Building community makes business sense

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Print this page by Bernie Niemeier

Virginia Business is an annual sponsor for the Hampton Roads Corporate Volunteer Excellence Awards presented by Volunteer Hampton Roads in partnership with the Hampton Roads Corporate Volunteer Council.  These awards recognize excellence among workplace volunteer programs.  As I sat through last month’s recognition breakfast at the Westin Virginia Beach Town Center, I was reminded of the important role community service plays in business success.

Some interesting statistics emerge from a report titled “Virginia’s Nonprofit Sector,” released in November by the Johns Hopkins Center for Civil Society Studies, The Community Foundation Serving Richmond and Central Virginia and Virginia Commonwealth University.  Virginia’s nonprofits have a combined total of nearly $78 billion in assets and produce more than $39 billion in annual revenues.

Nonprofits are the third-largest employer among the commonwealth’s industries, employing 6.6 percent of the state’s workers and producing $313 million in income-tax revenues for the state.

But the commonwealth’s share of the state work force is below the national average of 8.4 percent.

Like many things, Virginia’s nonprofit sector benefits from its proximity to Washington, D.C. A full third of Virginia’s nonprofits are in Northern Virginia. 

Nonprofits play a significant role in the arts and social services, as well as in education and health care.  In fact, while religious, grant-making and civic groups make up the largest number of organizations, most of Virginia’s nonprofit economic activity is concentrated in health care.

The business community supports nonprofits in many ways, through sponsorships, grants and contributions as well as through volunteer programs, such as those recognized by Hampton Roads Corporate Volunteer Excellence Awards.  Many of these companies lend support through daylong volunteer projects. Some also offer paid time off for individual volunteer activities.

One might ask, why get involved with nonprofits?  After all, doesn’t the tax-free status of nonprofits give them an unfair advantage in certain fields where for-profit businesses also compete?  Aren’t tax exemptions de-facto examples of government interference with the efficiency of private markets?

Well, yes and no. Nonprofits don’t produce taxable earnings.  In fact, they don’t produce any earnings.  This means that all of the potential for profit goes back into organization to support its core mission.

For-profit businesses, on the other hand, are subject to taxes when profits are produced for investors.  Earnings also are taxed when distributed to shareholders as individual income.
Which system is more efficient? Nonprofits must invest everything in their missions. For-profits must produce a return for shareholders.  For many types of services, the nonprofit model just makes better sense.

Working with nonprofits, companies create opportunities for employees to learn new skills and build relationships in the community.  This arrangement positions companies as community leaders and good places to work, allowing them to show concern for the area’s quality of life.

Nonprofits have experienced financial pressures as a result of the recent weak economy.  According to the Johns Hopkins report, the 2009 American Recovery & Reinvestment Act helped nonprofits avoid the full impact of the recession. Nonetheless, economic strains have lingered with most organizations showing only marginal growth since 2009.

Looking forward, we may see tax code reforms that would limit tax deductions.  If donations to nonprofits are subject to these limitations, the changes could be disastrous for this large segment of our economy.

As 2013 unfolds, each of us will have opportunities to contribute time and money to worthy causes.  It is important to remember that giving back to the community helps to build a stronger community, attracting people, new companies and building skills in a way that helps to sustain our long-term success.  Helping to build community makes good business sense.

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