A Further Examination of Entry and Exit in the Nonprofit Sector
We examine whether the patterns of entry and exit established in prior work continue to persist, despite recessions in 2001 and 2008, the introduction of the new Form 990 in 2008, and claims of increased IRS enforcement. We find that charity net entry rates remain positive and consistent over time and sector, are similar to previous findings, and are driven by extremely low exit rates. In analyzing the sector based on Form 990 filing thresholds, we find that charities enter and exit the sector at smaller sizes and that the median charity size is decreasing after the introduction of the Form 990-N. We find 78.23% of all NPs fail to file for at least one year across our entire sample and 35.35% fail to file for at least one interval of three years or longer. The paper emphasizes how this creates an upward bias on exit rates and provides guidance on accounting for this bias when examining entry and exit. We discuss the importance of including the 990-N filers and the implications for policy and future research.
darryll jones