Nonprofits

in Washington 2012 Recent statistics

and policy developments

November 2012

ABOUT NONPROFITS IN WASHINGTON Updated several times since the first edition in 1994, Nonprofits in Washington uses state and federal administrative statistics to profile nonprofit organizations serving Washington communities.

The preparation of the 2012 update to Nonprofits in Washington was supported by Washington Nonprofits and the Nancy Bell Evans Center on Nonprofits & Philanthropy at the Evans School of Public Affairs, University of Washington. The preparation of this report was generously assisted by the National Center for Charitable Statistics. Pam Floyd and Rebecca Sherrell of the Corporations Division in the Office of the Washington Secretary of State provided data from the state’s administrative files. Mark Hugh supplied information on recent changes to Washington state tax rules. Megan Farwell compiled the data for the online supplements as well as providing editorial assistance. Putnam Barber prepared the text.

Copyright © 2012 University of Washington and Washington Nonprofits

The Nancy Bell Evans Center (the Center) works to

enhance the understanding and vitality of the

nonprofit and philanthropic sector through

research, education, and community engagement.

The Center's faculty and affiliates conduct research

on a variety of topics including nonprofit and

philanthropic accountability and certification,

charitable solicitations and regulation, nonprofit

resiliency, financial accountability and performance

management, and public private partnerships. The

Center also convenes members of the academic,

nonprofit, and philanthropic communities to

stimulate thinking on current issues, share research

and best practices, and promote increased dialogue

and collaboration. The Center’s interim director is

Senior Lecturer David Harrison. Associate Professor

Mary Kay Gugerty serves as the senior faculty

advisor.

Bringing together nonprofits from throughout the state, Washington Nonprofits facilitates communications and networking, convenes regional and topical groups to share information to improve performance, and encourages nonprofits to become engaged in sector-wide policy issues. Washington Nonprofits connects with other regional and national organizations to strengthen nonprofit organizations and to increase public understanding for the work nonprofits do throughout the state. Founded in 2009, Washington Nonprofits officially launched services in October 2011. By the summer of 2012, Washington Nonprofits had grown to include over 300 members and was recognized as an emerging statewide association by the National Council of Nonprofits, recognizing its commitment to serving nonprofits across all sizes, sub-sectors, and geography. Alison McCaffree serves as the executive director.

203 Parrington Hall • Box 353055 Seattle, WA 98195-3055

nbec@uw.edu • 206.221.4629

http://evans.uw.edu/centers-projects/nbec

120 State Avenue NE, #303 Olympia, WA 98501

info@washingtonnonprofits.org • 253.330.8850

http://www.washingtonnonprofits.org

Further detail on the topics presented here is available on the related website http://evans.uw.edu/centers-projects/nbec/nonprofits-in-washington

ON THE WEB

1 | NONPROFITS IN WASHINGTON 2012

NUMBERS AND TYPES OF NONPROFITS1

Washington communities are served by nearly 55,000 nonprofit corporations. This number includes some of the largest and best-known institutions in the nation. Both the Bill & Melinda Gates Foundation and PATH: A Catalyst for Global Health are nonprofits, for example, and included in that number. However, the majority of nonprofits are small and local, often staffed largely by volunteers, and little known outside the community where they operate.

In 2012, 54,823 nonprofit corporations were registered with the Corporations Division in the Secretary of State’s office. While this number includes a large number of community benefit organizations commonly identified as charities, a great many of these Washington state nonprofit corporations fit into other categories such as chambers of commerce, recreation clubs and leagues, business associations, cooperative water supply systems, and festivals. They are organized as nonprofit corporations because they do not have a goal of generating profits for shareholders or owners. Instead, they use any revenue they receive to pursue their mission or support their members.

Many Washington nonprofits have also been recognized as exempt from federal corporate income tax by the Internal Revenue Service (IRS). Recognition means they are not required to pay taxes on any surplus of revenue over expenses (or profit); they are also subject to restrictions that prevent distribution of excess revenue (if any) to shareholders or individuals. In August 2012, there were 26,242 active exempt organizations with addresses in Washington state in the IRS files.2 Sixty-six percent of the exempt organizations in Washington fit into the familiar category, known by reference to the relevant section of the Internal Revenue Code, of 501(c)(3) organizations. This category includes both public charities and private foundations, as defined by the IRS.3 Subject to certain restrictions, individual taxpayers can usually deduct donations to these organizations when calculating their adjusted gross income for federal income tax purposes.

Further, Washington (like many other states) requires registration and reporting by organizations that engage in fundraising from its residents; registered fundraising organizations are usually, but not always, nonprofits. Organizations that solicit charitable contributions from Washington residents are generally required (by RCW 19.09, the Charitable Solicitations Act) to report annually to the Charities Program of the Secretary of State. In April 2012, there were 10,070 fundraising organizations in the Charities Program’s rolls, of which 3,871 were based in some other state. During the previous 12 months, 1,183 new organizations registered to raise funds from Washington residents. Organizations that are not required to register by the Charitable Solicitations Act—principally churches—may file an optional statement that will show potential donors they are aware of the requirements and are exempt. In the spring of 2012, there were 3,670 such optional statements on file; during

1 In recent years, the Internal Revenue Code has been revised to require new annual reports from exempt organizations,

and the IRS has changed the forms used for that purpose and the thresholds that determine which form an organization may use. As a result, the underlying data used for this edition of Nonprofits in Washington have been assembled on a different basis from the approach in earlier years. The new reporting requirements and framework are described in the text below and in the Data Note on page 13. 2 Active here means that the organization filed some version of the annual information report (Form 990) during the 24

preceding months, as reported by the National Center for Charitable Statistics using IRS data. 3 The IRS uses the term public charity to describe organizations that receive broad public support from donations, fees,

grants, and government agencies. The term private foundation, in contrast, refers to exempt organizations that are supported by endowment income or by a small number of donors who make significant gifts. The Internal Revenue Code imposes more stringent requirements on private foundations in light of their closely held characteristics.

54,823 nonprofit corporations were registered with the Corporations Division in the Secretary of State’s office in 2012.

The number of nonprofits in Washington may appear impressively large, but it actually underrepresents the true scope of services provided.

2 | NONPROFITS IN WASHINGTON 2012

the previous year, 442 organizations submitted a statement for the first time, of which 266 were located outside of Washington.4

Both the state and the IRS use technical definitions to classify nonprofits and there are, of course, further caveats about interpreting these figures. Some examples:

Churches and related religious organizations are usually organized as nonprofit corporations, so it is likely they will be included in the roster of nonprofits maintained by the Secretary of State.

However, churches are not required to request recognition as exempt organizations by the IRS (though many do), so the 17,287 public charities in the IRS records include an unknown number of religious groups, but very likely do not include them all.

Nonprofits organized in other states that have significant operations within Washington will usually enroll with the Secretary of State as foreign corporations and will be counted along with the local organizations in the state records.

On the other hand, the IRS records simply show the address of the principal office of the recognized organization, so some of the 501(c)(3) organizations with Washington addresses in the IRS files (World Vision, for example) may primarily operate or provide services in other states or abroad.

Conversely, exempt organizations with headquarters in other states may provide significant services in Washington communities—the United Way of Columbia-Willamette in Portland, Oregon, for instance, also serves Clark County, Washington.

Though the number of nonprofits reported in Washington may appear impressively large, it actually underrepresents the true scope of the benefits provided without the goal of profit. An untold number of cooperative community benefit activities occur in neighborhoods of every size without any official registration or recognition—from carpools to neighborhood watches to broad coalitions of active citizens who influence public policy and respond to community needs.

CHANGES IN THE NUMBER AND FINANCES OF NONPROFIT ORGANIZATIONS IN WASHINGTON

State filings

In the mid-1990s when the first Nonprofits in Washington report was published, there were approximately 32,000 nonprofit corporations on record. By 2012, the number of nonprofit corporations registered with the state has increased to nearly 55,000. As shown in Table 1, though, the rate increase in the number of filing organizations has declined significantly since 2010, with net declines in the recorded numbers in the most recent years.

Nonprofit corporations renew with the Office of the Secretary of State by filing a standard form each year before the anniversary of their initial registration. Dilatory filing by nonprofits and processing delays in the Corporations Division mean that fluctuations in the resulting statistics may not reflect the current numbers of nonprofit corporations active in Washington communities. As noted, however, economic conditions since 2008 have changed the pattern of steady growth that prevailed through the 1990s and early 2000s.

Federal filings

Because of changes in the administration of federal data about nonprofits (often termed exempt entities in IRS materials), it is not possible to present corresponding trends derived from the information available in federal filings. Three of these changes are particularly important. First, the IRS has tightened the standards for accepting

4 In legislation requested by the Secretary of State, the Washington Legislature raised the upper limit for

exemption from registration to $50,000 for all volunteer organizations in 2011. This new level matches the change that the IRS made in the requirement for filing of annual financial reports. The year-to-year changes in the reported number of soliciting charities is likely to have been affected by this shift in the threshold.

3 | NONPROFITS IN WASHINGTON 2012

delayed filing of the required forms. Second, Congress has started to require some annual filing from all organizations instead of larger organizations only, as in the earlier rule. And third, as this new filing requirement phased in, the new law also mandated that an organization failing to file an annual report for three consecutive years would have its exempt status revoked and its name removed from the list of exempt organizations in Publication 78 the cumulative listing of recognized public charities published by the IRS.

In the mid-1990s, the IRS reported 25,910 recognized exempt organizations in Washington state. At the same time, though, the number of active exempt organizations in the IRS records in 1995 (i.e., those which had filed a Form 990 in the preceding 24 months) was 8,789—about one-third of the number listed in Publication 78.5 The large difference in these two statistics is to some degree due to the pattern of delayed filings which was prevalent at that time and also greatly influenced by the fact that smaller organizations were not required to file any annual report to the IRS.6

Following these changes, 35,125 organizations were listed by the IRS in August 2012. At that time, though, the tally of active exempt organization totaled 26,242—75% of the number reported in Publication 78.7 The automatic revocation process adds to the difficulty of interpreting that total. By August 2012, 11,098 Washington-based organizations had been removed from Publication 78 as a result of failing to file Form 990 for three consecutive years.

Finances

Information from organizations that file the longer annual information returns with the IRS (Form 990 and Form 990-EZ) provides some indication of how the finances of larger Washington-based public charities and private foundations have fluctuated during the recent economic downturn. In recent years, only organizations with annual revenues of at least $50,000 have been required to file Form 990 or 990-EZ; organizations with less than that amount of revenue file Form 990-N, which does not include any financial information.8

In the important category of public charities, the rate of increase in the number filing with the IRS since 2007 has been significantly lower than in earlier years, with a small decline from 2011 to 2012. As shown in Table 2, focusing on the number of organizations with annual revenue of at least $50,000 suggests an even more pronounced slowing, but with an upturn in the most recent interval. Revenue of these large organizations over the interval increased slowly, if at all, while total revenue and assets actually declined slightly from 2008 to 2009.

For private foundations, the IRS data reveal a sharp decline in revenues and assets from 2008 to 2009 and a slow recovery in the subsequent years. The total number of foundations has not grown appreciably throughout the six-year span (and has actually declined in the most recent periods). Total revenue grew by nearly $4 billion between 2007 and 2008 and then declined to lower levels, which have remained far from the 2008 high. Total assets, in contrast, have increased or held steady each year since 2009 because of stock market appreciation and new donations. Neither revenue nor assets have, however, recovered to the levels seen in 2008. Foundation revenue includes both investment earnings and new donations; both have been subject to downward pressures since 2008 which suggests that donors and managers have had to overcome unusually difficult conditions to achieve the relative stability—and asset growth—that has been present in the most recent years.9

5 The term active organization is used here and throughout this report to designate exempt entities that have filed the

required version of Form 990 with the IRS within the 24 months preceding the date specified. 6 See the discussion for Form 990-N on page 11.

7 A table with full details of these changing tallies is posted online at http://evans.uw.edu/centers-projects/nbec/nonprofits-in-

washington 8 Because the IRS has changed the filing thresholds for the various versions of Form 990 in recent years, the statistics shown

in this report for earlier years have been recompiled on a consistent basis. As a result, they do not match the numbers for the corresponding categories of organizations shown in previous versions of Nonprofits in Washington. 9 In contrast to the situation for public charities, there have been no significant recent changes in the way the IRS collects

and publishes data on private foundations.

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TABLE 1 Number of Active Nonprofit Corporations Enrolled with the Washington Secretary of State as of April 30, 2005–2012

2005 2006 2007 2008 2009 2010 2011 2012

37,957 41,010 44,259 48,108 51,917 57,769 56,412 54,823

Source: Corporations Division, Office of the Secretary of State. Courtesy tally from registration files. See data notes on page 13.

TABLE 2 Number, Revenues, and Assets of Active Public Charities, 2007–2012

Year

Active Public

Charities

Public Charities with Total Revenue of $50,000 or more

Number Total Revenue Total Assets

2007 9,323 5,880 25,240,524,844 37,023,423,604

2008 11,869 6,246 26,476,175,466 39,255,189,473

2009 13,794 6,220 26,298,931,431 38,585,673,621

2010 15,548 6,134 28,407,486,881 40,075,324,729

2011 16,312 6,083 29,137,460,309 43,060,422,395

2012 16,203 6,402 30,653,926,249 45,188,831,092

Note: Includes all public charities filing Form 990 within the preceding 24 months. The revenue and asset data refer only to those organizations with total revenue of $50,000 or more in the filing year. Source: IRS data compiled by the National Center for Charitable Statistics, The Urban Institute. Used by permission. See data notes on page 13.

TABLE 3 Number, Revenues, and Assets of Active Private Foundations, 2007–2012

Year Private Foundations Total Revenue Total Assets

2007 1,098 5,617,631,863 69,663,312,274

2008 1,166 9,964,727,188 85,666,907,744

2009 1,126 7,194,305,567 66,696,020,533

2010 1,173 6,668,012,273 74,241,050,339

2011 1,125 6,668,542,572 74,107,781,721

2012 1,081 6,928,350,282 80,881,198,556

Note: Includes all private foundations reporting to the IRS on a Form 990-PF within the 24 months ending in July 2012 and a small number of organizations classified as private foundations that used Form 990-N. Organizations filing Form 990-N do not report financial data; the effect of the inclusion of 990-N filers on the financial data is negligible. Source: IRS data compiled by the National Center for Charitable Statistics, The Urban Institute. Used by permission. See data notes on page 13.

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CHART 1 Trends in Number, Revenue and Assets of Public Charities and Private Foundations (in billions), 2007–2012

Note: Bubble size represents the relative size in number of active Washington registered public charities or private foundations. Source: IRS data compiled by the National Center for Charitable Statistics, The Urban Institute. Used by permission. See data notes on page 12. Chart design by Elizabeth McNeilly.

Further, the economic pressures of the last few years have affected the operations of countless nonprofits, many adversely. Some nonprofits serving populations in need have reported increases in public support, though usually not to a degree that covers the increased demand for their services that has occurred over the same interval.

The declining numbers of smaller public charities and of private foundations suggest that one consequence of the recent economic downturn has been an increase in the number of organizations that have ceased operations. Some nonprofits cease operations even in the best of times, of course. They do so for a wide variety of reasons. They merge with other organizations. They complete their projects and shut down. Some have certainly found it impossible to continue due to recent reductions in donor support, government contracts, and the number of paying participants in their programs. For a detailed discussion of these pressures, see Resilient Nonprofits: How Western Washington Nonprofits Have Been Coping with the Impact of the Economic Downturn and Nimble Nonprofits: Taking Nothing for Granted in an Era of Constant Change by Paul Ahern and David Harrison of the Nancy Bell Evans Center on Nonprofits and Philanthropy at the Evans School of Public Affairs, University of Washington.10

10

Find these and other research reports online at http://evans.uw.edu/centers-projects/nbec

25.2 26.5 26.3

28.4 29.1 30.6

37.0 39.2 38.6 40.0

43.0 45.1

5.6 9.9

7.2 6.7 6.7 6.9

69.6

85.6

66.7

74.2 74.1

80.9

0

10

20

30

40

50

60

70

80

2006 2007 2008 2009 2010 2011 2012 2013

Charities Revenue

Charities Assets

Foundations Revenue

Foundations Assets

6 | NONPROFITS IN WASHINGTON 2012

VOLUNTEERS AND CHARITABLE CONTRIBUTIONS

The Corporation for National and Community Service estimated in a 2010 report that nearly a third of Washingtonians are volunteers, a rate that places Washington 11th among the states. Using conventional standards for assessing the value of volunteer time, this service is equivalent to a contribution of $4.7 billion dollars. In Washington Serves, the Seattle-based management support organization 501 Commons describes a plan to expand this resource through increased communication and technical support for engaging volunteers from 2012 to 2016.11

The annual report on philanthropy, Giving USA 2012, reports that Americans gave just under $218 billion in charitable contributions during 2011, an increase of .8% over the previous year.12 This modest increase is the third in a row, following the sharpest declines in charitable giving ever recorded during the years from 2007 to 2009. To arrive at these estimates, researchers at the Center on Philanthropy at Indiana University and staff from the Giving USA Institute combined information from a wide variety of sources following a protocol refined over the 57 years of publication of this annual report on American philanthropy.

To get information on philanthropy for Washington state, it is necessary to rely on information from the IRS. Using statewide tax return data from 2009, the National Center on Charitable Statistics reports that approximately 865,000 of the 3.1 million individual tax returns contained itemized charitable deductions. These returns showed $3.4 billion dollars in contributions, for an average of $3,000 per tax return.13 By these measures, Washington ranked relatively far down on the list of states: 26th in average donation per return and 32nd in average donation per return with itemized charitable contributions. The Urban Institute warns, however, that the wide variations in coverage between the states mean such rankings should be viewed with caution.

More recently, the Chronicle of Philanthropy created an interactive map that allows inspection of details about a more limited group of tax returns from the year 2008 in great geographic detail—ZIP code by ZIP code, county by county, state by state.14 While Washington state ranks 15th among the states in total amount given, the newspaper’s generosity rankings—which relate contributions to household discretionary income—place Washington at number 33.

GEOGRAPHIC DETAIL FOR NONPROFITS

The Postal Service’s delivery zones, identified by ZIP codes, provide a convenient method of summarizing the distributions of nonprofits across the state. The first three digits of an organization’s ZIP code indicate its location among 14 areas of the state.15 In Table 4, organizations have been grouped into these ZIP Regions using the first three digits of the ZIP code in their addresses.

The highest concentration for most categories of nonprofit organizations is in the city of Seattle (981xx16) and surrounding King County (980xx). Larger numbers of nonprofits in most categories are also found along the I-5 corridor in the western part of the state and in the major city of the “Inland Empire,” Spokane (990xx and

11

Washington Serves is available online at http://www.501commons.org/invest/washington-serves/washington-serves-plan-1 12

Giving USA Foundation, Giving USA 2012: Executive Summary. Page 4. Available online from http://www.givingusareports.org/ 13

Nationally, returns with itemized deductions include about one-third of all returns and two-thirds of the estimated total of contributions from individuals. http://nccsdataweb.urban.org/NCCS/extracts/CharGiv_09_updated.pdf 14

To improve consistency, the Chronicle of Philanthropy limited the information used in the map to itemized returns from households reporting more than $50,000 in income. http://philanthropy.com/section/How-America-Gives/621/ 15

The ZIP code reported to the IRS is, of course, not entirely descriptive of every organization’s service area. Some have multiple offices, or may have their primary operations in a different location from their administrative offices. And some organizations use an attorney’s or CPA’s office as the address on these reports, which may very well not share a ZIP code with the reporting organization. 16

This ZIP code group also includes Bainbridge Island, in Kitsap County, served by Washington State Ferries from downtown Seattle.

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992xx). Smaller nonprofits (i.e., those that file Form 990-N) among those defined by the IRS as other, such as trade associations and social action groups, are located with greater frequency in the vicinity of the state capital in Olympia (985xx). Similarly, the wider variety of organizations registered as nonprofit corporations with the Secretary of State are more densely concentrated in that part of the state.

Notably, though, 981xx includes a distinctly higher proportion of the state’s 501(c)(3) organizations—public charities and private foundations—than is seen in any of the other administrative categories. In fact, more than 40% of the public charities and 60% of the private foundations in the state are located in Seattle and surrounding King County. It is also worth noting that the largest number of organizations in the state government’s roster of nonprofit corporations is found in suburban King County; other exempt organizations is the only other classification of organizations for which this pattern is seen.

The small organizations newly required to report to the IRS in recent years (990-N filers17) are found throughout the state in roughly similar proportions to their larger counterparts. They are found somewhat less frequently in Seattle than is the pattern for the larger reporting 501(c)(3) organizations, and somewhat more frequently than the larger 501(c)(3) group in the Olympia area (985xx).

Starting in 2011, the IRS, as required by the 2006 law, has removed organizations that fail to file the required report for three consecutive years from the roster of tax-exempt groups. In August 2012, the list of revocations included 11,098 Washington-based organizations. As shown in the right-most columns of Table 4, the pattern of revocations across the state closely matches the distribution of federally recognized organizations overall—with larger numbers in Seattle and the Olympia area. These data suggest that organizations have ceased to operate, or failed to heed the announcements from the IRS and others about these new rules, in somewhat larger proportions in the less populous parts of the state. Both the Form 990-N and the revocation process are discussed in more detail below.

The revocation process also affects all federally recognized organizations; they can fall into any of the categories used in Table 4 and, depending on the timing of action by the IRS, organizations that recently lost their tax-exempt status may or may not also be included in the other federal data shown in Table 4. The resulting possibility that a small number of organizations may appear in multiple columns of Table 4 is a good example of the challenge of using administrative files to create profiles of the nonprofit sector. The IRS processes additions to and deletions from the roster of exempt organizations throughout the year and on differing schedules. As a result, a tally made from one data file will not align exactly with one from a different file even when there are no anomalies—misspellings are a common occurrence—or other unusual circumstances affecting the processing.

As Table 4 shows, nonprofits operate everywhere in Washington state. The more urban areas of the state, not surprisingly, include larger proportions of every type of organization. The concentration of financial resources (revenues and assets) among tax-exempt entities, as demonstrated by annual reports filed with the IRS, is even more sharply concentrated in the urban areas, where the largest and most capital-intensive organizations in the state—principally hospitals, research laboratories, universities, and foundations—are located. Table 5 shows the totals of revenue and assets for active public charities (i.e., those that filed a Form 990 or Form 990-EZ within the 24 months preceding July 2012.

The location of a foundation’s headquarters does not, of course, indicate the geographic focus of its activities. Larger foundations, like the Bill & Melinda Gates Foundation for example, may actively support projects not only throughout the United States, but around the world. Smaller foundations may have a specific program focus and a wide geographic reach. On the other hand, the 2012 “Trends in Northwest Giving” report, prepared by Philanthropy Northwest, ranked the Gates Foundation as the largest funder to the northwestern United States, representing 18% of grant dollars to the region.18

17

Form 990-N was created by Congress in 2006 as a streamlined way to maintain the roster of smaller exempt organizations—ones that do not file another version of Form 990 because of their size. 18

http://www.philanthropynw.org/s_pnw/sec.asp?CID=8175&DID=18608. Page 9 of the PDF file.

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TABLE 4 Active Nonprofit Corporations; Organizations Recognized as Exempt from Federal Income Taxes; Exempt Status Revoked, 2012

ZIP code Regions

Active Nonprofit

Corporations

Public Charities

(not filing 990-N)

Private Foundations

(not filing 990-N)

All 501(c)(3)s

filing 990-N

Other Exempts

(not filing 990-N)

Other Exempts

filing 990-N

Revocations

(all exempts)

980xx King County (not Seattle) 8,923 16.3% 1,301 17.6% 258 24.7% 1,595 18.0% 656 14.9% 577 12.7% 1777 16.0%

981xx Seattle and Bainbridge Island 8,577 15.6% 1,936 26.1% 376 35.9% 1,844 20.8% 1105 25.1% 466 10.2% 2515 22.7%

982xx NW Portion of the State 6,765 12.3% 874 11.8% 101 9.7% 1,199 13.5% 498 11.3% 615 13.5% 1213 10.9%

983xx Olympic Peninsula, Pierce Co. 4,718 8.6% 560 7.6% 61 5.8% 841 9.5% 312 7.1% 485 10.6% 962 8.7%

984xx Tacoma and Environs 3,043 5.6% 496 6.7% 37 3.5% 512 5.8% 232 5.3% 260 5.7% 714 6.4%

985xx Thurston County 4,446 8.1% 434 5.9% 26 2.5% 625 7.0% 280 6.4% 499 10.9% 857 7.7%

986xx SW Portion of State 2,841 5.2% 456 6.2% 56 5.4% 609 6.9% 327 7.4% 329 7.2% 647 5.8%

988xx North Central Portion of State 1,588 2.9% 231 3.1% 19 1.8% 234 2.6% 149 3.4% 231 5.1% 366 3.3%

989xx South Central Portion of State 1,427 2.6% 228 3.1% 10 1.0% 248 2.8% 114 2.6% 245 5.4% 505 4.6%

990xx Spokane Vicinity (not city) 683 1.2% 62 0.8% 8 0.8% 136 1.5% 50 1.1% 108 2.4% 168 1.5%

991xx North East Portion of State 1,015 1.9% 99 1.3% 6 0.6% 265 3.0% 140 3.2% 184 4.0% 298 2.7%

992xx Spokane (city) 2,180 4.0% 417 5.6% 49 4.7% 343 3.9% 308 7.0% 236 5.2% 580 5.2%

993xx South East Portion of State 1,681 3.1% 266 3.6% 22 2.1% 380 4.3% 217 4.9% 304 6.7% 465 4.2%

994xx South East Corner of State 106 0.2% 19 0.3% 2 0.2% 45 0.5% 9 0.2% 19 0.4% 31 0.3%

ZIP Missing or not WA 6,830 12.5% 30 0.4% 15 1.4% 0 - 0 - 0 - 0 -

TOTAL 54,823 100.0% 7,409 100.0% 1,046 100.0% 8,876 100.0% 4397 100.0% 4,558 100.0% 11,098 100%

A B C D E F G Notes: A: State of Washington data from the Corporations Division, Office of the Secretary of State, courtesy tally April 2012. B: 501(c)(3) organizations not classified as Private Foundations which filed a 990 or a 990-EZ during the 24 months preceding July 2012. Federal data (see below). C: 501(c)(3) organizations classified as Private Foundations which filed a 990-PF during the 24 months preceding July 2012. Federal data (see below). D: 501(c)(3) organizations of both types which filed a 990-N during the 24 months preceding July 2012. Federal data (see below). E: Exempt organizations other than 501(c)(3)s which filed a 990 or a 990-EZ during the 24 months preceding July 2012. Federal data (see below). F: Exempt organizations other than 501(c)(3)s which filed a 990-N during the 24 months preceding July 2012. Federal data (see below). G: The Internal Revenue Service publishes a cumulative list of organizations that have been removed from the list of recognized tax-exempt entities because they have failed to

file any informational return (Form 990) for three or more years; the numbers in column G are derived from the list as published in August of 2012. (Note that organizations that have had their exempt status restored are not removed from this list.) Federal data (see below).

Sources: Federal data—National Center for Charitable Statistics, The Urban Institute, IRS Business Master File as of July, 2012, used by permission; Revocations from IRS online at http://www.irs.gov.

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TABLE 5 Active Public Charities by ZIP code Region, Total Revenue and Total Assets, 2012

ZIP

Region

Name of Region Active Public

Charities

Total Revenue Total Assets

980xx King County (not Seattle) 1,301 17.6% 5,979,446,152 19.7% 7,701,558,735 16.7%

981xx Seattle and Bainbridge Island 1,936 26.2% 12,999,044,220 42.8% 19,581,934,525 42.6%

982xx NW Portion of the State 874 11.8% 2,393,835,853 7.9% 3,942,132,454 8.6%

983xx Olympic Peninsula, Pierce Co. 560 7.6% 806,992,592 2.7% 882,906,243 1.9%

984xx Tacoma and Environs 496 6.7% 3,316,677,844 10.9% 4,460,222,541 9.7%

985xx Thurston County 434 5.9% 501,841,176 1.7% 783,401,429 1.7%

986xx SW Portion of State 456 6.2% 1,108,720,791 3.7% 1,860,784,886 4.0%

988xx North Central Portion of State 231 3.1% 364,024,151 1.2% 615,099,600 1.3%

989xx South Central Portion of State 228 3.1% 912,430,372 3.0% 996,640,457 2.2%

990xx Spokane Vicinity (not city) 62 0.8% 22,992,752 0.1% 63,204,295 0.1%

991xx North East Portion of State 99 1.3% 99,959,120 0.3% 393,841,397 0.9%

992xx Spokane (city) 417 5.7% 983,114,827 3.2% 3,202,959,477 7.0%

993xx South East Portion of State 266 3.6% 820,479,454 2.7% 1,446,357,219 3.1%

994xx South East Corner of State 19 0.3% 61,695,181 0.2% 63,734,452 0.1%

TOTAL 7,379 100.0% 30,371,254,485 100.0% 45,994,777,710 100.0%

Notes: Does not include organizations reporting on Form 990-N, which includes no financial information. Active public charities are those that filed a Form 990 or a Form 990-EZ within the 24 months preceding August 2012. Source: National Center for Charitable Statistics, The Urban Institute, IRS Business Master File as of August 2012, used by permission.

TABLE 6 Active Private Foundations by ZIP code Region, Total Revenue and Total Assets, 2012

ZIP

Region Name of Region

Active Private

Foundations Total Revenue Total Assets

980xx King County (not Seattle) 258 25.0% 80,151,064 1.2% 833,345,266 1.0%

981xx Seattle and Bainbridge Island 376 36.5% 6,651,023,215 96.0% 77,987,618,277 96.4%

982xx NW Portion of the State 101 9.8% 29,544,138 0.4% 177,842,387 0.2%

983xx Olympic Peninsula, Pierce Co. 61 5.9% 7,605,842 0.1% 69,850,172 0.1%

984xx Tacoma and Environs 37 3.6% 24,511,001 0.4% 551,965,415 0.7%

985xx Thurston County 26 2.5% 33,999,532 0.5% 120,891,786 0.1%

986xx SW Portion of State 56 5.4% 84,068,209 1.2% 942,275,355 1.2%

988xx North Central Portion of State 19 1.8% 3,938,439 0.1% 45,048,065 0.1%

989xx South Central Portion of State 10 1.0% 5,218,501 0.1% 32,785,457 0.0%

990xx Spokane Vicinity (not city) 8 0.8% 711,862 0.0% 2,861,511 0.0%

991xx North East Portion of State 6 0.6% 164,718 0.0% 2,765,267 0.0%

992xx Spokane (city) 49 4.8% 5,335,477 0.1% 58,163,413 0.1%

993xx South East Portion of State 22 2.1% 1,297,197 0.0% 45,494,654 0.1%

994xx South East Corner of State 2 0.2% 197,717 0.0% 7,439,100 0.0%

TOTAL 1,031 100.0% 6,927,766,912 100.0% 80,878,346,125 100.0%

Notes: Does not include organizations reporting on Form 990-N, which includes no financial information. Active private foundations are those that filed a Form 990-PF within the 24 months preceding August 2012. Source: National Center for Charitable Statistics, The Urban Institute, IRS Business Master File as of August 2012, used by permission.

10 | NONPROFITS IN WASHINGTON 2012

TABLE 7 Active Public Charities by Service Type,19 Total Revenue and Total Assets, 2012

NTEE Major Group Observations Total Revenue Total Assets

Arts, Culture, and Humanities 806 10.90% 626,262,449 2.10% 2,030,188,517 4.40%

Education 1,395 18.90% 2,369,917,217 7.80% 7,747,093,707 16.80%

Environmental Protection and Beautification 221 3.00% 156,266,460 0.50% 434,218,228 0.90%

Animal-Related 171 2.30% 147,732,615 0.50% 163,275,893 0.40%

Health 378 5.10% 19,591,027,582 64.50% 23,621,269,619 51.40%

Mental Health, Crisis Intervention 169 2.30% 576,710,271 1.90% 574,283,701 1.20%

Diseases, Disorders, Medical Disciplines 143 1.90% 160,824,053 0.50% 150,596,506 0.30%

Medical Research 42 0.60% 727,285,337 2.40% 1,258,045,321 2.70%

Crime, Legal Related 140 1.90% 167,183,387 0.60% 105,299,491 0.20%

Employment, Job Related 119 1.60% 485,650,827 1.60% 452,272,684 1.00%

Food, Agriculture, and Nutrition 100 1.40% 191,007,901 0.60% 68,945,494 0.10%

Housing, Shelter 309 4.20% 300,272,431 1.00% 1,216,606,273 2.60%

Public Safety 33 0.40% 9,398,954 0.00% 34,106,257 0.10%

Recreation, Sports, Leisure, Athletics 638 8.60% 205,396,701 0.70% 306,585,610 0.70%

Youth Development 180 2.40% 171,639,875 0.60% 342,740,746 0.70%

Human Services—Multipurpose and Other 838 11.40% 2,141,793,169 7.10% 3,786,317,486 8.20%

International, Foreign Affairs, National Security 234 3.20% 1,358,327,989 4.50% 1,054,884,367 2.30%

Civil Rights, Social Action, Advocacy 35 0.50% 33,787,567 0.10% 89,284,256 0.20%

Community Improvement, Capacity Building 357 4.80% 144,356,929 0.50% 345,307,360 0.80%

Philanthropy, Voluntarism, Foundations 246 3.30% 425,399,437 1.40% 1,557,915,086 3.40%

Science and Technology Research Institutes, Services 47 0.60% 133,955,807 0.40% 204,129,614 0.40%

Social Science Research Institutes, Services 14 0.20% 33,156,235 0.10% 69,327,762 0.20%

Public, Society Benefit—Multipurpose and Other 55 0.70% 25,851,557 0.10% 28,394,941 0.10%

Religion Related, Spiritual Development 679 9.20% 158,568,914 0.50% 254,628,591 0.60%

Mutual/Membership Benefit Organizations, Other 18 0.20% 24,349,915 0.10% 92,055,917 0.20%

Unknown 12 0.20% 5,130,906 0.00% 7,004,283 0.00%

TOTAL 7,379 100.00% 30,371,254,485 100.00% 45,994,777,710 100.00%

Notes: Does not include organizations reporting on Form 990-N, which includes no financial information. Active public charities are those that filed a Form 990 or a Form 990’EZ within the 24 months preceding August 2012. NTEE is shorthand for National Taxonomy of Exempt Entities, the classification system used to code areas of service by the IRS and the National Center for Charitable Statistics. Source: National Center for Charitable Statistics, The Urban Institute, IRS Business Master File as of August 2012, used by permission.

19

The service types are classified into 25 groups by the IRS and the National Center for Charitable Statistics using National Taxonomy of Exempt Entities (NTEE) codes. For an explanation of the NTEE classification, see http://nccs.urban.org/classification/NTEE.cfm

11 | NONPROFITS IN WASHINGTON 2012

SIZE OF WASHINGTON’S NONPROFIT ORGANIZATIONS

Most nonprofit organizations are small. The data offer an indication of how many organizations operate entirely with volunteers or on very small budgets. Among the public charities, 1,348 (18.2%) reported annual revenue of at least $1 million or more in the period ending in July of 2012; these organizations received 96% of the revenue ($30 billion) and held 91% of the assets ($44 billion). In contrast, 17,413 public charities reported revenue of less than $100,000 for the year or filed the Form 990-N, used by organizations whose annual revenue is less than $50,000. Of the private foundations, 9.5% (103) had revenue over $1 million; these Washington state foundations received 98.5% of the revenue ($6.8 billion) and held 97.6% of the assets ($77.2 billion).

TYPES OF SERVICES

Table 7 shows the numbers of reporting 501(c)(3) organizations in Washington state along with total revenues and assets, both financial and fixed, for organizations classified into several service categories.20

For the state of Washington as a whole, Health accounts for by far the largest proportion—at 64%—of the revenues of all nonprofit organizations. Education is a distant second, with 8%. The other categories that have significant numbers of organizations—Arts, Recreation, Human Services and Religion-related—receive together just over 10% of reported revenue. The entries for Religion and Spiritual Development include only a fraction of the religious organizations active in Washington communities since churches are not required to file financial reports with the IRS; some, but by no means all, do so voluntarily.

Table 7 does not include data reported by private foundations. As shown in Table 6, foundations’ revenue equals about 23% of the corresponding amounts for public charities while their assets amount to 175% of public charity assets. It would be misleading to combine foundation revenues and charity revenues in one total, since much of the revenue of foundations from one year is reported as revenue by charities in some subsequent year. This analytical issue cannot be avoided for community foundations because they are classified as public charities by the IRS in light of the broad public support they receive.

THE 990-N

Most small exempt organizations have been required to complete IRS Form 990-N annually since 2008. Filing a Form 990-N confirms that the organization continues to operate and that it has revenues below the threshold that defines small: $50,000 for reports for 2011 and future years and $25,000 for earlier periods. Some organizations are not required to file any version of Form 990 because they are exempt from filing (most often because of their status as a religious congregation). As shown in Table 4, 13,434 Washington state nonprofits filed a Form 990-N in time to be reported in August 2012.

The rules established by the Pension Protection Act of 2006 (which defined the Form 990-N) stipulated that failing to file any annual report with the IRS for three consecutive years would result in automatic revocation of tax-exempt status. On June 9, 2011, the IRS published the first list of organizations affected by this rule; there were 7,189 Washington entities in that list. By August 2012, the number of organizations formerly based in Washington state that had had their tax-exempt status automatically revoked for this reason increased to 11,098. Recent changes in filing thresholds for the various types of Form 990 and the effect of this requirement to strike organizations from the roster of exempt entities have made it difficult to interpret changes from year to year of the numbers and finances of federally recognized nonprofits.

20

Individual statistics for each of Washington’s 39 counties are presented in the online supplement. The National Center for Charitable Statistics offers county-by-county listings of all recognized exempt entities online at http://nccsdataweb.urban.org/PubApps/statePicker.php?prog=geoCounties&param=q

12 | NONPROFITS IN WASHINGTON 2012

One policy goal for the creation of Form 990-N was to remove from the IRS files organizations that have completed their goals, merged, or simply stopped operating without informing the IRS. In 2011, the National Center for Charitable Statistics at the Urban Institute published a detailed analysis of the effect of the automatic revocation process.21

DEVELOPMENTS FOR WASHINGTON NONPROFITS

During 2012, the City of Seattle created a new deduction from its local Business and Occupations (“B&O”) tax for revenue supporting life sciences research received from federal, state, or local governments, whether by grant or by contract. Sub-recipients, who receive such revenue as a pass-through from the entity receiving the funds from the government, also qualify for the deduction. Effective June 7, 2012, the deduction has a five-year sunset date.

Constrained by budget issues, the Washington State Legislature avoided creating substantial new exemptions for nonprofits in the 2012 legislative session. However, existing property tax exemptions were modified to allow certain nonprofits to continue an exemption from taxes on property when it is transferred to an entity formed exclusively for the purpose of leasing the property to a qualifying nonprofit for continued exempt use. The act applies to character-building, benevolent, protective or rehabilitative social services, church camps, and youth organizations; it became effective June 7, 2012.

21

Online at http://www.urban.org/publications/412386.html. Sandy Deja has published an analysis of the revocation process with advice on how an organization seeking to be reinstated should proceed. It is available online at http://501cfreebook.com/The_Comeback_Kids.php

13 | NONPROFITS IN WASHINGTON 2012

DATA NOTES

To estimate the number of nonprofits in Washington state, show their distribution within the state, and describe some of their

characteristics, this report draws on the records that government agencies collect for administrative purposes.

The State of Washington registers nonprofit corporations formed in the state as well as nonprofits incorporated elsewhere

operating within the state. The Corporations Division in the Office of the Secretary of State renews the corporate status of

nonprofits filing an annual report each year and enrolls newly formed nonprofits as the necessary paperwork is filed. Nonprofit

corporations are removed from the rolls in two ways: some organizations file a notice of dissolution when they wind up their

affairs while others simply fail to file the required annual report and are, eventually, dissolved administratively. Throughout the

year, organizations that have been administratively dissolved apply for re-instatement (as is permitted by the rules). As a result,

the tally of active corporations on the rolls can vary from time to time, influenced by filing deadlines, processing schedules, and

the volume of requests for reinstatement. The ZIP code reported for a Washington nonprofit corporation may reflect the location

of the corporation’s registered agent and not the site of its operations. For this reason, Table 4 probably overstates the numbers

in the more urban areas of the state. In a separate program, the Corporations Division also registers charitable organizations that

solicit donations from Washington residents.

The Internal Revenue Service receives annual reports from more than 20 kinds of organizations that qualify for exemption from

federal corporate income taxes. The largest category of such groups, and the most familiar, includes tax-exempt public charities

and private foundations described in section 501(c)(3) of the Internal Revenue Code. Churches, broadly defined, and their

integrated auxiliaries are not required to report to the IRS, though some do so voluntarily. There are also a variety of other

categories of exempt organizations listed in the tax law; these are not, in general, eligible to receive tax-deductible donations to

support their activities. These other forms of exempt organizations include business leagues, social clubs, and advocacy

organizations along with a variety of less common sorts of institutions. In this report, the other categories of exempt organizations

are discussed together and designated as other.

Most exempt organizations are required to file some sort of informational return each year with the Internal Revenue Service. The

most common of these returns are filed using one or another of the various versions of IRS Form 990. Recently, the Internal

Revenue Service made extensive revisions in the version of Form 990 filed by larger public charities. The new Form 990 requires

presentation of additional financial and program information on one or more schedules, depending on the nature of the financing

and program activities of the filing organizations. The effective date for use of the new form varies with organizational financial

status (larger organizations were required to use the new form sooner than smaller ones). In 2012, the effects of the transition

will have a larger effect on the information available; in later years, these changes will become part of the historical series and

interpretation of the data will be more straightforward.

There is also a Form 990-EZ, available for organizations too large to use Form 990-N whose revenues do not reach the amount

that requires use of the full Form 990. Over the past few years, this threshold was first increased to $1 million when a new version

of the Form 990 was introduced, then lowered to $200,000 for tax year 2010 and following. These changes affect the historical

data in this report, since recent data include some number of organizations that have been eligible to choose among the various

forms—and hence the financial and other information provided—based on varying thresholds. Financial and other detailed

information is, also, available for a smaller number of nonprofits in 2012 as these changes take full effect.

As required by the Pension Protection Act of 2006, the Internal Revenue Service developed a new short form, known as the Form

990-N, for use by organizations with annual revenues below the threshold for filing a Form 990-EZ. That threshold was raised from

$25,000 to $50,000 in 2011. To prepare Table 2, the data were filtered on reported total revenue, rather than by the form used by

the reporting organization, to avoid the effect of this change in the filing threshold. Some organizations with less than $50,000 in

revenues nonetheless use Form 990-EZ or Form 990, which means that the count of organizations in Table 2 is different from

similar counts in other parts of the report which are based on whether or not the organization filed a Form 990-N.

By agreement with the Internal Revenue Service, the National Center for Charitable Statistics (NCCS) at the Urban Institute

publishes online, detailed information from IRS Form 990 for tax-exempt entities. The information published as of a given month

represents the most recent forms filed by the included organizations within the past 24 months. The financial information shown

in this report is based on data fields that have been scanned by NCCS to correct for frequent anomalies—such as rounding to the

nearest $1,000. Visiting http://nccsdataweb.urban.org allows online access to these statistics using a variety of pre-formatted

reports.

14 | NONPROFITS IN WASHINGTON 2012

NONPROFIT SUPPORT ORGANIZATIONS

501 Commons http://www.501commons.org

Institute of Public Service, Seattle University https://www.seattleu.edu/artsci/publicservice

Nancy Bell Evans Center on Nonprofits and Philanthropy Evans School of Public Affairs, University of Washington

http://evans.uw.edu/centers-projects/nbec

Nonprofit Alliance (Port Angeles)

http://www.jccfgives.org/our-services

The Nonprofit Network—Southwest Washington

http://nonprofitnetworkwa.org

Northwest Nonprofit Resources (Spokane)

http://www.nnr.org

Shunpike

http://www.shunpike.org

United Ways of Washington

http://www.unitedway-wa.org

Washington Attorneys Assisting Community Organizations

http://www.waaco.org

Washington Nonprofits

http://www.washingtonnonprofits.org

Whatcom Council of Nonprofits

http://www.wcnwebsite.org