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Tips and Answers
to Your Questions
Deciding to Restructure
Do you have any information on numbers of nonprofits
that have merged or been acquired by others?
The short answer on this is: we wish we did. We have been actively
researching this question since last fall, and have been surprised
at how difficult it is to ferret out those numbers. Anecdotally, we
have seen, heard of, and worked with more mergers and consolidations
in the last few years than ever before, but hard numbers on this are
hard to get. There are several reasons for this.
First, there is no national-level law requiring nonprofits to file
paperwork indicating that they are merging. That type of activity is
regulated at the state level, and state laws vary. We have learned
that only 12 states keep databases on the activity of the nonprofits
in their state, and that these databases all track information in different
ways, using different terms, and to different levels of detail. These
databases are not able to "talk" to each other or to the
IRS databases on nonprofit tax status, and thus there is no easy way
to get consolidated information of this type.
Given this situation, we decided to look at one state that does keep
records: California. In California, as in many other states, nonprofits
are required to file some sort of paperwork if they dissolve, merge,
or transfer their assets. Nonprofits who merge, however, can easily
(and honestly) file information saying that they are dissolving, if
in fact that is the way they are choosing to effect what is basically
a merger. Other nonprofits that are for all intents and purposes merging
may choose to keep their corporate shell, and may not file anything
indicating that they are transferring programs and assets over to another
organization. Even in California the data is not very clear, and it
is difficult to pick out the legal filings that stemmed from merger
activity.
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