Mississippi regulations slow charitable organizations

One cannot help but wonder how many additional charitable success stories Mississippi could have and how many more communities could be better served if the state adopted a more favorable regulatory environment.

Mississippi donors, charities and volunteers are hard at work this year supporting the most vulnerable in our communities. Clean up and recovery efforts continue this month as charitable organizations step up to provide much-needed aid to those who lost everything when tornadoes tore through the heart of the state in March.

However, certain barriers are holding local charities back from fulfilling their missions—namely excessive regulation. A recent study found that Mississippi’s regulatory framework may be hindering charities from effectively assisting those in need. Mississippi has been ranked 47th in Philanthropy Roundtable’s 50 State Index of Charity Regulations. 

Unfortunately, this means, the state is among the most challenging places in the country for charitable organizations to operate, which could explain why Mississippi has fewer charities than other states with a similar economic size.

Mississippi has fewer than 67 charities per $1 billion in state GDP, which is significantly lower than the top five states with the least burdensome regulatory environment. For instance, those states have 76 charities per $1 billion in state GDP, highlighting the adverse impact of heavy regulation on charitable activity in Mississippi.

Despite regulatory hurdles, Mississippi has a vibrant and thriving charitable sector that is supported by over 350 charitable foundations and over 8,000 charities dedicated to serving communities across the state. The state’s charitable community is further bolstered by the generosity of its residents, who donate more than $1.5 billion each year to charitable causes.

For example, The Redeemer’s School in Jackson, Mississippi, is funded almost entirely by philanthropists, churches, foundations, and business leaders and provides an excellent education for disadvantaged children in a safe urban environment. With an enrollment of 139 K4 through 8^th grade students, the school has grown from an enrollment of 42 students when it opened its doors in 2014.

Despite having one of the most challenging regulatory environments for charities, Mississippi’s charitable sector has achieved remarkable success. However, one cannot help but wonder how many additional charitable success stories Mississippi could have and how many more communities could be better served if the state adopted a more favorable regulatory environment.

Registration fees for charities in Mississippi are higher than all but 13 states, while annual report filing fees are higher than all but 11 states. What’s more, nonprofit organizations in the Magnolia State must apply for exemption from the state corporate income tax or else face taxes on up to 5 percent on their donations. Charities are also not exempt from state sales and use taxes.

In addition to high start-up costs and fees, charities in Mississippi are subject to some of the most stringent solicitation fees and regulations. Mississippi boasts the 5^th highest solicitation registration fee at $250 and charities are required to give notice before a solicitation campaign, register by fundraising counsel, and file reports on commercial fundraisers and contracts between charities and commercial fundraisers.

Mississippi’s policymakers must take a closer look at the onerous regulatory burdens placed on charitable organizations operating in the state. Instead of imposing even more red tape on charities, lawmakers should learn from the experiences of states that have adopted a more favorable regulatory environment for charities. This will enable the state to create a regulatory framework that is both effective in safeguarding the public interest and supportive of the vital work being carried out by charitable organizations.

To prevent worsening the regulatory burden placed on charities and foundations in Mississippi, policymakers should consider requiring legislative approval for any new regulatory requirements that may increase costs for these organizations. Three of Mississippi’s neighboring states have already passed such legislation, including Arkansas, Louisiana and Tennessee.

By taking this approach, Mississippi can create a more transparent and accountable regulatory process that balances the need to protect the public interest with the imperative to support the growth and development of the charitable sector.