Sudden Policy Shifts: Nonprofits and Washington Politics

Every time a federal or state administration shifts, nonprofits are among the most exposed, sometimes negatively (extra work, extra costs, or undoing needed protections) and other times positively (greater opportunities to fulfill their mission).The fast-changing political climate in Washington is creating a host of challenges for the nonprofit community.

• Nonprofits focused on climate change and other environmental issues are facing repeal of agreements and regulations.
• Nonprofits focused on reproductive health, rights, and justice face funding cuts and new regulations.
• Tightened immigration policies, including deportations, disrupt communities and increase the demand for children’s services and for legal aid.
• The repeal of the individual mandate of the Affordable Care Act will increase the need for charity-based healthcare.

The news is not all bad.

The Giving USA 2017 report published by the Giving USA Foundation, covering charitable giving in the 2016 election year, notes that all categories of recipient organizations saw an increase in 2016, with the largest being a 7.2% increase in giving to the environment and animal organizations.

People without a lot of disposable income gave in larger numbers than they would have in the recent past. When President Trump signed an executive order suspending refugee admissions from seven Muslim-majority countries the American Civil Liberties Union (ACLU) raised over $24 million from more than 350,000 individual online donations in a two-day period—six times the amount the ACLU normally handles in online donations in a year.

Planned Parenthood received more than 300,000 donations in the six weeks after the election, 40 times its normal rate.

A new nonprofit, We The Action, connects volunteer lawyers with nonprofit organizations, to “protect and defend nonprofit organizations who need it.”

The Tax Bill’s Impact

The tax bill passed in December provides generous tax cuts to businesses and individuals, but it appears likely that it will have a negative effect on nonprofit donations.

Of greatest concern is that increases in the standard deduction for taxpayers will discourage itemized deductions, and charitable gifts can only be claimed that way. Estimates vary, but somewhere between $16 billion and $24 billion (about 6-9%) could be lost each year.

The National Council of Nonprofits points out that the new $10,000 limit on the amount of state and local income taxes and property taxes that can be deducted federally is likely to pressure state and local governments to enact tax and spending cuts, leading to elimination of programs serving people in need and increasing the burden on charitable nonprofits and foundations to fill the gaps.

Doubling the exemption in the estate tax is expected to lower charitable giving by $4 billion per year because of the impact it will have on tax planning.

All of this is more troubling given the current financial health of the nonprofit sector. According to a new report, half of U.S. nonprofits had less than one month’s cash reserve. 30% had lost money over three years, and 7% were technically insolvent.

The potential for reduced funding due to tax cuts is likely to further impact the many nonprofit organizations that depend on government for half or more of their budgets.

But there’s no point in bemoaning what’s not possible. You’ve got to focus on strategy and action. You need to get into the mindset that there will always be change. Steps to be taken include increasing the sense of urgency of your whole organization including the Board for fundraising. Be sure you have prioritized your strategy so it is fundable.

Think about how you can message to your donor base (or new donor audiences) that you need their donations more than ever.

Are there cost reductions to make? Consider merging with similar organizations.

I’d like to hear from you on this topic, please comment below.