Fostering U.S. Social Enterprise Development to Diversify Financial Resources for Severe Human Service Needs
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Date
2017
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Abstract
Human Service Nonprofit organization are a vital and critical component to American society. They have a long history supporting government in addressing socio-economic concerns the government would otherwise tackle alone. One of the major concerns these organizations face, is the inconsistency in financial resources, which can be contingent on the condition of the economy and traditional donors. The emergence of Social Enterprises and Entrepreneurs have helped produce a new path of resources for social and environmental needs. These new entities have helped create and support economic activity, all while fostering an environment to generate new jobs. In the last five years, there has been a considerable amount of bipartisan support to foster the creation of social enterprises in the US. Unfortunately, America has yet to incorporate the sector into federal legislation.
This paper proposes a legislative policy that creates a subsector in the Small Business Administration, called the Social Enterprise Subsector. It will focus on the advancement and development of Social Enterprises, and the creation of the Qualified Program Related Investment (QPRI) tax status. The QPRI status increases the use of private or philanthropic investment in social programs as oppose to governments agencies bearing the full cost to explore new programs. Historically PRIs are rarely used by charities and foundations, as IRS has yet to formally recognize them. The QPRI status will allow nonprofits and social enterprises to apply for QPRI status, so that investors can safely invest in programs without their investment termed jeopardizing by the IRS. This opens a new market of investors for socially beneficial programs, who will now receive a return on their investment. The policy proposes reducing the current 100% charitable tax deduction by 15% in order to pay for the SES and QPRI tax status. Those who invest in QPRI status organizations, will be able to write off 75% of their donation or investment and receive returns on investments.
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social enterprise, program related investment, human service financing, social service financing, social impact bonds