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What is Your Community Benefit?

Rebecca Novick

The reason for the tax break for nonprofits is that nonprofits are meant to provide a “community benefit.”

When you apply for nonprofit status, the forms you have to fill out include making a case that the benefit you will provide (often expressed in your mission statement) is worth the state letting go of your potential tax revenue.

If you’re starting a homeless shelter, it’s pretty obvious that it is (“lessening the burden of government” is explicitly listed in the IRS guidelines for exempt purposes). But what about your small theater company? Your chamber ensemble? Your single-choreographer dance company? What are you explicitly doing to (more from the IRS language) relieve the poor and distressed, advance education, and combat community deterioration?

Does art in general help achieve these aims?

I would argue that it does. But does your specific group have those (or related) aims at the center of its mission? Or are they at best tangential or abstract goals, referred to only when applying for an educational grant?

We’ve heard this a lot recently, and we’re going to hear it more as the economy continues to flounder: if what your nonprofit arts organization is mainly doing is creating a product (art) for which you charge money (ticket sales) but those ticket sales don’t cover your costs, then perhaps you’re more like a struggling restaurant or a worthy independent bookstore that’s having trouble staying open than like a nonprofit in need of community support.

There are rumblings that the government is taking aim at the nonprofit status of large arts institutions with significant assets and at the tax-deductibility of donations to the arts. I think we should be concerned also about the nonprofit status of small groups whose efforts are focused primarily on art-making and who don’t have ancillary activities that fit more easily into the tax code’s definition of exempt purposes.

I’m doing some strategic planning work for a young theater company that’s in the process of incorporating as a 501(c)(3). We’ve been discussing the theory of community benefit and it’s not an idea that has come up for this group in their five-year producing history. Their goal, as with many small companies, has been to put on the plays they are interested in. Pressed to talk about what the gap would be if they disappeared, they talk about service to playwrights and other emerging artists, but are really only at the beginning of thinking of themselves as belonging to a community, or having an obligation to that community.

I think that the arts do provide a host of valuable community benefits, but service to our communities can’t happen by accident, or as an afterthought to our missions.

If we want to stay under the nonprofit umbrella, then we need to get better at framing our work in those terms, and at doing work that has visible, tangible community benefit.

And if that’s not the goal, then we should seek other structures that suit our activities better.

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