RANT: Too many non-profits have an unfair advantage over small family businesses

Posted on by Vickie & Peter

Before you read this rant … vote for our grant.  It’s free & easy.  Just go here.

People who know us have seen how much Vickie and I support non-profits.  We volunteer our time.  We produce concerts & festivals that raise money for them.  And we donate money when we can.  Gloucester is blessed to have several excellent non-profits with dedicated staff, supporters and volunteers who serve our community well.  You know who they are.

Lately, it feels like some organizations with 501(c)(3) tax exempt status are gaining an unfair advantage in the marketplace.  And last week, several events conspired to drive this point home to us.

It began last Wednesday when an MCC delegation came to Beverly for a proposed Cultural District site visit. The proposed Beverly Arts District (BAD for short) includes The Larcom Theatre, where we present concerts, so we arranged for the MCC delegation to tour the theatre and I participated in a round table dialogue afterwards.  The Larcom Theatre is clearly the largest arts organization in the district in terms of the number of people we connect with annually (over 30K people come to shows at the Larcom from over 320 towns in 30+ states).

But The Larcom is not eligible for an MCC Cultural Facilities Fund Grant because it’s not a 501(c)(3).  Neither is gimmeLIVE.  Currently, the Larcom has no air conditioning, so we don’t have concerts in the summer; and no sound system, so we rent one (an excellent one, BTW) for the season.  If we were a 501(c)(3) we could apply for a grant and use the money for those and other improvements.  But we can’t.  Nor can we hang posters in lots of locations (including Market Basket) that only allow posters for non-profits.

However, the group that hopes to purchase the Cabot Theatre (just up the street from the Larcom) is rumored to be a non-profit.  They won’t pay taxes.  They could get a Cultural Facilities Grant.  They could hang posters where we can’t.  So… our tax dollars are funding our competition, whose 501(c)(3) status gives them lots of other advantages over us too.

Does this seem fair to you?

When I mention this disparity to various people, their answer is usually, “Well, why don’t you become a non-profit?  It’s really not that hard.”  In fact, that’s what Biotech investor Greg Verdine is doing for his new Gloucester venture according to this Boston Business Journal article that I read on Thursday.

Is this really what we want?  Smart business people starting non-profits to gain an advantage in the marketplace?

We’re not talking about poor starving aid workers here.  People who run non-profits in the Northeast make over $148K on average and as much as $3.7 million a year in salary according to this report.

Recently we applied for a Mission Main Streets Grant from Chase Bank.  Getting this grant would allow us to hire people, buy sound equipment, take bigger risks on more expensive artists and maybe even help get air conditioning in the Larcom Theatre (it’s not enough for that, but it could help).  Refreshingly, these grants are only available to for-profit small businesses.  That’s us — a small, family business trying to make a living for ourselves, our crew and our artists by bringing the best live music to your backyard at reasonable prices.  Non-profits have a huge advantage.  Please help level the playing field by voting for us.  It’s easy and free.  Just go here.

Thanks.

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Published by Vickie & Peter

Vickie grew up in Iowa. Lived in Silicon Valley & NYC. Peter has lived all over (NJ, NY, CH, IN, CA, MA, etc.) We chose to live and raise our family in Gloucester. Owners of gimmesound.com & Van Ness Group. Producers of gimmeLIVE concerts.

18 thoughts on “RANT: Too many non-profits have an unfair advantage over small family businesses”

  1. Peter
    Great Article, this same disparity happens locally in the music recording and TV business. We compete against WGBH. They offer their facilities at a reduced price compared to the rest of the commercial businesses. They get grants, offer tax deductions and compete in the general market place. Let’s us not forget that Harvard University
    one of the best financially endowed colleges in the world AND you’re gonna love this the N.F.L. are both non profits. How does that work? An industry with a 100 BILLION dollars can be a NON PROFIT … It an’t just you !

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  3. Ok, done.
    By the way I was unable to vote on Firefox and had to use Explorer. Then I had to connect with Facebook to register my vote.

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  4. I feel your pain P&V but I disagree with your reference about nonprofit compensation. Did you know private colleges are 501c3? Do you know how much those President’s make, given their generous alumni? And we have quite a few in the North East. Furthermore, CEOs at Boston’s biggest cultural organizations (MFA, BSO, etc) require large $$ into the millions. A director of a major local Cape Ann cultural organization in Cape Ann makes in the upper $40s. Averages are not good statistical quotes.
    All nonprofit 990s are registered on GuideStar: http://www.guidestar.org if you know their EIN.
    I hope this is helpfil

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    1. Good point about averages being skewed. Actually I shouldn’t have used the word “average”. The Northeast figure of $148K is the median, which means there are just as many CEOs who make less as there are who make more. And, yes, there are plenty of people who run cultural organizations who make a lot less. But then, as Bill Winn points out, there’s the N.F.L. — a non-profit with $Billions.

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      1. The NFL (it is only the governing organization that is a non-profit…certainly not any of the teams who are actually generating all that income you reference) is really not germane to this. The salaries of non-profit organization leaders elsewhere isn’t the issue. It seems that your company’s place in the local market is – so I am interested in the reason you choose not to run the Larcom as a non-profit – you posed the question, but did not answer it!

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        1. Good question, Hugo. We answered the question — and the answer is NO. Here are some reasons: 1) It’s unfair. Just because it’s legal doesn’t make it right. We don’t think your tax dollars should be spent on giving us an advantage in the marketplace. There are far better causes to spend public fund on, like curing cancer (and ebola, AIDS, etc.); feeding hungry people; and fostering peace. 2) It’s expensive. We don’t have the money to hire a grant writer and pay for extra, specialized accounting. 3) It takes too much time. It’s just Vickie and me and we barely have enough time to book shows; produce them (in some cases); promote them; design posters, programs, ads & other collateral; print posters, programs, etc.; hang posters; write radio ads; buy ad space; build and maintain an on-line ticketing system; provide customer support; stage manage; run the front of the house; find the best sound gear; hire techs, etc … so the irony is that if you’ve already got the extra time because you don’t have enough to do OR you have lots of extra money to hire people to apply for 501(c)(3) tax exempt status, write grants and manage all the filing requirements, etc., then you can get a tax break. Another contributor to the shrinking middle class.

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        4. Many non-profit arts organizations do not hire grant writers – they build relationships and do the work themselves; and the accounting costs are no different….perhaps marginally, at best. You don’t have to spend “lots of money” to file for 501(c) 3 status, either. As for all the other things you list – promotion and marketing, putting on shows, hiring people….please – I’ve been involved in doing that most of my working life…much of it for a local non-profit performing arts organization for 10 years – that was also seasonal.

          There are a number of things that may be “legal, but not right” in the world – it doesn’t stop people trying and working to make what they believe happen. You just have to stick at it.

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    1. Thanks, Dave, for the inspiration. We are trying to abide by Gandhi’s exhortation, “Be the change that you wish to see in the world.”

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  6. Great post and discussion Peter and Vickie. I completely emphasize with you. In my design practice, I am increasingly running into challenges of the same nature. Best, best wishes for success with the grant.

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    1. I doubt it, Jason. Are there any records of Gandhi filing for 501(c)(3) tax exempt status in the US? When he was a lawyer in South Africa, I suspect he paid taxes and I’ve never read anything about him heading a tax exempt organization. But I could certainly be wrong . . .

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