Uncertainty seems to confront the nonprofit sector after any election and change of party – but the rapid, radical policy changes occurring under the current administration are creating unprecedented angst. How should the smart, adaptive organization manage through the moment? While there are many reasons for concern, positive policy changes are also under discussion!

Crystal Ball Concerns:

Key programs see spending cuts: On the block for cuts are Medicaid, affordable housing, food assistance (SNAP), and other vital services that many nonprofits, healthcare organizations and hospitals administer.

Changes in tax laws for foundations and endowments: Large foundations and university endowments may face pressure from government agencies that oppose their funding priorities and progressive policies potentially leading to them paying increased taxes.

Services shift to for-profits: Services traditionally funded by the government and provided by nonprofits (job training, homelessness support, addiction and mental health services) could shift toward for-profit providers.

Increasingly politicized causes encounter friction: Social justice and humanitarian-oriented nonprofits will likely be challenged by more aggressive political and policy attacks. Nonprofits involved in immigrant services, healthcare, climate advocacy, civil and LGBTQ rights could find themselves at the frontline, requiring resilience and creative solutions.

Reasons For Hope:

1. High-end prosperity drives philanthropy: Stock market returns, if positive,  and tax changes will likely create favorable conditions for major donors – factors that correlate to generosity.

2. Donor-advised funds (DAFs) disburse more: DAFs could potentially be required to spend a certain portion of their funds over a set period, such as 15 years, or risk penalties.

3. Tax policies increase giving incentives: The Tax Cuts and Jobs Act (TCJA), which passed in 2018, limited charitable deductions for 90% of taxpayers who do not itemize, reducing charitable contributions by roughly $880 per taxpayer. This may now change. Republican Sen. James Lankford of Oklahoma and Democratic Sen. Chris Coons of Delaware have been working to build bipartisan support for a charitable deduction for non-itemizers, perhaps increasing the limit to as much as $5,000 for individuals and $10,000 for couples*. 

“The charitable deduction as it exists is almost to the point of being seen as a handout to the rich,” Lankford says.

Nonprofits have lost an estimated $20B+ in philanthropic revenue from the limit on charitable deductions from non-itemizers.

What non profits can do now to prepare for change.

We cannot fully predict how the landscape will evolve. What we can and must do is plan for all scenarios, be adaptable and resilient in the face of change. A few tips for adjusting:

1. Increase transparency with your boards: Many board members lack sufficient knowledge of the budget they are responsible for overseeing – a gap that can be especially critical during times of change. Board members should be trained in an organization’s funding sources when they are onboarded and receive updates at least annually.  To avoid being caught off guard by unexpected revenue shifts, board members should receive information about potential legislative changes  and play a key role in developing contingency plans.  The same transparency that keeps boards on their toes may encourage major donors to step forward  as well.

2. Beef up that board: A skilled and engaged board is the bellwether of a healthy, high- impact, respected nonprofit. Identify board prospects who have experience, creativity, and the backbone to manage during uncertainty. Do not shy away from frank discussions, and action, regarding board members’ obligations.

3. Confer with funding sources: Nonprofits should maintain close, transparent communication with their funders, including foundations, corporations, and government entities. Seek insight into how these organizations are navigating the shifting landscape and whether funding priorities are changing. Engage in open discussions about potential solutions; work with funders to explore creative strategies for adapting to challenges.

4. Don’t silo: Now is the time for collaboration, not isolation. Changes in government policy compel us to unite with one clear, strong voice to ensure decision-makers fully understand the implications of their actions. If we are feeling the pressure, imagine the even greater strain on the constituents who depend on our services.

5. Be the first to let your donors know:  Development teams should anticipate tax deduction changes and prepare to communicate with donors regularly about the implications. Nonprofits who inform constituents are most likely to receive the benefits of donors’ new awareness.

Given that we’ve lost $20 billion in philanthropic contributions over the past seven years, the potential to recover these funds presents a significant opportunity.

Nonprofits are facing what may be the most significant societal shifts of our era. Those we serve may need us more than ever, even as our vital revenue streams are diminished. With a heads up on what’s to come, we must prepare.

Our nonprofit sector is a resilient community of dedicated professionals who have weathered immense challenges over the past five years. We will survive this too.

As Albert Einstein reminds us,

“In the middle of difficulty lies opportunity”.