New Reports Shed Light on Payout Practices and Expense Patterns of U.S. Foundations

New York, NY — October 23, 2012. The Foundation Center, the nation's leading authority on philanthropy, has released new reports that examine the payout practices and spending patterns of more than 1,000 larger U.S. independent foundations. These reports provide an authoritative, unbiased source of knowledge to help the public and policymakers better understand foundation practice and to help foundations benchmark their own activities.

Understanding and Benchmarking Foundation Payout explains the concept of payout, which refers to the total amount that a foundation reports as its charitable distribution. (The law requires the vast majority of private U.S. grantmaking foundations to distribute at least 5 percent of their net investment assets for charitable purposes each year.) The report is the first of its kind to track payout practices of the largest U.S. foundations. It finds that during the period 2007-2009, the largest share of endowed foundations (46 percent) reported payout rates in the range of 5 to 5.9 percent, on average. Nearly one-in-five foundations had payout rates at or above 10 percent. The Foundation Center does not take sides on whether the minimum payout rate should be higher or lower — whether foundation assets should be spent down quickly or preserved long-term — rather it provides data and research to inform the debate.

"While the very top grantmakers tend to pay out close to the 5 percent minimum, there is surprising variation in payout levels of larger foundations overall, and annual rates are affected by drastic changes in the stock market," said Loren Renz, the author of the report and vice president emeritus for research at the Foundation Center. "Only by averaging these rates across multiple years can a balanced view of payout practices be realized."

The amount a foundation spends on staff, overhead, and other program-related administrative expenses is included in the calculation of its qualifying distributions each year. Benchmarking Foundation Administrative Expenses: Update on How Operating Characteristics Affect Spending considers how differences in foundations’ infrastructure, operations, and programmatic activities influence their spending patterns.

The report finds that whether a foundation employs paid staff is the single most important factor affecting its expense levels, followed by staff size. In addition, foundations that regularly engage in international grantmaking, foundation-administered programs, or making grants directly to individuals have expenses-to-qualifying distribution ratios that are roughly twice as high as those that do not.

Understanding and Benchmarking Foundation Payout and Benchmarking Foundation Administrative Expenses can be downloaded at no charge from the Gain Knowledge area of the Foundation Center's web site. To receive future updates on Foundation Center news, sign up here.

This research was made possible through support from the Charles Stewart Mott Foundation.

About the Foundation Center
Established in 1956, the Foundation Center is the leading source of information about philanthropy worldwide. Through data, analysis, and training, it connects people who want to change the world to the resources they need to succeed. The Center maintains the most comprehensive database on U.S. and, increasingly, global grantmakers and their grants — a robust, accessible knowledge bank for the sector. It also operates research, education, and training programs designed to advance knowledge of philanthropy at every level. Thousands of people visit the Center's web site each day and are served in its five regional library/learning centers and its network of more than 470 funding information centers located in public libraries, community foundations, and educational institutions nationwide and around the world. For more information, please visit foundationcenter.org or call (212) 620-4230.

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Vestal refuses tax exemption on new UHS clinic, case headed to court

United Health Services Hospitals Inc. and the Town of Vestal are likely headed for a showdown in court after officials refused to grant the nonprofit a tax exemption on an $8.48 million property assessment for its new hospital clinic and the land it sits on.

 

UHSH contends it can use its nonprofit status for a tax exemption on not just the 77,600-square-foot facility it built and owns at 4417 Vestal Parkway East, but also the land it leases from a private corporation.

 

The town, however, dismissed the request for the tax exemption in May, saying: “Your complaint has been dismissed because of your (or your representatives) willful neglect or refusal to attend this board’s hearings or to be examined concerning your complaint or to answer questions relevant to your complaint.”

 

If the exemption is granted, the town, Broome County and the Vestal Central School District stand to lose tax revenue from the property. Just how much remains to be seen.

 

The private corporation, FGR Vestal LLC, with principal members George and Ronald Akel, previously paid property taxes on the parcel.

 

In May, while construction of the new hospital clinic was still underway, the building, improvements on the land, and the land itself, were valued at $8.48 million based on the tax roll filed for the 2012-13 fiscal year.

 

Before the facility was built, the land was assessed at $2.42 million, and FGR paid the $36,702 tax bill on the parcel, reflecting the 2011-12 fiscal year. FGR also paid the $49,437 school tax bill to the Vestal school district for the same fiscal year.

 

UHSH, which is administered by parent organization United Health Services Inc., or UHS, said lost tax revenue would be offset by the new hospital clinic creating other economic benefits for the town.

 

Vestal Town Attorney David Berger did not return requests seeking comment. Town Supervisor John Schaffer and Town Assessor Mark Minoia declined to comment, citing potential litigation.

 

After town officials dismissed the tax exemption request, UHSH began pursuing a legal challenge in Broome County Supreme Court, according to court documents filed July 27.

“It is very concerning to us that the Town of Vestal is choosing to question our tax-exempt status, while scores of other not-for-profit agencies in the town also are tax-exempt,” Matthew Salanger, president and CEO of UHS, said in a statement.

“We expect that the new UHS Vestal, with its appealing design, range of services and central location, will attract many people from outside the area to Vestal, where they will purchase goods and services and contribute substantial dollars to the local economy,” he added.

With the 2012-13 fiscal year tax exemption dispute unresolved, UHS, on Oct. 2, paid the $180,255 school tax bill that is based upon the disputed $8.48 million property assessment.

The town and county tax rates for the 2012-13 fiscal year haven’t been finalized.

'A unique situation'

During initial interviews for this report, attorneys for UHSH said court proceedings have been adjourned until November while they negotiate with town officials to try to reach a settlement.

In follow-up interviews, attorneys said UHSH plans to leave it up to the courts to decide.

“Is the property partially exempt, wholly exempt or, as it currently stands, not exempt at all,” said Paul Sheppard, an attorney of the firm Hinman, Howard & Kattell, representing UHSH in the case.

“This is a unique situation in that (UHSH) possesses the building that is on the property,” said Jeffery Alexander, a vice president and general counsel for UHS.

He said this means the leased land becomes an “integral” part of the not-for-profit health care services and is thus warranted a tax exemption based on New York State tax laws.

 

Alexander was asked to provide examples of other lease agreements where the nonprofit owns a building, but leases the land it sits on.

 

“UHS has many tenant leases, but none parallel the Vestal situation,” he said, noting other legal precedents could not be found by the nonprofits’ outside legal counsel.

 

In March 2010, UHSH began a 25-year lease with FGR for the property where the hospital clinic was built for about $30 million, according to UHS. The lease permits UHSH to renew for another 50 years.

 

Read more here.

UPMC Among Nonprofits Eager to Avoid Paying Property Taxes

An interesting article about a major nonprofit (UPMC) who is making a rare move in order to avoid paying property taxes. Click on the link below to read this article and learn more about what types of deals other nonprofits are making.
 

 
View Article Here

2011 Member Mapping Report from National Council of Nonprofits

2011 Member Mapping Report from National Council of Nonprofits
A unique report that gives your State Association data and analyses that are relevant to every State Association board and staff member in the National Council of Nonprofits' network. 

The 2011 report addresses many frequently asked questions, including:

• How are State Associations weathering the economy?
• How do State Associations earn revenue other than through member dues?
• Why are the numbers of people trained through our network trending down?
• Why are there lots of new members in State Associations every year, but not a corresponding growth in the network?

VIEW REPORT HERE