Nonprofit organization (NPO) versus PUBLIC CHARITY versus Community Benefit organization (CBO)?
Updated: Mar 17
Until the mid-18th century, charity was mainly distributed through religious structures (such as the English Poor Laws of 1601), almshouses and bequests from the rich. During the 19th century, a profusion of charitable organizations emerged to alleviate the awful conditions of the working class in the slums.
The nonprofit sector did not come about by accident; it was molded by the actions of people who wanted to preserve and develop the role of the charitable sector in public life.In 1917, the US Income Tax Law was passed, which allowed taxpayers to deduct charitable contributions from up to 15 percent of their income tax payments. This part of the law was instituted to help fund the country’s participation in World War I, and was passed by Congress to encourage private philanthropy. Starting in 1936, corporations could also claim deductions for their charitable contributions. https://en.wikipedia.org/wiki/Charitable_organization
Later in the 1950s, the term "nonprofit" was used frequently in lieu of "public charity". But a nonprofit is one that is traditionally dedicated to furthering a particular social cause or advocating for a shared point of view. In economic terms, it is an organization using its surplus of the revenues to further achieve its ultimate objective. Being public extensions of a nation's revenue department, nonprofits are tax-exempt or charitable, meaning they do not pay income tax on the money that they receive for their organization. They can operate in religious, scientific, research, or educational settings. A nonprofit organization (NPO) versus a for-profit entity illustrates the term nonprofit is simply the organization's tax status.
The term public charity often evokes images of a tin cup held out for money or as in the 1800s with beggars asking for "alms".
Public charity is used in the IRS definition and in the IRS determination letter denoting the 501 (c) (3) status necessary for not paying taxes on the donations and revenue that comes into the NPO or public charity.
Community benefit organization (CBO) means a nonprofit charitable organization that is tax-exempt under section 501(c)(3) of the internal revenue code and whose mission is solely to engage in community benefit activities.
6 Reasons to Use the Term Community Benefit Organization.
1. "Comunity Benefit," says what our organizations are and why they exist.
2. The Meaning of “Community Benefit Organization” is Straightforward and Clear.
3. The Term “Community Benefit Organization” Creates a Strong, Powerful Self-Image
4. The Term “Community Benefit Organization” is Inclusive
5. The Term “Community Benefit Organization” Provides Direct Marching Orders to the
Board: Focus on Providing Benefit!
6. “Community Benefit” is a Promise!
I have always felt the term "nonprofit" focused solely on the actual financial standing of the organization and made the organization feel less competent, reliant, and successful. Just using "non" anything is always a big turnoff to me, and is only connected to the organization's tax status. Again, I like creatingthefuture.org's explanation of the words, "nonprofit organization" versus "community benefit organizations".
Referring to your organization as a nonprofit makes the board and staff feel defensive and weak. A sense of weakness is almost guaranteed to lead to fear-based, short-sighted decisions, and plans.
Referring to your organization as a Community Benefit Organization generates an almost palpable sense of strength and power. That sense of strength then pervades every decision that is made and every action that is taken.
So...let's just use CBO instead of NPO.
The problem is more of a marketing issue. Community benefit does NOT roll off the tongue like nonprofit does, especially when describing your organization's work in less than 3 minutes. Even if you default to using the term nonprofit organization, it is still better than saying, I work for a public charity-envision that tin cup!