Cross Border Philanthropy: The More we are Different, The More we are the Same
Can the American philanthropic sector be transposed to the Canadian experience? What are the similarities and differences between the two countries from a nonprofit perspective, and why is this important?
These questions will be addressed in two parts. This article will focus on the organizational structure of the nonprofit sector and the attitudes of its donors; the second will detail the tax incentives for making charitable contributions.
There is very little research on this topic as a comparison study (each country has studies on the make-up of the sector and its investors). As a result, information has been gathered from several sources; what results is, in essence, a comparison of apples and oranges. At first blush, both are fruits, both are round, both can be put into fruit salads and cakes… but is there more?
“…A primary motivation for charity has always been to provide for the poor and disadvantaged, and to attack the root causes of poverty and disadvantage. Certainly this is true of the world’s traditions of charity think of almsgiving in various religious traditions. One of the world’s first laws concerning philanthropy, the Charitable Uses Act of 1601 in Elizabethan England, also strongly connected philanthropy with relief for the poor.
Today, philanthropy continues to imply, at least to most people, some kind of charity…” 1
The history of the American charitable sector is steeped in religious beliefs and cultural traditions. From the Quakers as they established themselves in the New World, to celebrity endorsed fundraising campaigns of Hollywood, to Web 2.0 social networking sites the American charitable sector is deep and rich. The Council on Foundations has a page entitled, “An Abbreviated History of the Philanthropic Tradition in the United States.” This page and its resources expand these statements further. 2
The Canadian charitable sector has its roots in Elizabethan England, with various laws regarding how charities can be organized and funded. Also with religious underpinnings and cultural mores, the Canadian sector is about a decade behind the American one not by lack of sophistication, but simply because Canada is a younger nation with strong ties back to England. In fact, Canada’s charitable laws have not been revamped to any great extent since the 1600’s (there, of course, have been a few changes).
In order to understand how donor attitudes differ between the countries, we should have a basic understanding of how the non-profit and charitable sectors are organized.
Please note that the words “non-profit” and “charitable” will be interchanged in this discussion.
Much has been written about the U.S. and Canada and their charitable sectors’ organizational structure. Figure 1 charts the differences (please note, this chart only looks at tax differences on cursory level).
|Canada’s Charitable Sector||United States Charitable Sector|
|161,000 Registered Charities & Non-Profits (2004 stats)||297,000 Registered Charities & Non-Profits (2004 stats)|
|0.75% of annual income is given to charities by individual donors = $9 Billion (Based on deductions claimed on 2006 tax returns)||1.6% of annual income is given to charities by individual donors = $295 Billion (Based on deductions claimed on 2006 tax returns)|
|25% of tax-filers claim charitable donations||25% of tax-filers claim charitable donations|
|Donors (private and foundations) are typically more conservative in their philanthropy||History of venture-philanthropy through charitable foundations (Kellogg, Carnegie, etc.)|
|Socialist roots Government has an obligation to take care of its citizens||Capitalist roots Individuals are responsible for themselves|
|Expectation that when government doesn’t meet the needs of its citizens then charities will (the church).||Where government isn’t meeting the needs of its citizens, then businesses will (fee-based services).|
|Provincial AND Federal tax benefits for individuals to give to charity. There does not seem to be a real incentive from a tax perspective for companies to make charitable contributions.||State AND Federal tax benefits for corporations and individuals to give to charity.|
|Religious institutions are the biggest receivers of funds (aside from hospitals and universities)||Religious institutions are the biggest receivers of funds (including hospitals and universities)|
|Larger organizations receive the majority of the charitable investments (universities, hospitals)||Larger organizations receive the majority of the charitable investments (universities, hospitals)|
|Charities cannot lobby government (there is a maximum allowable amount of overhead permitted to government lobbying ~ 20%)||Charities can lobby government|
In both countries, philanthropy extends beyond the financial (in-kind and direct) to include human resources (volunteerism) and intellectual capital (professional guidance). “…philanthropy is about what is in your heart and your spirit, not about what is in your bank account.” sup3
What does this all mean? The sectors themselves are very similar each has social service organizations, educational institutions, political bodies, performing arts centres and healthcare providers (to name a few). What shapes the sectors, then, is the role that government plays in influencing the donor mindset. Because Canada has socialist and monarchical roots, the way that individuals and companies interact and support charitable organizations is reflected through that prism.
Because there is a societal expectation in Canada that non-profit organizations will pick up where government leaves off, there seems to be a common understanding that the average citizen will ensure that these are running efficiently. In the States, because government is more hands-off, a more capitalist approach to how non-profits generate revenue can be expected.
The hardships of early settlers to North America, where government was weak and distant, forced people to join together to govern themselves, to help each other and to undertake community activities, such as building schools and churches and fighting fires. Out of these experiences grew a tradition of citizen initiatives and individual efforts to promote the public welfare. Later, immigrants supported communities by giving through churches and forming groups to help the poor as well as organizing associations to assist each other in their new homeland. 4
In the end, while one country might be more conservative, or government-supported, or less-incentivized to donate, both are building community on either side of the border. There has been much discussion of the $1 trillion wealth transfer that is going to happen in the next 5-10 years in North America. It will be interesting to see how Canadians and Americans differ in their approaches to investing those funds back into their respective communities.
1 Reich, Rob; A Failure of Philanthropy: American Charity Short-changes the Poor, and Public Policy is Partly to Blame, Stanford Social Innovation Review, 2005
2 Council on Foundations, http://www.cof.org/Learn/content.cfm?ItemNumber=730
3 Sperling, Julie and Hall, Michael, Philanthropic Success Stories, Imagine Canada, 2007, pg. 5.
4 Council on Foundations, http://www.cof.org/Learn/content.cfm?ItemNumber=730
5 All stats in this chart are from the following studies:
Giving USA 2007 Benevon: Creating Sustainable Funding for Non-Profits, Giving USA Foundation, http://www.givingusa.org/
Cornerstones of Community: Highlights of the National Survey of Non-Profit and Voluntary Organizations, Statistics Canada 2004
Leroy, Sylvia, et al; Comparing Charitable Giving in Canada and the United States: Canada’s Generosity Gap, Fraser Institute, December 2003
Sperling, Julie and Hall, Michael, Philanthropic Success Stories, Imagine Canada, 2007