The number of new nonprofits focused on hunger, housing, and civil-rights jumped in 2020, according to a Chronicle analysis of preliminary Internal Revenue Service data.
Leaders of these newly incorporated charities said they decided to seek nonprofit status to better organize their responses to a devastating global pandemic, economic uncertainty, and renewed attention on social-justice issues. Many groups predated the pandemic, existing as informally organized collectives.
That was the case for HomeFull Community Outreach in Fultondale, Ala. In 2020, Janae Jones applied for and was granted nonprofit status for the group, which evolved from her volunteer work at local homeless shelters. She and her three-person group have raised money to provide homeless people with food and personal-hygiene kits. Jones plans to apply for grants to expand the group’s operations.
“We want to go beyond just walking on foot and giving out to the homeless,” said Jones. In the long term, the group hopes to open a transitional housing shelter.
The organization is one of at least 950 social-service groups to receive nonprofit status in 2020, a 23 percent increase over 2019. The number of new housing and shelter charities also increased 23 percent, adding at least 956 such groups.
On the flip side, fewer charities focusing on recreation and sports, education, and the arts and humanities were created last year than in 2019.
The data comes from the Internal Revenue Service’s tally of approved 1023-EZ applications — the short-form application for tax-exempt status available to organizations with less than $50,000 in annual gross revenue. According to IRS spokesman Bruce Friedland, 72 percent of all applications for tax-exempt status in 2020 were made using that form. For that reason, researchers say the data is a good indicator of broader trends in nonprofit creation.
It’s not unusual to see an uptick in new nonprofits during economic downturns, says Shena Ashley, vice president of nonprofits and philanthropy at the Urban Institute. That growth is typically driven by the creation of groups that address basic needs or other causes that see a rise in donor interest during times of economic hardship. “Even when we have an economic downturn, like the last recession,” said Ashley, “nonprofit starts increase, and they follow the patterns of philanthropic giving.”
Incomplete Data
The IRS normally releases quarterly and annual lists of new nonprofits approved through the short-form application. But the 2020 count is missing data for many groups that incorporated in November and December, according to IRS officials. Data for the first , second and third quarters of 2021 has also been delayed due to a software issue. The agency plans to release the data after ensuring its accuracy.
Still, a look at monthly figures shows an upward trend. An average of 4,678 nonprofits were created per month in 2019 versus an average of 5,141 in the 10 months for which 2020 data is available.
Among the newly approved nonprofits are at least 1,204 classified as food, agriculture, and nutrition groups. That’s up 27 percent from 2019. Those gains were driven by a 41 percent increase in the number of “food programs” — a catch-all subcategory for nonprofits that works to address hunger — and a 38 percent increase in the number of charities that describe themselves as food banks and pantries.
At least 740 new civil-rights, social-action, and advocacy charities were approved in 2020 — an increase of 24 percent.
Several restaurant-industry workers, Matt Hite, Peter Do, Clarissa Williamson, and Christine Klein. founded the Minnesota Service Industry Foundation last year to help fellow service-industry employees in any way they could. The idea came about early in the pandemic as social distancing shuttered restaurants in the city and government assistance was hard to find.
The group could not directly accept donations during the several months before its application was approved, and that stymied fundraising during the early days of the pandemic. By the time it received nonprofit status, stimulus funds had been made available to restaurants, and many workers could access expanded unemployment benefits. There was less need for its services, at least in the early days of summer 2020.
“The service industry really started getting a lot of help, so we were like ‘OK, we think we should hold our funds until it gets desperate again,’” said Minneapolis lawyer Megan Curtis, who provided pro bono legal and fundraising support to the social-action group.
But when the murder of George Floyd renewed attention on civil-rights, racial-justice, and police issues, the group shifted focus to registering voters. The organization bought tents, staked out space near the George Floyd memorial site, and registered thousands of voters there and where marches took place. That move also brought a surge of donations to the fledgling charity, Curtis said.
How Other Causes Fared
The available data for 2020 shows notable declines in some obvious nonprofit categories, though the severity of these declines could be eased in the so-far unreleased data.
Sports and recreation saw the biggest decline in new charities last year: Thirty-two percent fewer were created in 2020 than in 2019. In a typical year before the pandemic, sports and recreation groups consistently accounted for 11 percent of all approved nonprofits that use the short-form application. In the data from 2020 released so far, they have accounted for only 8 percent.
The creation of new arts, culture, and humanity organizations declined by 15 percent in 2020, not surprising in a year when existing groups were hard-hit by social-distancing mandates that shuttered concert halls and theaters.
Education charities, normally the second-largest category of nonprofit startups, saw a nearly 17 percent decline compared with 2019. This was driven by a steep drop in the number of newly approved parent and teacher groups and education fundraising organizations.
