In 100 short days, President Trump’s administration set off an unprecedented whirlwind of activity and headlines, resulting in widespread speculation about the attendant political, social, and economic consequences. Across the nonprofit sector, many organizational leaders continue to wonder how enacted, proposed, and future changes could impact their fundraising efforts and what steps they should take to safeguard their missions.
At the beginning of the new administration, Campbell & Company published advice for nonprofit leaders to help nonprofits successfully navigate the unpredictable political landscape. We've closely watched new developments since then—from executive orders and Trump’s proposed budget to environmental policy shakeups, attempts to repeal and replace the Affordable Care Act (ACA), and impending tax reform efforts. To cut through the clutter and update the nonprofit sector, we built on our recommendations to reflect these new developments and help organizations stay strong and on mission in the months ahead.
Look out for tax reform
President Trump revealed a plan for tax cuts at the end of April. With a few edits, this revelation mostly matched what we heard from him on the campaign trail. In the refined plan, Trump still wants to repeal the estate tax and reduce the corporate tax rate to 15 percent. Instead of increasing the standard deduction from $6,300 to $15,000, the new plan sets the bar at $12,600 for single filers. Trump also maintained interest in reducing the number of tax brackets from seven to three, but he moved his proposed rates from 12-25-33 to 10-25-35. Lastly, his new plan eliminates all itemized deductions except for the charitable giving and mortgage deductions.
What does this mean for nonprofits? If Congress were to repeal the estate tax, it would likely be a disincentive for high-net-worth individuals to give. Through this tax, high-net-worth individuals are encouraged to give to reduce the amount of taxable wealth in their estate. The Congressional Budget Office reported in 2004 that an estate tax repeal could decrease charitable giving by 6 to 12 percent.
In terms of the standard deduction, it’s difficult to pinpoint how an increase would affect donor behavior. Raising the standard deduction would likely mean less people would choose to itemize and use the charitable deduction. However, this doesn’t necessarily translate into decreased giving. As we referenced in our January advice to nonprofit leaders, the 2016 U.S. Trust® Study of High Net Worth Philanthropy revealed that only 18 percent of high-net-worth individuals identify tax benefits as a reason for giving. Additionally, 54 percent of those surveyed cited a belief in the organization’s mission as the core reason for giving.
When considering President Trump’s proposed changes to the tax code, keep in mind that a bill for tax reform must originate in Congress, and the President can either sign this bill into law or veto it. While Trump has every right to promote his views, bills must still pass congressional scrutiny. Treasury Secretary Steven Mnuchin acknowledged that Congress is unlikely to pass tax reform by August, but that it could be accomplished before the close of 2017. Over the next few months, edits to released proposals will likely arise to mount a consensus. Look out for tax reform, but do not expect it to happen until after Congress’ August recess.
Though we do not yet know what the final tax bill will include, organizations should take action now by educating members of Congress on the importance of a nonprofit-friendly tax code. We share details on how to build connections with lawmakers later in this article.
Continue to focus on the economy
While the tax code can impact donor behavior, the economy has been a historically solid indicator of the giving forecast. “In our original advice for nonprofit leaders, we referenced Giving USA data to illustrate that the economy is an important predictor of charitable giving. From 2012 to 2015, total giving reached record highs as the U.S. economy recovered from the Great Recession,” explains Peter Fissinger, President & CEO of Campbell & Company. “While legislation can have an impact on giving, a strong economy generally indicates a strong philanthropic outlook.”
Economic growth for 2017’s first quarter clocked in at a very modest annual rate of 0.7 percent, but this number alone is not cause for panic. The majority of forecasts estimate a GDP growth rate of 2 to 2.5 percent for 2017 and 2018, which is similar to the recovery rate under former President Obama. Should these projections pan out, we will likely see continued robust levels of charitable giving in the short term.
Have a backup plan ready
Even with a positive economic outlook, individual organizations need to be ready for shakeups caused by legislative actions. Though nonprofit interests fared well in the federal spending bill expected to fund the government until the end of September, organizations that receive government support need to develop alternative plans should that funding be cut or reduced in the future. President Trump’s budget blueprint would eliminate or slash funding for a wide range of programs and departments. These include the Environmental Protection Agency, the National Endowment for the Arts, the National Endowment for the Humanities, the Corporation for Public Broadcasting, the Corporation for National and Community Service, the National Institutes of Health, and the Community Development Block Grant.
While this proposal is not an appropriations bill—Congress will weigh in before the process gets to that point—it signals a major shift in priorities from the previous administration. Organizations may face funding cuts from other legislation, as well. For instance, the American Health Care Act (the withdrawn bill to repeal and replace the ACA) would have barred organizations that provide abortions, such as Planned Parenthood, from receiving Medicaid payments for one year. Though this bill did not receive a vote, President Trump signed legislation in April that repeals the Obama-era Title X mandate instructing states to distribute federal funding to family planning centers without restrictions. These proposed threats and concrete changes underscore the importance of nonprofit adaptability in the current political climate.
Likewise, healthcare institutions need to be ready to respond to changes to the ACA. A repeal is still in the works, and a court case before the DC Circuit that will be decided in May could also significantly impact healthcare coverage. If the healthcare market is disrupted by this case or a future ACA repeal, millions could lose coverage, increasing pressure on the safety-net system and intensifying the demand for nonprofit services. In the face of these looming challenges, healthcare institutions should emphasize philanthropy and explore how to enhance or expand services for vulnerable populations.
Leverage political changes to motivate action—as appropriate
Given the threats to a wide variety of nonprofits and their missions, affected organizations can channel these challenges into calls to action. This means motivating supporters to make gifts, volunteer, contact their legislators, and spread awareness. In perhaps the most striking example, the ACLU received $24 million in online gifts during the weekend President Trump’s first immigration ban went into effect.
Organizations with missions related to healthcare, social justice, immigration, arts and culture, environment, and human rights should explore how they can use current events to activate and energize their bases. For instance, environmental organizations that focus on threatened causes—from localized projects like the Chesapeake Bay cleanup to issue-oriented efforts such as reducing carbon emissions—should leverage increased national interest in environmental protection.
As Kate Roosevelt, Executive Vice President at Campbell & Company, explains, “While effective messaging is always critical, at this juncture, supporters of threatened causes already feel tremendous urgency. The most important step for nonprofits to take is simply to make the case and ask for support. Then, they need to begin testing strategies to retain donors.”
For organizations that are not newly at risk, it’s best to stay true to mission rather than attempt to capitalize on the urgency of other sectors. As we emphasized in our January advice to nonprofit leaders, successful organizations achieve results because their missions speak to people's hearts, and they far outlast the length of any presidency.
Advocate for the nonprofit sector
With the Trump administration and Congress poised to take on tax reform, the budget process, and other pivotal legislation, all organizations and their supporters need to speak up for the nonprofit sector. “The value of nonprofits, their missions, and the constituents they serve should be front and center as our politicians make important decisions at the local, state, and federal levels,” says Julia McGuire, Executive Vice President at Campbell & Company. “Build connections with lawmakers and educate them on the impact of your organization.”
To forge these relationships, set up meetings when lawmakers are in their home districts, bring volunteer advocates to share personal stories, invite elected officials to events, or visit Washington, DC to meet with Congress members or their staff. While meeting with a lawmaker may be ideal, Congress members’ legislative assistants carry significant influence in writing and negotiating policy with their counterparts in other congressional offices.
Without a personal connection, contacting a Congressperson directly is rarely the best way to set up a meeting. Instead, reach out to a Congressperson’s scheduler, administrative assistant, or legislative assistant who works on forming policies related to your organization. Building an understanding of how decisions are made and who to contact can be a tricky first step, especially because every congressional office operates differently. But once a relationship is built, use it to advocate on a consistent basis. Don’t wait until a dire situation arises to reach out—effectively advocating for the nonprofit sector is an ongoing commitment.
As nonprofit organizations continue to navigate the political landscape, adaptability will be key to dealing with unanticipated challenges that crop up along the way. We will be here to answer questions, provide guidance, and support nonprofits throughout the next 100 days and beyond.