This brief discusses trends in the number and finances of 501(c)(3) public charities and key data insights on important resources for the nonprofit sector, such as: private charitable contributions and grantmaking by foundations.
Highlights
- Approximately 1.54 million nonprofits were registered with the Internal Revenue Service (IRS) in 2016, an increase of 4.5 percent from 2006.
- The nonprofit sector contributed an estimated $1.047.2 trillion to the US economy in 2016, composing 5.6 percent of the country's gross domestic product (GDP).1
- Of the nonprofit organizations registered with the IRS, 501(c)(3) public charities accounted for just over three-quarters of revenue and expenses for the nonprofit sector as a whole ($2.04 trillion and $1.94 trillion, respectively) and just under two-thirds of the nonprofit sector's total assets ($3.79 trillion).
- In 2018, total private giving from individuals, foundations, and businesses totaled $427.71 billion (Giving USA Foundation 2019), a decrease of -1.7 percent from 2017 (after adjusting for inflation). According to Giving USA (2018) total charitable giving rose for consecutive years from 2014 to 2017, making 2017 the largest single year for private charitable giving, even after adjusting for inflation.
- An estimated 25.1 percent of US adults volunteered in 2017, contributing an estimated 8.8 billion hours. This is a 1.6 percent increase from 2016. The value of these hours is approximately $195.0 billion.
Size and Scope of the Nonprofit Sector
All Nonprofit Organizations
Number
From 2006 to 2016, the number of nonprofit organizations registered with the IRS rose from 1.48 million to 1.54 million, an increase of 4.5 percent. These 1.54 million organizations comprise a diverse range of nonprofits, including art, health, education, and advocacy nonprofits; labor unions; and business and professional associations. This broad spectrum, however, only includes registered nonprofit organizations; the total number of nonprofit organizations operating in the United States is unknown. Religious congregations and organizations with less than $5,000 in gross receipts are not required to register with the IRS, although many do.2 These unregistered organizations expand the scope of the nonprofit sector beyond the 1.54 million organizations this brief focuses on.
Finances
Approximately 35 percent of nonprofits registered with the IRS in 2016 were required to file a Form 990, Form 990-EZ, or Form 990-PF.3 These reporting nonprofits identified $2.62 trillion in revenues and $5.99 trillion in assets (table 1).4 Between 2006 and 2016, reporting nonprofits experienced positive financial growth. Both revenues and assets grew faster than GDP; after adjusting for inflation revenues grew 24.2 percent and assets grew 30.9 percent, compared with 13.6 percent growth for national GDP during the same period. Expenses grew 30.7 percent between 2006 and 2016. In the short term, after adjusting for inflation, revenues grew 1.8 percent from $2.58 trillion in 2015 to $2.62 in 2016; assets increased 2.3 percent from $5.86 trillion to $5.99. Expenses also grew from $2.39 trillion in 2015 to $2.48 in 2016, an increase of 3.6 percent.
Public Charities
Number
Public charities are the largest category of the more than 30 types of tax-exempt nonprofit organizations defined by the Internal Revenue Code. Classified under section 501(c)(3) (along with private foundations), public charities include arts, culture, and humanities organizations; education organizations; health care organizations; human services organizations; and other types of organizations to which donors can make tax-deductible donations. In 2016, about 1.08 million organizations were classified as public charities, composing about two-thirds of all registered nonprofits. Between 2006 and 2016, the number of public charities grew 19.6 percent, faster than the growth of all registered nonprofits (4.5 percent). Consequently, public charities made up a larger share of the nonprofit sector in 2015 (69.7 percent) than in 2005 (60 percent).
The number of reporting public charities required to file a Form 990 or Form 990-EZ grew slightly between 2015 and 2016, showing an increase of 1 percent.
Finances
Almost three-fifths (59.7 percent) of all nonprofit organizations reporting to the IRS in 2016 were public charities. Accounting for more than three-quarters of revenue and expenses for the nonprofit sector, public charities reported $2.04 trillion in revenues and $1.94 trillion in expenses. Assets held by public charities accounted for just under two-thirds of the sector's total ($3.79 trillion).
Size
Even after excluding organizations with gross receipts below the $50,000 filing threshold, small organizations composed the majority of public charities in 2016. As shown in figure 1 below, 66.6 percent had less than $500,000 in expenses (211,782 organizations); they composed less than 2 percent of total public charity expenditures ($32.8 billion). Though organizations with $10 million or more included just 5.4 percent of total public charities (17,063 organizations), they accounted for 88.1 percent of public charity expenditures ($1.7 trillion).
Type
Table 2 below displays the 2016 distribution of public charities by type of organization. Human services groups—such as food banks, homeless shelters, youth services, sports organizations, and family or legal services—composed over one-third of all public charities (35.2 percent). They were more than twice as numerous as education organizations, the next-most prolific type of organization, which accounted for 17.2 percent of all public charities. Education organizations include booster clubs, parent-teacher associations, and financial aid groups, as well as academic institutions, schools, and universities. Health care organizations, though accounting for only 12.2 percent of reporting public charities, accounted for nearly three-fifths of public charity revenues and expenses in 2016. Education organizations accounted for 17.3 percent of revenues and 16.9 percent of expenses; human services, despite being more numerous, accounted for comparatively less revenue (11.9 percent of the total) and expenses (12.1 percent of the total). Hospitals, despite representing only 2.2 percent of total public charities (7,054 organizations), accounted for about half of all public charity revenues and expenses (49.8 and 50.6 percent, respectively).
Growth
The number of reporting public charities in 2016 was approximately 1 percent higher than the number in 2015. The total revenues, expenses, and assets for reporting public charities all increased between 2015 and 2016; after adjusting for inflation, revenues rose 1.9 percent, expenses rose 4 percent, and assets rose 2.1 percent.
These trends are indicative of larger growth in the sector: both the number and finances of organizations in the nonprofit sector have grown over the past 10 years. But this growth has differed by subsector and period (table 3). Subsectors experienced varying degrees of financial expansion: although all subsectors reported increases in revenue in 2016 compared with 2006 (even after adjusting for inflation), a few decreased in number of nonprofits, including arts, education (excluding higher education), health, and other public and social benefit organizations. Consequently, these organizations accounted for a slightly lower proportion of the total sector in 2016 (50.7 percent) than they did in 2006 (53.5 percent). The smallest subsectors (international and foreign affairs organizations and environment and animals organizations) saw the largest growth rates in the number of organizations, increasing 16 and 10.1 percent, respectively, from 2006 to 2016.
Financially, religion-related organizations had the largest proportional increase in both revenue and expenses, growing from $13.2 billion in revenue in 2006 to $19.4 billion in 2016 after adjusting for inflation (a change of 47 percent). Environment and animals organizations experienced similar growth, growing from $14.6 billion in revenue in 2006 to $19.8 billion in 2016 after adjusting for inflation (a change of 35.6 percent). Both types of organizations, however, still account for a very small proportion of overall nonprofit sector revenue in 2016, at just about 1 percent each. Health-related organizations, which account for a much larger proportion of overall sector finances (59.2, 60.3 and 43.3 percent, respectively, of revenues, expenses, and assets), also experienced considerable growth between 2006 and 2016. Revenues for hospitals and primary care facilities, in particular, increased from $739.7 billion in 2006 to $1016 billion in 2016 after adjusting for inflation, by far the largest dollar growth of any subsector during this period. The growth for the health sector, $331.4 billion, accounts for over three-fifths of the growth of the entire nonprofit sector between 2006 and 2016 ($505.1 billion).
Giving
Giving Amounts
Private charitable contributions reached an estimated $427.71 billion in 2018, as shown in figure 2 below (Giving USA Foundation 2019). Although total charitable giving has been increasing for four consecutive years, beginning with 2014. In 2018, total charitable giving decreased -1.7 percent from 2017.
Recipients
Congregations and religious organizations received just under a third (29.6 percent) of all charitable contributions in 2018 (table 5), a lower proportion than they received five years earlier in 2013 (32.2 percent). Education organizations received the next-highest share of private charitable contributions (13.9 percent), which is the same proportion received in 2013 (also 13 percent of all donations). Human services organizations received the third-highest pro portion of all contributions in 2018 (12.2 percent), but this is a slight decline from their 2013 proportion (12 percent). Gifts to individuals made up the smallest proportion of total contributions in 2018: 2.1 percent.
Conclusion
Overall, in 2018, the nonprofit sector remained relatively healthy with continuous financial growth and increases in the number of nonprofits throughout various subsectors. However, new data in charitable giving trends point to nuances worthof further exploration. Public charities composed over two-thirds of all registered nonprofit organizations and accounted for over three-quarters of the revenue andexpenses of the nonprofit sector in the United States. From 2011 to 2016, the number of nonprofit organizations registered with the IRS rose by 4.5 percent. Nonprofit revenues grew 1.8 percent; assets increased 2.3 percent; and expenses grew by 3.6 percent.
While the nonprofit sector as a whole continues to see steady financial growth (with revenue, expenses, and assets all continuing to grow),” U.S. giving data points to new nuances in charitable giving worth disentangling. While annual levels of giving remained relatively steady since the Great Recession, pointing to an overall increase of 0.7 percent in giving between 2017 and 2018, after adjusting for inflation, private charitable giving shows a downward trend in total charitable giving. Disentangling this nuance will help better inform the overall state of nonprofit sector in the United States.