fiscal year ended September 30, 2015, the IRS approved over 86,000 applications for 501(c)(3) charity status.  Prior to 2013, the annual volume of approved applications was below 50,000 new groups. 

As if the new charity floodgates were not open wide enough, however, the IRS recently announced that effective July 1, 2016 the user fee to process the IRS Form 1023-EZ was decreased from $400 to $275.  While it is too soon to tell how much this reduced fee will further impact the increasing volume of new charities, it is good bet that it will not be a deterrent. 

On the other hand, some view the size of the American charitable sector as an asset in terms of helping to generate new ideas and approaches to the growing needs and challenges charities face each day.  For donors, however, the challenge they face is in making informed giving decisions about new charities that have no track record or experience. 

Many of the items included in the 20 BBB Standards for Charity Accountability cover recommended practices that are applicable to even new organizations such as:  including clear program descriptions in appeals and on its website, having an adequate board size, not having the CEO also serve as board chair, not engaging in transactions with board or staff-member related firms that result in a conflict of interest, having a board-approved budget that identifies projected expenses on programs, fundraising and administrative expenses, and including a privacy policy on the charity’s website. 

As the volume of new charities continues to increase, the BBB Charity Standards can provide guidance that can help these organizations avoid accountability pitfalls while also being transparent to donors.

On a separate note, as part of our Building Trust Video Series we are pleased to provide a video that features Barry Lynn, Executive Director of Americans United for Separation of Church and State (a BBB Accredited Charity) which seeks to preserve the separation of church and state through litigation, advocacy, and educational efforts. 

We are always working with charities to publish or update reports for donors. Visit Give.org or local BBBs to check out any charity before giving. Our recently evaluated charities include: 

Finally, remember to let us know by going to https://give.org/ask-us-about-a-charity1/ if you are  interested in seeing a report on a charity not on the list and we will do our best to produce one.  

H. Art Taylor, President & CEO
BBB Wise Giving Alliance

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