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Best States for Nonprofits (January 2023)

Updated: Feb 13

You often hear about which states are best or toughest for businesses with regard to taxation, regulation, complexity of starting up, etc. Various organization conduct such studies and with relative frequency. But the same isn't true for the nonprofit sector. The Philanthropy Roundtable has stepped into this gap in analysis with "The 50-State Index of Charity Regulations."

The analysis looks to five indicators in ranking the states: start-up regulations, annual reporting and filing regulations, paid solicitor regulations, audit requirements, and oversight regulations. Some of the results might not be surprising if you're of the belief that state treatment of nonprofits probably tracks closely to state treatment of for-profits. If that's what you have in mind, then Texas (ranked 10th) and California (ranked 42nd) are probably unsurprising. But you might be surprised by some of them (for example, Vermont at 11th, Florida at 49th).

Interestingly, California is in the middle as it comes to audit requirements (27th) and oversight regulations (25th), but dead last in annual reporting/filing.

Texas ranks first with regard to audit requirements and oversight regulations, and its lowest (at 19th) is start-up regulations. This is also interesting because, as I'll address in a future post (and touched on here), forming a Texas nonprofit is not that complicated.

The report finds that there is "...a strong correlation between the states that impose more burdensome regulatory environments and the vibrancy of the charitable sector." "The states with a less burdensome regulatory environment (a lower ranking number) tend to have more charitable organizations per billion dollars of GDP."

It's worth noting that the Philanthropy Roundtable generally advocates for fewer regulations on nonprofits, so keep this in mind when reviewing the report. In any event, it is both interesting and likely to lead to other organizations doing the same.

HT: This news was originally brought to my attention by the Nonprofit Law Prof Blog.

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