Widening Gaps In Financial Profiles of Nonprofits: 1982-2012

Background:
Income and wealth inequality in the United States has increased substantially over the past several decades. While these trends are well documented at the household level, less is known about whether similar patterns exist within the nonprofit sector. Organizational inequality may parallel household inequality because the rich–poor distinction among individuals is often mirrored by the large–small distinction among organizations. Large nonprofits frequently command greater financial resources, public visibility, and access to influential networks, whereas small nonprofits often operate with limited resources while serving marginalized communities. Increasing concentration of financial resources among large nonprofits may therefore have important implications for service diversity, civic representation, and the overall resilience of the nonprofit sector. This study examines whether financial disparities between large and small nonprofits have widened over time. Specifically, the study asks two research questions: (1) Has the financial gap between large and small nonprofit organizations increased between 1982 and 2012? and (2) Has total nonprofit revenue become increasingly concentrated among large organizations during this period?

Methods:
This study uses Internal Revenue Service Statistics of Income (SOI) files derived from Form 990 for U.S. 501(c)(3) public charities from 1982 to 2012. Each annual dataset contains a nationally representative stratified sample of nonprofit organizations. Sample sizes range from approximately 4,700 to more than 16,000 organizations per year. Organizational size is defined using total assets to align with the SOI sampling framework. Large nonprofits are operationalized as organizations in the top 10 percent of the asset distribution, while small nonprofits are those in the bottom 10 percent. Sensitivity analyses use alternative thresholds of 5 percent and 20 percent. Financial inequality is assessed using four indicators: total assets, total revenue, total expenses, and payroll taxes. For each year, top-to-bottom ratios of average financial values are calculated to measure the magnitude of financial gaps between large and small organizations. All analyses apply SOI sampling weights to produce population estimates.

Results:
Results indicate substantial and increasing financial disparities between large and small nonprofits over the study period. Across all four indicators—assets, revenue, expenses, and payroll taxes—the top-to-bottom ratios generally increased from 1982 to 2012, despite short-term fluctuations during economic recessions. The widening gaps are particularly pronounced among the largest organizations, with the steepest increases observed at the top 5 percent threshold. Revenue concentration analyses reveal similar patterns. Revenue concentration analysis shows that by 2012 the top five percent of nonprofits accounted for more than forty percent of total sector revenue, the top ten percent received over half, and the top twenty percent controlled nearly two-thirds.

Conclusions and Implications:
These findings demonstrate widening financial inequality within the nonprofit sector that parallels broader patterns of economic inequality in society. Increasing concentration of financial resources among large nonprofits raises concerns about reduced diversity, weakened grassroots representation, and heightened vulnerability among small community-based organizations. Policymakers and funders may need to consider strategies that support the sustainability of smaller nonprofits and promote a more balanced distribution of resources within the sector.