For our second rendition of “Four Organizations You Might Not Know Are Nonprofits,” we scoured the Earth for juicy tidbits and fun factoids about the nonprofit world.
Okay, you caught us. We didn't really search the globe, we merely did some really fantastic web surfing. And we found some interesting organizations.
Some you probably have heard of (Exhibit A: Yale University). Others, not so much (Exhibit B: The Modern Woodmen of America). So here goes …
1. Yale University
What it's known for: being one of the top 10 universities in the United States.
What it isn't known for: having over $34 billion in assets.
How it works: : In legal terms, Yale is classified as a 501(c)(3), which is a tax-exempt, charitable organization. You'll find other universities, such as Princeton, Stanford, and Harvard, in this category as well.
Why would a private university be tax exempt? And why does charitable status matter? Under the U.S. tax code, if an organization works toward advancing education or science, it qualifies for exemption as a charitable organization. Being exempt means a nonprofit doesn’t have to pay taxes on its income. Being charitable means donations to the institution are tax deductible. (Pay attention, alumni!)
Yale's endowment (its assets) covers about 34 percent of all university operations. After accounting for liabilities (a.k.a. debts), Yale is left with $24.5 billion. This large sum is invested in stocks, bonds, bank deposits, foreign equity, private equity, absolute return strategies, and real assets. Yale states that three-quarters of these assets are "true" endowments, meaning that many, many people have bequeathed (or "given," but sounding much fancier) stocks, bonds, and more equaling that amount to the university.
The other quarter of Yale's assets is considered a "quasi-endowment," or money that wasn't donated but is treated by Yale's board as an investment for future generations. These assets also give a nice 12.6 percent return-on-investment annually.
For information on Yale's programs, finances, and more, view its GuideStar Nonprofit Profile.
2. The Heritage Foundation
What it's known for: its conservative policies and recent advisory role for president-elect Donald Trump.
What it isn't known for: receiving rental income from three limited liability companies (LLCs) .
How it works: The Heritage Foundation is, in its own words, “a research and educational institution—a think tank—whose mission is to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense.” It researches key policy issues, and markets its findings to members of Congress, congressional staff, policy makers in the executive branch, journalists, the academic world, and the general public.
But what about that rental income? Many people are surprised to learn that it is entirely legal for a tax-exempt organization—even a charitable one—to own and generate income from businesses or property. In fact, GuideStar receives income from renting out our Washington D.C. office to co-tenants. To learn more, please visit GuideStar's Nonprofit Profile.
Excerpt from Schedule R of the Heritage Foundation’s 2014 IRS Form 990.
In 2014, the Heritage Foundation received $462,298 from Intern Housing LLC, $604,522 from Massachusetts Avenue Properties LLC, and $265 from 3rd Street Properties LLC. The income from Intern Housing LLC was program service revenue, that is, earnings generated by activities related to the foundation’s exempt purpose (i.e., reason it is tax exempt). The program in question was the Young Leaders Program, which directly supports the foundation’s mission by “nurtur[ing] some of the nation’s most promising young minds and giv[ing] them the training and experience necessary to assure principled, effective leadership that will hold our country in good stead for the future.” The foundation’s 2014 annual report notes that some 189 interns participated in the program that year.
Rentals from the other two properties did not, however, result from activities to carry out the Heritage Foundation’s mission. This revenue was therefore unrelated business income, which would have been taxable, except the costs associated with renting these two properties exceeded the revenue they generated.
Excerpt from page 9 of the Heritage Foundation’s 2014 IRS Form 990.
You can find the Heritage Foundation’s 2014 Form 990 and a wealth of other information in its Platinum-level GuideStar Nonprofit Profile.
3. American Civil Liberties Union (ACLU)
What it's known for: defending the civil rights of all people in the United States.
What it isn't known for: being a 501(c)(4) social welfare organization.
How it works: Although many people know that the ACLU is a nonprofit, they aren’t aware that it is not a public charity. In fact, many people outside the nonprofit sector don’t realize that there are more than 30 different types of tax-exempt organizations.
The ACLU is an advocacy group, classified by the IRS as a 501(c)(4) social welfare organization. As a 501(c)(4), the ACLU can lobby unlimitedly, as long as the lobbying is related to its exempt purpose. It can also campaign for or against candidates for public office, as long as this involvement doesn't make up its primary activity.
In contrast, a 501(c)(3) public charity can lose its charitable status, or even have its tax exemption revoke entirely, if it engages in lobbying activities that are more than an "insubstantial part of its overall activities" or if it participates in a political campaign on behalf of—or against—a candidate running for public office.
Another difference is that donations to 501(c)(4) organizations are not tax deductible. People can—and do—give to 501(c)(4)s, but they can’t deduct these gifts from their income taxes. For this reason, many 501(c)(4)s, including the ACLU, establish separate 501(c)(3) organizations. It’s important that the organizations ensure that money donated to the 501(c)(3) is used only for charitable purposes and not for political activities by the 501(c)(4).
4. Modern Woodmen of America
What it's known for: let's be honest folks, not many of us have heard of this organization. But it is an IRS-recognized tax-exempt organization.
What it isn't known for: having an annual income of over $1.7 billion—all from its program services.
How it works: The Modern Woodmen of America isn't what you might expect it to be. It isn't made up of barrel-chested men, with strapping arms and flannel shirts, chopping wood, day in and day out.
Instead, it's a financial services organization, categorized as a 501(c)(8) Fraternal Beneficiary Society. Originally created in the 19th century, fraternal societies function today much as they did in the 1800s. They provide for the payment of life, sick, accident, or other benefits to the members of their society, order, or lodge.
Ever heard of the Elks Lodge? How about the Moose, Kiwanis, or Ruritarians? These are all fraternal societies.
Who can join a fraternal society (other than college freshmen)? People “who have the same or similar calling, profession, or who are working together to accomplish a ‘worthy object,’ and who have banded together as an association or society to aid and assist one another, and to promote the common cause.”
Back to our Modern Woodmen. Why the name? Their website states that they were inspired by the pioneer woodmen who cleared out forests to provide community and security to their families.
These woodmen are chopping down finances into simpler terms. They offer financial products to help their members protect their families (and their futures). Their $1.7 billion in sales helps fund member benefits and support social, educational, and volunteer programs that help the local community.
For more information on the work of the Woodmen, please visit their GuideStar Nonprofit Profile.
When she isn't helping nonprofits update their GuideStar Nonprofit Profiles, Madeline Kardos writes for GuideStar's top-rated blog. Follow GuideStar on Twitter and Instagram to stay up to date on the latest nonprofit sector news.