New Aspen Institute Report Outlines Potential New Legal Forms for Social Enterprise Organizations

February 26, 2007  • Institute Contributor

New Aspen Institute Report Outlines Potential New Legal Forms for Social Enterprise Organizations

WASHINGTON, D.C., Feb. 26, 2007 – There is now a broad range of emerging social enterprise organizations that combine philanthropy with traditional business practices to advance social purposes. While serving the functions of charitable organizations, these “hybrid” organizations still contend with tax laws and regulations that do not recognize their social contributions.

The Aspen Institute’s Nonprofit Sector and Philanthropy Program, in its continuing effort to inform and support the growing field of social enterprise organizations and social-benefit companies, held a roundtable discussion in Washington, D.C. in late September, 2006, addressing the question of whether new legal and tax approaches are needed to accommodate this new trend. Mixing Mission and Business: Does Social Enterprise Need A New Legal Approach?, written by Thomas J. Billitteri and published by the Aspen Institute, provides highlights of the meeting.

More than 40 attorneys, investors, finance and tax consultants, and field leaders, as well as founders and executives of several social enterprise groups, attended the discussion. The pressing question addressed in the meeting was “Are wholly new legal forms and tax structures needed to accommodate the next generation of social enterprise organizations? Or can existing laws be used, perhaps with some modest adjustments?” Attendees agreed that an important first step in this exploration is to compile and make information on existing hybrid organizations publicly available, with the hope that a centralized source will lead to the development and testing of new organizational and financial models.

Most of the group embraced the idea of creating a new corporate form or changing the tax code to accommodate “hybrid” activity, insisting that what currently exists is not sufficient for fostering social entrepreneurship. An idea that gained significant attention from participants was modifying the current tax code to include a new designation that would certify as “social benefit” both nonprofit and for-profit organizations that operate in a business-like manner and have an underlying charitable mission.

Those who favored employing existing laws suggested that the nonprofit groups can operate selectively within the traditional business realm while supporting charitable causes. Some also expressed skepticism about the feasibility of altering the tax code and/or implementing a new legal form on the federal level.

For more information regarding the New Legal Forms roundtable or Aspen Institute’s Social Enterprise Initiative, please contact Rachel Mosher-Williams at 202.736.2501 or [email protected].

The Aspen Institute’s Nonprofit Sector and Philanthropy Program seeks to improve the operation of the nonprofit sector and philanthropy through research and dialogue focused on public policy, management, and other important issues affecting the nonprofit sector. The Aspen Institute is a global forum for leveraging the power of leaders to improve the human condition.

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