Subsidyscope presents government data and summary statistics on federal programs and tax policies that provide subsidies to nonprofit organizations. It is challenging to assemble and present spending and subsidy data regarding the nonprofit sector because the federal government does not identify nonprofits as a distinct budget category. Further, federal budget data are of uncertain quality; specifically, the data available through USAspending.gov1 are incomplete because certain program information is missing for a number of records, making it difficult to discern which specific agencies and programs may be awarding funds to nonprofits.
Nonetheless, while Subsidyscope’s analysis found many data quality issues with grant, contract and risk transfer information, we discovered that the nonprofit sector is overwhelmingly subsidized through indirect means, namely through tax subsidies. Subsidyscope determined that the government data on tax subsidies is generally of higher quality than data on grants, contracts and risk transfers because tax expenditures are estimated by one agency, the Treasury Department, while the data on grants, contracts and risk transfers originate from many different agencies that differ in interpretation of, and compliance with, reporting requirements. Thus, the highest quality data coincide with the largest source of subsidies to the nonprofit sector.
One of the oldest sectors in our economy, nonprofits have had a constantly evolving relationship with the federal government—from their roots in colonial voluntary organizations to the robust sector of nearly 1.8 million nonprofits that exists today in the United States.2 As the Urban Institute reports, in 2007:
Federal funding to tax-exempt groups continues to grow each year. A 2007 Government Accountability Office (GAO) report cites research estimating that federal support to nonprofits increased about 230 percent from fiscal year 1980 to fiscal year 2004 in real (inflation-adjusted) dollars.4 The GAO also noted that current data on federal aid to nonprofits is of questionable quality due to frequent inaccuracies in reporting.
Subsidyscope looks at four different mechanisms the federal government uses to provide subsidies: tax expenditures (including tax deductions or credits), direct expenditures (including grants), contracts and risk transfers (including loans). Tax expenditures are by far the largest source of federal subsidies to nonprofits.
Subsidyscope estimates that the federal government lost approximately $50 billion in forgone tax revenue in fiscal year 2008 due to tax expenditures that specifically target activities involving nonprofits, though it is unclear how much of the value of these tax reductions actually reached the nonprofits they were meant to help.5 The majority of this loss is due to the tax deduction allowed for charitable donations ($47 billion in fiscal year 2008), for which all of the funds, by definition, reached nonprofits. However, some amount of giving would have taken place whether or not a tax subsidy was available to donors and, therefore, we know that some portion of the subsidy benefited the individuals who gave to nonprofits. The amount of the subsidy that went to nonprofits is dependent on the extent to which the charitable deduction increased the amount of money that individuals donated.
Subsidyscope also provides information on other nonprofit-related tax expenditures, such as tax-exempt bonds that are typically issued by state and local governments to finance the construction of facilities used by 501(c)(3) organizations. Additionally, Subsidyscope has assembled a list of tax expenditures that may benefit nonprofits as well as other entities. See more on tax expenditures benefiting nonprofits here.
Subsidyscope summarizes available data on subsidies that nonprofits receive through federal loan and loan guarantee programs; however, a recent GAO analysis indicates that federal data on risk transfers are of particularly poor quality,6 which are likely to understate subsidy costs.
Subsidyscope’s examination of 2008 data found that at least $7 billion in loans through 12 federal direct loan programs, and $284 million in loan guarantees through four federal programs, went to nonprofits in fiscal year 2008—providing subsidies of at least $96 million and $18 million respectively.7 Summary tables listing these programs are presented here.
Subsidyscope analyzed the federal grants data (which are included in direct expenditures) that were marked as going to a nonprofit recipient or a higher education recipient. It is important to note that not all grants contain a subsidy, and if they do, the amount of the grant is not the amount of the subsidy; the subsidy could be much less than the actual grant amount. Based on the government’s data, there are over 1,400 federal programs that provide grants to nonprofits. For instance, social services and research activities are often funded through such grants. Those grants made directly to nonprofits totaled $38 billion in fiscal year 2008, 8 percent of all federal grant spending.8
Additionally, the government contracts with nonprofits. Contracts, as opposed to grants, are used when the service or goods provided directly benefit the government or when the work is being performed to certain specifications under the government’s supervision. Using USAspending.gov data from the Federal Procurement Data System (FPDS), Subsidyscope analyzed the largest nonprofit contractors and the extent of non-competed contracts that were awarded to nonprofit organizations. Similar to data on grants, these records identify the nonprofit recipients of the contracts. It is important to note that not all non-competed contracts contain a subsidy. Subsidyscope provides data on non-competed contracts simply because such contracts are more likely to contain a subsidy compared to contracts that are openly competed. However, it is impossible to estimate the amount of subsidy, if any, actually delivered to the contractors.
Based on an analysis of the contracts awarded to nonprofits, Subsidyscope found that approximately 52 percent ($10 billion) of those contracts were not competed for fiscal year 2008. Also, this analysis estimates that 73 percent ($13 billion) of all 2008 contracts to nonprofits (competed and non-competed) went to the top 100 recipients (based on the total dollar value of all contracts held) and 44 percent ($8 billion) went to the top 10.9
See more on grants and contracts to nonprofits here.
