June 13, 2006
Ever wonder why associations exist—what purposes they serve and why people join them? This article explains just what an association is, traces the history of associations, and describes how these organizations benefit members and the general public.
Editor's Note: This article includes information provided by the American Society of Association Executives (ASAE).
The official IRS definition of an association is "In general, an association is a group of persons banded together for a specific purpose." This definition leaves a lot of room for interpretation, because associations are formed for an enormous variety of purposes and provide a huge range of products and services for their members and, in many cases, for society at large.
Associations' unique role in the democratic process has led to the misperception that associations primarily are lobbyists. Yet according to a study conducted by Harris Interactive Inc., lobbying accounts for only a fraction of association budgets. Here's a look at where association dollars go:
- Education and Public Information Activities — 27%
- Operating Expenses — 26%
- Meetings and Convention Planning — 17%
- Lobbying — 14%
- Industry Research — 8%
- Defining Product and Service Standards — 8%
A sense of community is at the heart of associations. People voluntarily join associations because they want to work together on a common cause or interest. U.S. associations have deep roots in the country's history. The first settlers formed "guilds," patterned after British traditions, to address common challenges and support each other's work and lifestyle. In 1830 French statesman and author Alexis de Tocqueville toured the U.S. and remarked that the new nation seemed to be succeeding so well at democracy because inhabitants of all ages, all stations of life, and all types of disposition were forming associations.
This trend toward community coordination has shaped and advanced the U.S. since its birth and historically has set the country apart from many other nations (although associations or "nongovernmental organizations" now are growing in number internationally, as well). Although associations' complexity and roles have evolved, today's associations still share the purpose of coming together to produce positive results.
Enacted in 1913, the first integrated federal income tax statute provided exemptions for "business leagues," as many associations were called at that time. The 1913 act also provided exemptions for charitable, scientific, and educational organizations.
Congress first gave associations favored tax treatment largely in recognition of the benefit the public derives from their activities. The exemption was based on the theory that the government is compensated for any loss of tax revenue by its relief from the financial burden that would have to be met through appropriating public funds. In simple terms, associations earn their exempt status by meeting many of the needs of their members and the general public that the government would have to meet otherwise.
As tax-exempt entities, associations are barred from accumulating equity appreciation for private benefit. Instead, these organizations undertake programs or initiatives to benefit members and the public rather than private individuals. Their earnings, therefore, must be dedicated to furthering the primary purpose for which they were organized.
There are many associations, and the number keeps growing. The overall tax-exempt community has close to 1.8 million organizations in the U.S. alone. These organizations include trade associations and individual membership organizations, or professional societies, organized under Section 501(c)(6) of the tax code; and philanthropic organizations, organized under Section 501(c)(3).
In 2004 an estimated 86,054 trade and professional associations existed. These organizations include local, state, regional, national, and international associations. Some are independently incorporated chapters or allied organizations of larger associations. Add to that an estimated 1 million philanthropic or charitable organizations and you begin to get an idea of the scope of the nonprofit community nationwide.
In a time when challenges are many and expectations are high, it's nice to know that organizations are available to help. Associations are organized for many purposes, but they typically provide these recurring benefits to their members:
Besides benefiting members, many associations make contributions that are vital to society and to maintaining quality of life.
Hundreds of national, state, and local associations coordinate assistance to individuals and families in times of natural disaster or urgent need. Association members devote more than 495 million volunteer hours to charitable and community service projects yearly. Other associations write product standards for everything from children's toys to airline and traffic safety. Still more invest millions of dollars to advance the postcollege professional training of the nation's work force.
Association members themselves spend more than $25 billion annually participating in educational programs. In terms of annual spending, membership education and training also is the single largest budget item for associations, accounting for 27 percent of the average association's budget.
Associations spent $8.8 billion on conferences, conventions, and meetings in 2004. In that year 21 million people attended tradeshows, conventions, conferences, and seminars, and nearly 5 million attended committee and board meetings. These industry events accounted for more than 14 million flights and 21 million overnight stays in U.S. hotels.
With their membership networks and communication vehicles, associations are uniquely prepared to respond to industry or charitable needs. A community of varied interests and missions, associations can move with one purpose. The offshoot of many of the initiatives started by associations is that they encourage volunteerism. Associations empower people to get involved in issues that affect their personal and professional communities and their quality of life.