The nonprofit sector is highly unique from the other sectors, and some aspects can be tricky to navigate - even for seasoned nonprofit leaders. With so many different words and nuances, it can be difficult to find the correct language or know which phrase is appropriate to use in particular settings. So, if you are new to the nonprofit world or just need a refresh, here is a quick guide to some of the unclear and commonly disputed terms in the nonprofit sector:
Philanthropy vs. Charity
This one comes up time and time again in the sector. The most commonly agreed upon definition of philanthropy was coined by Robert Payton as “voluntary action for the public good.” But what is not so commonly agreed on is the line between philanthropy and charity, or if they are actually synonymous.
We tend to use the word philanthropy more nowadays and refer to charity when speaking about the past. This is because most of the sector perceives philanthropy as impact-driven and scientific-based social change, whereas charity invokes an idea of more passive giving and short-term goals.
So when in doubt, use the term philanthropy when referring to long-term systemic change and charity for providing short-term solutions and relief.
Something else to consider: Eli Broad once said, “Charity is just writing checks and not being engaged. Philanthropy, to me, is being engaged, not only with your resources but getting people and yourself really involved and doing things that haven't been done before.”
Nonprofit, Social, Independent and the Third Sector
What we know for sure is that somewhere between the private sector and the government sector, there is another faction providing important social services and programming and creating social change in innumerable ways. And there is no one right way to refer to this “third” sector: nonprofit sector, social sector, independent sector, third sector, and the list goes on.
Most of us would agree that all of these words are synonymous. It is difficult to pinpoint exactly what this third sector provides: this sector is and will always be more nebulous than the private sector (companies and corporations) and the public/government sector (which includes all levels of government and its services) because it includes more aspects of society than the other sectors.
So if someone references any of these terms, rest assured that you are probably talking about the same thing. Heck, you should work on trying to use all of them! These terms all help to define what makes our sector unique.
Is it Development, Fundraising, or Fund Development?
It is common for a Director of Development to be a Certified Fund Raising Executive (CRFE) and have a strategic plan titled “Fund Development” in his/her office. There are many words in our sector to describe the act of soliciting donations and increasing funding for nonprofit organizations, and for the most part these terms can be used interchangeably.
501(c)3, 501(c)4, 527, and Other IRS Lingo
IRS lingo can be especially tricky when navigating the nonprofit sector, especially because the terms are used by nonprofits in the everyday to differentiate what “type” of nonprofit they are incorporating as legally.
A 501(c)3 is your average nonprofit organization- they are tax-deductible organizations with a mission and vision that rely on donations to supply services and/or programming. This group also includes churches/religious organizations and private foundations, among other organizations.
A 501(c)4 will either be a social welfare organization or a local association of employees. So groups like a homeowners association or labor unions are all included in this grouping.
A 527 is a nonprofit political organization. Contributions are not tax-deductible and they are allowed to lobby and be engaged in the political process at a local and state level.
This list is not exhaustive- there are WAY more, so if you really want to know all of the lingo, the IRS would be happy to help go over all of these with you…
Board of Directors or Board of Trustees
Some organizations refer to their governing body as a Board of Directors and some call is a Board of Trustees. Although many people use them interchangeably, there is a legal difference between the two.
Board of Trustees are subject to higher standards legally than a Board of Directors. As it turns out, some state laws dictate that the term ‘trustee’ is only to be used in relation to charitable trusts, while the term ‘director’ is used only for nonprofit organizations.
So while it is common in the nonprofit world to use both Board of Directors and Board of Trustees, with this one it is better to air on the side of caution and only use the term Board of Directors when referring to a nonprofit board.
What is missing from our list? Comment below with other common nonprofit jargon, questions, or your thoughts on the meanings of these common nonprofit words!