Nonprofit 411: Cause Marketing: What You Need to Know Before You Sign

BMK-HeadshotMore and more companies want to partner with nonprofits in cause marketing campaigns. Also known as commercial co-ventures, these partnerships can help both parties build their brands and enhance their effectiveness. Many prospective co-venturers don’t realize that they need to register or submit other documents in many states.

Harbor Compliance Account Executive Brock Klinger has helped many businesses and nonprofits set up successful co-ventures. “Overall, commercial co-ventures are a positive opportunity, but business and charities should only engage once they’ve ensured all requirements are met,” he said. Brock recently provided some advice for setting up a compliant cause marketing campaign.

What are commercial co-ventures?

Commercial co-ventures are agreements to conduct a revenue-generating activity and donate a portion of the proceeds to a charity. They include campaigns such as cash register donation requests, coupon nights at restaurants, co-branded merchandise sales, and charity events, and their popularity has soared in recent years. “Cause marketing is a huge trend in advertising circles because it allows businesses to align themselves with charity brands that their consumers are passionate about,” Brock said. “Commercial co-ventures allow businesses to translate their values into tangible actions.”

The most successful co-ventures are generally ones that align closely with the company’s brand and mission. For example, a company that sells outdoor gear may do well with an environmental campaign, while a children’s clothing chain might do better with a charity serving kids.

What do they require?

Both charities and companies have obligations to meet when engaging in a co-venture.

Twenty-four states have registration and disclosure requirements for co-venturers. Some states require certain disclosure language to be used in advertising, or specific provisions to be included in the co-venture contract. In Alabama, California, Massachusetts, and South Carolina, the business must register and submit a copy of the contract within a prescribed period before launch of the campaign. In Illinois, the nonprofit must register and file the contract. Wherever contracts are required, the co-venturers must generally file a financial statement at the end of the campaign summarizing receipts and expenditures. In Massachusetts, co-venturers must secure a bond.

In addition, nonprofits must meet state charitable solicitation requirements wherever they will be raising funds. If the campaign is conducted online, you may need to meet requirements nationwide. State charity officials check the nonprofit’s registration status when reviewing co-venture contracts, and some states specifically advise co-venturers to ensure that the nonprofit is fully registered before entering into contracts. Many states also advise donors to check registration status before donating.

Is registration expensive?

Across the board, registration fees for co-ventures are minor. Because the requirements are detailed and varied in each state, however, it can take a great deal of time to sort through them and complete the required paperwork.

Building a strong foundation

Like many state requirements, co-venture regulations exist to protect the public, ensuring that campaigns fulfill their promises to participating consumers. In this case, the requirements also protect co-venturers by ensuring that the terms of the contract are fulfilled.

If you have questions about commercial co-ventures, get in touch and we’ll be happy to answer them.

About the author

Brock Klinger leads Harbor Compliance’s fundraising compliance sales team. He handles charitable solicitation, professional fundraising, commercial co-venture, and charitable gift annuity client relationships across all jurisdictions and industries. Brock’s work also includes nonprofit formation services, industry-specific and occupational licensing, and corporate lifecycle services.

Member Spotlight: The Dignity Institute

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Siena is pictured above with Alex Diaz (center), champion break dancer and Dance Artist at The Dignity Institute.

“I want to be invisible.”

These were the first words that staff at The Dignity Institute heard spoken by 11-year-old Siena when they met her at a Boys and Girls Club. Hidden in the protection of the back row, sinking into the comforting cave of the hoodie that covered her face, it was clear that Siena meant every word.

Staff at the Dignity Institute are no strangers to hard-to-reach kids like Siena. Their mission is to connect underserved youth to college, a career, or entrepreneurship by awakening their purpose and passion through learning life skills and the urban arts. They approach this mission from the principle of respect: everyone, no matter their life circumstances or background, deserves to be treated with dignity.

Over the course of their 8-week hip-hop dance program, Siena was transformed.

Her hoodie was pushed back to reveal a contagious smile. Her spot in the back row was slowly abandoned in favor of a position at the front of the stage. Siena became a leader among her peers, offering suggestions for improvement and giving hugs of encouragement. By the day of the final performance, Siena had transformed into a vibrant, curious individual confident that her presence matters, her voice matters, and that she is worthy of being heard.

Learn more about The Dignity Institute at www.thedignityinstitute.org.

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This is the first in a new series, Member Spotlights, that aim to promote awareness of the impact of our nonprofit members. All members are encouraged to share stories of their organizations’ work that best illustrate the positive impact their organization has in their community. Nonprofit members can click here to submit a Member Spotlight.

MNN Testifies Before State Committee on the Impact of Tax Reform on Nonprofits

Today, MNN CEO Jim Klocke testified in front of the Joint Committee on Revenue at an invitation-only informational hearing on the recently passed federal tax reform law, the Tax Cuts and Jobs Act. In the testimony, Klocke discussed the pieces of the federal tax bill which will be harmful to the Massachusetts nonprofit sector, highlighting that the federal tax bill will make it harder for all nonprofits to operate – small, medium, and large alike.

“The federal tax bill will reduce charitable giving, impose new taxes on the sector, and will negatively impact the Commonwealth’s nonprofit community and the people and causes they serve,” said Klocke.

Klocke’s testimony also outlined the future opportunities for state government and the nonprofit sector to work together to mitigate the impact of the federal tax bill on “communities and the people that rely on the programs and services provided by our government and nonprofit sectors.”

Nonprofit 411: Finding Opportunities in the New Tax Law

by George Zoglio, Principal, Zoglio Financial Management Solutions

“Finding opportunity is a matter of believing it is there” – Barbara Corcoran, entrepreneur, business leader, and “Shark Tank” investor

facepic (1)The ink on the landmark federal tax reform law, the Tax Cuts and Job Act, is barely dry. Much of the initial analysis points to an unintended negative impact on individual charitable giving. Under the new law, it is anticipated that even a greater number of taxpayers will not be able to itemize deductions, generating concern in the nonprofit sector that if a donor does not see a direct tax benefit from their contribution, they may be less inclined to give.

While the new tax law will likely provide challenges for nonprofits, there may be opportunities- if an organization knows where to look.

20% deduction for “pass-through” entities

A number of small- to mid-size businesses are taxed as “pass-through” entities, meaning the individuals who own them pay tax individually on the income derived from that business. The new tax legislation provides many of these businesses a first-time ever 20% deduction against their business income.

Who are these businesses that could take advantage of this deduction? Just walk down Main Street. They are your local restaurants, retailers, wholesalers, distributors, health clubs and spas, and other “Mom and Pop” establishments.

The individuals benefitting from this new deduction may be quite interested in “reinvesting” some of their tax savings in their community through a local nonprofit, viewing it as an opportunity to “do good while doing well.”

Nonprofits establishing relationships with local businesses is advantageous for a number of reasons. For example, the service populations of nonprofits and businesses may overlap. Building and fostering these relationships will strengthen the impact of and maximize the value for both the nonprofit and the business owner.

Social Return on Investment

Now more than ever, nonprofits will be challenged to effectively demonstrate and communicate how charitable giving has resulted in a real impact in the donors’ community. In recent years, a number of visionary and creative nonprofits in the United States have adopted the concept of Social Return on Investment (SROI) to quantify this impact.

Similar to the way financial ROI quantifies the gain or return on a financial investment, SROI strives to quantify the social and community impact of the programmatic investment. One way of calculating SROI would be:

Incremental impact achieved / Resources invested (program costs) = SROI

The incremental impact (or numerator in above equation) includes the tangible and/or intangible benefits generated that are attributable to the activities of the nonprofit. This might include a quantification of the costs saved or averted from a nonprofit’s intervention, with the supporting data extracted from published studies from reputable sources (i.e. studies on costs associated with a single family facing food insecurity, or the cost associated with the homelessness of one person) or from the nonprofits own internally collected data.

Jewish Vocational Service of Boston was able to demonstrate an SROI of $2 to $3 higher earnings by clients for every program dollar invested in the first two years of program completion and up to $15 after ten years. The Mentoring Partnership of Minnesota was able to quantify an SROI of $4.89 for every dollar invested in its Youth Intervention Program.

While heartwarming anecdotal stories that demonstrate impact are essential components of a nonprofit communications strategy, today’s reality is that we live in an information-driven society. Those nonprofits that can successfully convert the data they already collect into quantifiable outcomes and impact will possess a distinct advantage when soliciting charitable giving.

Are you up for the challenge?

Zoglio Financial Management Solutions provides outsourced, part-time and interim CFO, accounting, financial management and reporting, budgeting and related consulting services. They have expertise in working with small- to medium-sized nonprofits organizations.

Nonprofit 411: Getting Everything Done

By Annette Rubin, Certified Professional Coach, Founder of Coaching to Potential

Annette Rubin Getting Everything DoneIn the nonprofit world there always seems to be too much work and too few resources, but by focusing on what really matters—and using your time carefully and wisely—you’ll be surprised what you can accomplish. Here are suggestions for getting everything done.

Be Sure Everything You’re Doing Really Has to Be Done by You

Often people discover that they have tasks and projects on their to-do list that should be done by others. There are three basic reasons.

  • You can’t say no. Consider each request based on the importance to your organization, level of priority in relation to other work, who is asking, and whether someone else can take it on.
  • You don’t delegate. You may believe that your staff or colleagues are already working too hard or wouldn’t be able to do a job as well as you. However, giving others the opportunity to take on new tasks facilitates their engagement, helps them gain confidence and new skills, and supports your efforts to get the organization’s work done.
  • You haven’t let go of tasks/projects you don’t have to do yourself. Sometimes you just enjoy doing work that really isn’t part of your job description. Make sure you make your own critical work your highest priority.

Get Rid of Unnecessary Time-Wasters

You may find as you look back on how you spent your day that you actually spend very few hours taking care of business. Here’s what can you do to increase your focused work time.

  • Manage your meetings. Before you agree to attend any meeting, ask yourself if it is critical for you to be there. If not, then decline the meeting. Make certain that every meeting you organize is critical. Ensure you have a tight agenda, limit the length of the meeting, and stick to the schedule.
  • Manage distractions. Check your accumulated email or other social media only a few pre-considered times each day, so that you minimize the number of interruptions.
  • Encourage colleagues to schedule meetings instead of dropping in for unscheduled “brief chats.” Close your door when you are focused on a project, and put up a Please Do Not Disturb sign if necessary. If you don’t have a door, put a sign where everyone can see it. Create a culture of respect for people’s time and recognition of how distractions limit productivity.

Manage Your Work and Time

Do you take charge of each day or do you let requests from others divert you from your own essential work? Be strategic in the use of your limited time.

  • Know what you have to do. Create a list of everything on your plate. Update the list daily. Separate the list into categories: items that you can do quickly, tasks that might take up to a couple of hours and longer-term projects. Each day identify your priorities and focus on them.
  • Plan your day. Use your calendar to reserve time for projects and tasks, especially for work that requires concentration. If you have to bump one of these appointments with yourself, reschedule the time you’ve set aside for YOUR work so that doesn’t get lost.
  • Set deadlines. Assign a deadline for all of your projects and tasks. Then hold yourself accountable. Without a deadline, tasks and projects may remain on your list.

Free Webinar: “Now What: How the New Federal Tax Law Impacts Charitable Nonprofits”

The federal Tax Cuts and Jobs Act, enacted just days before the New Year, will affect nonprofits across Massachusetts and the country. From compliance issues, to fundraising challenges, to the prospect of changes in state and local tax law, there is a lot for nonprofits to understand about the Act.

MNN is joining with its colleagues at the National Council of Nonprofits in promoting a free nationwide webinar, “Now What: How the New Federal Tax Law Impacts Charitable Nonprofits,” on Thursday, January 11, 2018 at 3:00 pm. All workers and supporters of the nonprofit sector are invited to learn about operational changes nonprofits may need to make right away, what they need to know about state and local policy changes, and other items that will affect nonprofits and the people nonprofits serve.

Click here to register for the webinar.

 

Employer Health Care Assessment Takes Effect

On January 1, 2018, the new temporary Employer Health Care Assessment (EMAC) took effect. Employer charges for the new assessment will be included in 2018 first quarter unemployment insurance bills. Details of the new health care assessment include:

  • A January 1, 2018 effective date with a sunset 2 years after implementation.
  • For employers with 6 or more employees, an increase in the existing employer medical assistance contribution (EMAC) of $26 per employee annually.
  • For employers with 6 or more employees who have employees on MassHealth or ConnectorCare, an additional charge for each employee receiving those benefits (5% of the first $15,000 of annual pay to a maximum of $750/year).
  • Two years of unemployment insurance relief, estimated to save employers a total of $344 million in 2018 and 2019.
  • Additional details and FAQs can be found here.

During the regulatory process, MNN worked to secure changes to the new charge for workers on MassHealth or Connector Care. In November, MNN testified at a hearing on draft regulations for the assessment and urged changes to them. In December, state officials released a final version of the temporary regulations (accessible here), which included two of the changes MNN recommended. The assessment will now only apply to workers on MassHealth or ConnectorCare for at least 8 continuous weeks in a quarter, rather than the two weeks originally proposed. It will also not be assessed on workers who earn less than $500 per quarter in a given job. These changes will provide relief to many nonprofits, including those with employees in short-term or low-hours roles.

Even though the assessment has taken effect, the regulations will still go through one more round of reviews in the first quarter. MNN will continue to advocate for nonprofits throughout the process and if you have questions or feedback, please let us know.

In End-of-Year Fundraising, Consider Tax Reform in Your Pitches

The end of the calendar year is typically a time of frenzied fundraising for many of our members. This year is no different- except that last week, the federal tax bill passed the House and Senate. It will take affect in 2018.

One of the bill’s effects is that millions of donors across the country will no longer itemize their deductions. Those donors will no longer utilize the charitable tax deduction, beginning with their 2018 contributions. In MNN’s Commonwealth Insights publication earlier this year, we estimated that change could reduce Massachusetts giving by up to $513 million.

As you prepare your end-of-year asks to donors and other supporters, we suggest that you notify them of this change and encourage those affected to take advantage of the charitable deduction while they still can by donating in 2017. If you have already sent out your direct mail campaign, consider making phone calls or starting an online campaign.

MNN remains committed to working with our members, and our colleagues across the country, to advocate for the interests of nonprofits.

Nonprofit Independence Upheld as Johnson Amendment Protected in Final Tax Bill

The independence of the nonprofit community was upheld last night as the language that would have severely impeded nonprofits’ ability to pursue their missions was stricken from the final version of the tax reform bill.

During deliberations in the Senate late Thursday, the chamber’s parliamentarian blocked language that would have repealed the Johnson Amendment, an important provision in the current tax code that prohibits charitable organizations from endorsing candidates for political office.

“While the final tax bill set to be revealed today will contain a litany of provisions harmful to our sector, nonprofits will be able to operate free from partisan politics, ‘dark money,’ and tax-deductible political contributions. This represents a significant win for the integrity of nonprofits across Massachusetts,” said Jim Klocke, CEO of the Massachusetts Nonprofit Network (MMN).

Over the past few weeks, MNN activated its members in an expansive email and phone call campaign directed towards federal representatives integral in tax reform deliberations, including Representative Richard Neal of the Massachusetts 1st Congressional District, the ranking Democrat on the House of Representatives Ways and Means Committee.

But the fight for the Johnson Amendment is far from over, Klocke noted, as Congressional leaders may try to repeal the Amendment in the near future.

“We look forward to continuing our work with our members and colleagues as we pursue our ultimate public policy goal: enacting policies that strengthen and unite, not divide, our communities.”

Local Nonprofit Leaders: US Tax Reform Will Hurt People in Need

United Way of Massachusetts Bay and Merrimack Valley, the Massachusetts Nonprofit Network, and Catholic Charities of Boston today issued the following joint statement outlining their concerns about the impact of increasing the federal standard deduction on charitable giving:

“The Tax Reform legislation passed by the United States Senate, and by the US House of Representatives, has the potential to significantly harm the ability of nonprofit organizations to help people in need, both in Massachusetts and across the country. On behalf of the children, families and communities we serve, today we are speaking out about the ramifications of the tax proposal on the nonprofit sector, specifically the elimination of the charitable deduction for 31 million middle- and upper-middle income taxpayers.

“Currently, the charitable tax deduction is available to taxpayers who itemize, about 30% of taxpayers, or about 45 million taxpayers. Of the 45 million taxpayers who itemize, 36 million claim the charitable deduction, which accounts for an estimated 82% of charitable giving. The proposal would decrease the incentive to itemize by increasing the standard deduction, and 31 million taxpayers will lose the ability to claim this deduction. Studies suggest that this will result in about a $13 billion reduction in gifts to the charitable sector. These donors often give to humanitarian, social service and disaster relief organizations.

“The direct impact on nonprofits in Massachusetts could be devastating.  In Massachusetts, roughly 1 million donors (nearly a third of all Massachusetts filers) claimed the charitable deduction, accounting for $5.5 billion dollars.  A 5% loss resulting from tax reform would mean $275 million fewer dollars to fund private food banks, homeless or domestic violence shelters, provide day care, or job training.

“A drop in giving of this magnitude would have disastrous consequences. It would mean large cuts to services that people depend upon. It would put hundreds if not thousands of small nonprofits across the state out of business. And it would jeopardize the financial health of medium- and large-sized nonprofits, threatening their ability to deliver services.

“In addition, 20% of donors who would be eligible for the higher standard deduction earn an income of $200,000 or more. A national study released in 2016 asked philanthropists, whose incomes were $200,000 or more, whether their giving habits would change if the charitable giving deduction were eliminated. Nearly half (49%) indicated that they would decrease their giving, and 20% indicated that their contributions would ‘dramatically decrease.’

“There is unanimous agreement among academics and economists that charitable tax incentives enable people to give more. While any individual person has a variety of motives for giving, the century-old policy of exempting charitable donations from taxes significantly increases charitable giving. Claims that the final tax reform legislation will increase charitable giving are unsupported by any fact-based analysis.

“We are not optimistic that the compromise bill will differ significantly from what has been passed, but we will continue to look for other avenues to enact a universal “above-the-line” charitable deduction. We are deeply concerned for the millions of people in need in our communities and across the country who rely on private funding for critical early education, out-of-school time programs and organizations that provide pathways out of poverty.”

Michael K. Durkin, President and CEO, United Way of Massachusetts Bay and Merrimack Valley
Jim Klocke, CEO, Massachusetts Nonprofit Network
Deborah Rambo, President and CEO, Catholic Charities of Boston

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