Nonprofits Brace for Big Changes Under Trump Administration
Charity and foundation leaders pledge to ratchet up advocacy and public-policy work to protect the charitable-giving incentive if Congress takes up a tax overhaul, as expected. Another serious concern is federal spending — cuts to health care, housing, education, and child and senior care could create gaping chasms of support for nonprofits, especially those with government contracts.
“We are currently in the process of trying to assess the landscape of how we could be impacted, one by a President Trump that actually lives up to all the promises he made, or two, a Republican-controlled Congress that may want to do even more,” says Lorri Jean, chief executive of the Los Angeles LGBT Center, which offers health services and gets about a third of its $97 million annual budget from government.
It’s not just charities. Spending cuts would heap pressure on foundations to fill those chasms, even as they could face new scrutiny regarding their endowments and “in perpetuity” life spans.
Perhaps just as important, nonprofit leaders are focused on a potential change to strict limits on partisan politics that have been in place since the 1950s. Some worry that will lead to an influx of “dark money” and pressures from Republicans and Democrats that would make it impossible for them to focus on their missions.
Meanwhile, the election results have prompted soul-searching at foundations over whether they have badly underestimated the needs of people in the middle of the country. Maxwell King, president of the Pittsburgh Foundation, calls on his colleagues to get closer to the ground. “We must meet people where they are struggling, and we must examine how we have been engaging the poor and working class in developing our programs,” he says.
One truth that not even a profoundly unconventional president can shake? As the stock market goes, so goes giving. Adam Meyerson, president of the Philanthropy Roundtable, says that if Mr. Trump can keep his pledge to double economic growth, “that will be great for charitable giving.”
In the sections that follow, we explore critical issues on the minds of nonprofit leaders as sweeping political change unfolds in Washington.
Taxes and the Charitable Deduction
Donald Trump’s administration and congressional Republicans are likely to push for a sweeping tax overhaul in 2017 — and the plan they propose could have big implications for nonprofits.
It’s likely some members of Congress will call for limiting the charitable tax deduction, a move many in the nonprofit field predict would reduce rich individuals’ largess. Tax cuts for wealthy and middle-income families that could affect donor incentives are also likely.
So far, Mr. Trump has sent mixed messages about his view of the deduction for donors. The tax plan he touted during the campaign calls for capping all write-offs — including for charitable donations — at $100,000 for single people and $200,000 for married couples. But some senior advisers to the president-elect’s campaign said they did not want to limit giving incentives, says Steve Taylor, counsel for public policy at United Way Worldwide and a former congressional aid.
Mr. Trump’s position will become more clear when he releases his first budget in February or March, says Sandra Swirski, executive director of the Alliance for Charitable Reform, a group that represents grant makers and donors.
No matter what Mr. Trump’s views are, nonprofit leaders appear to have some powerful congressional allies who could help guard against limiting the charitable deduction.
Rep. Kevin Brady — chairman of the House Ways and Means Committee, which has jurisdiction over tax legislation — said at a recent Bloomberg BNA lunch that House Republicans would preserve the deduction and were “looking to see if there’s a way to unlock more charitable giving.” The Texas Republican drafted a blueprint for a tax overhaul in June that appeared to maintain the charitable deduction.
“We certainly welcome that expression of support from the chairman,” says Geoffrey Plague, vice president of public policy at Independent Sector, which advocates for nonprofits.
Mr. Plague says Independent Sector and other charity groups will continue their call for extending tax breaks to those who do not itemize their donations. Mr. Brady’s recent comments indicate some congressional support for that move, he says.
Ms. Swirski expresses confidence that the Senate will also protect charitable deductions. She says Utah’s Orrin Hatch, chairman of the Finance Committee, has expressed support for charitable giving incentives in the past.
Mr. Plague says charity leaders will also track changes to the standard deduction, which allows people to subtract a set amount from their taxable income without itemizing. If people are able to save more on their taxes by opting for the standard deduction, fewer people will itemize, eliminating an incentive to give, he says.
“It’s part of the reason we have been talking to lawmakers and their staffs about extending the deduction for all taxpayers irrespective of their filing status,” he says.
Republicans are also likely to cut income-tax rates. It’s unclear how large the reductions might be, but experts say tax cuts would reduce charitable donations from the wealthy in the short run because giving would become less valuable from a tax perspective. In the long term, more money in wealthy donor’s pockets might increase giving.
Nonprofits that serve poor communities should also be paying attention to proposals that affect low-income people, like any changes in tax credits for renters or for child care, says Mr. Taylor of United Way.
Many social-service groups fear that the federal well will run dry. Nonprofits that serve poor populations or that directly receive federal grants face a period of austerity if Donald Trump makes good on his promise to reduce domestic spending.
“This election has really upended what a lot of affordable-housing groups were expecting over the next four years,” says Sarah Mickelson, director of public policy at the National Low Income Housing Coalition. She isn’t the only nonprofit leader bracing for cuts.
On the campaign trail, Mr. Trump pushed a “penny plan” that would reduce nondefense domestic spending by 1 percent each year for 10 years. So-called entitlements, such as Medicaid, Medicare, and Social Security, would be excluded from the required cuts. He also proposed ending a budget detente, which lasted through much of President Obama’s two terms in office, in which caps on federal spending were apportioned equally between defense and nondefense programs. Mr. Trump has said that he would lift the caps on military spending.
As a result, every other aspect of domestic federal spending faces potentially deep cuts, including food stamps, housing aid, and federal support for education. The Committee for a Responsible Federal Budget calculated that Mr. Trump’s plan would reduce spending by $1.2 trillion over 10 years.
Cuts that deep would make recent federal budgets “seem like the New Deal” in comparison, says Tom Sheridan, who runs a lobbying firm that represents nonprofits.
Particularly worrisome, he believes, is the prospect of turning Medicaid, the health-care program for the poor, into a block grant. Under such a scenario, pushed by the Trump campaign, the federal government would stop providing states with a fixed percentage of their Medicaid costs and instead would provide a lump-sum payment.
Sending states block grants would give governors an incentive to kick people off the rolls, says Kay Toran, president of Volunteers of America’s Oregon office.
“You’re really going to put people in harm’s way,” she says, adding that the application of Medicaid policy under block grants would vary greatly from state to state.
Perhaps the biggest potential cut in federal spending is Mr. Trump’s proposal to end the Affordable Care Act, commonly known as Obamacare.
In California, nearly 5 million people gained access to health care after the act was passed, according to Sandra Hernández, president of the California Health Care Foundation.
In a letter posted on the group’s website in the days following the election, Dr. Hernandez rallied public officials, health-care leaders, and consumer advocates to stand firm against changes in the law.
“With so many Californians using this new coverage to gain health and financial security, we must not — we cannot — roll back the clock,” she wrote.
Gutting Obamacare could have a ripple effect, other nonprofit leaders warned. People whose insurance is dropped would find it difficult to afford necessities, says Alison Weir, chief of policy and research for the National Diaper Bank Network, a group that works to provide diapers to families in need.
“The fact that diapers are an issue shows that our safety net has more and more holes in it,” she says.
Steve Taylor, counsel for public policy at United Way Worldwide, thinks it’s inevitable Obamacare will be scaled back.
“We won’t be able to stop that train, but we may be able to mitigate some of the damage,” he says.
Mr. Taylor also worries about spending cuts, particularly in early-childhood-education programs.
However, he says lawmakers will start feeling tremendous pressure from their constituents when they produce actual legislation to reduce spending.
“In the abstract, big across-the-board cuts sound good politically,” he says. “In application, they can be really hard. When representatives start working at that local level, they can get reluctant to actually execute on the cuts.”
Despite tough campaign rhetoric on domestic spending, many social programs could continue to enjoy strong support from both parties in Congress, some nonprofit leaders predict. Mark Shriver, president of the Save the Children Action Network, for instance, has high praise for Rep. Tom Cole, an Oklahoma Republican. As chairman of the House Appropriations subcommittee that oversees education spending, Mr. Cole helped push for increased support for pre-kindergarten programs.
“Congressman Cole has been a strong advocate for early-childhood education,” Mr. Shriver says. “I hope and trust that he’s going to continue to invest in that area.”
Groups that support veterans could also see increased spending — Mr. Trump promised to boost federal support in that area.
The president-elect has also signaled that he’d like Congress to pass a broad infrastructure spending bill to rehabilitate the nation’s bridges, tunnels, and highways.
Nonprofit leaders think a big transportation bill, which could gain wide bipartisan support on Capitol Hill, might offer a tactical opportunity to gain federal support for other priorities. For instance, Ms. Mickelson believes affordable-housing language could be tucked into such a bill.
Still, those opportunities are limited and do little to assuage budget fears among many nonprofits.
Says Ms. Mickelson: “This is the worst of times for housing affordability.”
Limits on Nonprofits' Political Activities
To a roomful of Christian “values voters” in September, Donald Trump joked that repealing the so-called Johnson Amendment was his only hope for getting into heaven. Nonprofit leaders are about to find out how badly he wants to walk through those pearly gates.
The amendment, a change in the tax code enacted in 1954 at the urging of then-Sen. Lyndon Johnson, prohibits tax-exempt organizations from endorsing or campaigning for political candidates. It’s why a priest, rabbi, or imam is permitted to tell a congregation to vote but not who or what to vote for.
Many conservative church leaders say the law impinges on free expression and should be amended to allow for minimal political speech in the course of normal activities, like sermons. Opponents of changing the law say doing so would dramatically alter how nonprofits raise and spend money and lead to a proliferation of churches and 501(c)(3) groups being created with purely political aims.
It’s difficult to gauge how hard the president-elect will push for removing or changing the law, but it was a key promise he made to win over the Christian right. “I think [Mr. Trump] takes it seriously,” said Barry Lynn, executive director of Americans United for the Separation of Church and State, who opposes amending the law.
Mr. Lynn noted that a bill entitled the Free Speech Fairness Act, introduced in the House of Representatives in September, would have allowed churches and charities to engage in political speech during “ordinary” activities. It attracted few backers, but Mr. Lynn thinks there remains some latent support in Congress for similar moves.
Some worry that if 501(c)(3) nonprofits and churches are given even a little room to be political, they’ll push boundaries and divert money from their stated missions into partisan campaigning.
“If you make de minimis political activity legal, people are likely to push it further in ways that we haven’t yet seen,” says Noah Bookbinder, executive director of the progressive government-accountability group Citizens United for Responsibility and Ethics in Washington.
That’s been the experience with 501(c)(4) “social welfare” organizations, experts say. These groups, given the green light to engage in limited political activity by the Internal Revenue Service, have become major conduits for anonymous political donations in recent years. Their growth has been driven in large part by the Supreme Court’s 2010 Citizens United decision, which allowed corporations and unions to spend unlimited amounts for political purposes.
Should the Johnson Amendment be altered, Mr. Lynn says, charities and churches would be highly attractive to political donors because their contributions, on top of being anonymous, would also be tax-deductible — a benefit not currently offered for direct campaign contributions. It would be particularly hard to track political spending by churches, Mr. Lynn contends, because they do not have to file informational Form 990s to the IRS.
Still, Christian leaders insist that limiting political speech to “regular activities” would safeguard nonprofits and churches from becoming havens for “dark” campaign money.
“Amending the Johnson Amendment in this way, and not simply repealing it entirely, relaxes the speech restrictions on all Section 501(c)(3) nonprofit entities and allows them the breathing room to communicate how candidates have addressed their issues,” Tony Perkins, president of the conservative Christian group the Family Research Council, wrote in a September statement in support of the Free Speech Fairness Act.
Mr. Perkins endorsed Mr. Trump for president and invited him to speak at the 2016 Values Voters Summit, an annual conservative gathering hosted by the Family Research Council, at which the then-candidate said he’d “knock out” the Johnson Amendment.
Others remain wary about amending the law. It’s unlikely the IRS, which regulates tax-exempt organizations, would be an effective watchdog of political activity, says Roger Colinvaux, a professor at Catholic University of America’s Columbus School of Law who specializes in nonprofit tax issues. It would be difficult to define what “regular” activities are, and the IRS may hesitate to apply subjective standards, he said.
The agency is also reeling from budget cuts and the controversy over alleged targeting of Tea Party groups for extra scrutiny when they applied for tax-exempt status. And the IRS rarely takes enforcement actions against churches, even when they openly flout current laws around political activity, Mr. Colinvaux says: “It’s already hard to police.” — Timothy Sandoval
Women and Minorities
President-elect Donald Trump’s campaign rhetoric regarding immigrants, Muslims, and women dismayed many nonprofit leaders who work on behalf of those populations. With Mr. Trump taking office in January, they are scrambling to develop strategies to cope with what they see as a track record of hostility toward the vulnerable and policy changes that may follow as a result.
“We’re just trying to brace ourselves for the worst and hope it doesn’t come to that,” says Patricia Ortiz, program director at the Esperanza Immigrant Rights Project in Los Angeles.
Advocating against “hateful” language is a top priority. Groups including Human Rights Campaign, the American-Arab Anti-Discrimination Committee, and United We Dream have denounced what Rabbi Jonah Dov Pesner, director of the Religious Action Center of Reform Judaism, called “the scapegoating and fear-mongering” that took place during the campaign season.
Finding alternative sources of revenue is also on the agenda. Government money accounts for a large proportion of many nonprofits’ budgets. Leaders worry that the new administration will cut spending that benefits immigrants, women, and racial minorities. Leaders at Esperanza are asking foundations and individual donors for money in case government contracts for its community education programs are slashed, Ms. Ortiz says.
Some charities that serve women and minority groups — the Ms. Foundation for Women, the Council on American-Islamic Relations, and the National Immigration Law Center among them — started to receive unsolicited donations immediately after the election from concerned supporters.
It is unclear if the surge in giving will last, and some nonprofit leaders fear a backlash. Ken Martinet heads Catholic Big Brothers Big Sisters, which mentors mostly Latino children in Los Angeles. He said he and his colleagues have been stunned by stories from their young clients about harassment. They worry the rancor may extend to adults and that donors might “take umbrage at our services to this largely Latino population — undocumented or not — and stop their support of our work.”
Boosting efforts to serve at-risk populations is another goal for nonprofits in the wake of Mr. Trump’s victory. Staff members at Esperanza are contacting former clients to encourage them to complete the requirements for naturalization, with interns reviewing years’ worth of case files to identify eligible people.
“Depending on what happens, it could very well be a big change in our programs,” Ms. Ortiz said. “If he follows through on all the promises he made, with the people he’s surrounding himself with on the cabinet, it doesn’t look very promising.”
At other charities serving populations maligned by candidate Trump, the election has simply increased leaders’ commitment to ongoing advocacy and program work. Robert McCaw, manager of the government-affairs department at the Council on American-Islamic Relations, doesn’t foresee a stark change in strategy so much as a “doubling down” on the group’s existing advocacy for reform of federal guidelines on racial profiling and surveillance that targets Muslims.
Anticipating battles ahead, the organization is keeping some of its plans private for now, Mr. McCaw said: “You don’t put all the cards on the table.”
Struggling Rural Americans
Rural voters sent a clear message when they voted nearly two-to-one for President-elect Donald Trump: They are tired of being overlooked.
It was a repudiation of institutions many in the heartland consider elitist and out of touch, says Dee Davis, president of advocacy group the Center for Rural Strategies. Corporations, the media, and the government are part of that equation; so, too, are foundations and nonprofits, which he says have largely ignored rural concerns.
While nearly a fifth of the U.S. population lives in rural areas, a Department of Agriculture study last year found that about 6 percent of grants from the nation’s largest 1,200 foundations went to rural health, development, and agriculture programs.
In the 1960s, Mr. Davis says, philanthropic support began to pour into large cities. With good reason: Urbanites, especially African-Americans, suffered disproportionately from poor schools, crime, and health problems. In the past decade that philanthropic trend intensified, leaving rural communities with primarily white populations feeling left out as they faced worsening social and economic ills.
Clearly, there is a great need for charitable aid well outside urban population centers. Using census figures, the Agriculture Department found that in each region of the country, poverty rates were higher in nonmetro areas than in metro areas. In the South, the gap is significant: The poverty rate in rural areas is 21 percent, six points higher than in cities.
But larger foundations are far less active in rural communities, according to Aaron Dorfman, president of the National Committee for Responsive Philanthropy — they have a bias against working in the countryside, or find committing resources in remote areas inconvenient. And because many don’t have a history of rural work, they may lack reliable partners outside of cities.
Another hurdle: Grant makers that want to evaluate progress often get more bang for their buck in densely populated areas, where the benefits of a particular program can be more easily measured.
“The obsession of many funders with metrics and measurement [is] part of the problem,” Mr. Dorfman says.
So what now? Mr. Davis and other nonprofit experts believe foundations need to commit to rural areas, helping build networks of organizations that serve remote communities and giving their residents a greater sense of hope.
Mr. Dorfman’s group is conducting interviews with more than 100 foundation and nonprofit leaders from the South. The goal of the exercise, which should be complete next spring, is to determine how philanthropy can help those in need in that region. A big part of that, he says, is taking a close look at urban versus rural grant making.
Janet Topolsky, director of the Aspen Institute’s Community Strategies Group, is also looking to improve foundation work in rural America. Early next year she will convene a group of smaller, “place-rooted” foundations as the Rural Economic Development Philanthropy Network to discuss ways to strengthen job creation. The aim is to help smaller grant makers become the “glue” that binds economic-development efforts. That, she says, could go a long way toward attracting outside help from national foundations.
“This is a great opportunity to increase capacity and sharpen strategy,” she says.
But shifting philanthropic priorities geographically because rural voters flocked to Mr. Trump would be a misreading of the election results, according to Amy Liu, director of the Metropolitan Policy Program at the Brookings Institution in Washington, D.C.
She notes that voter-participation rates among blacks declined, an indication that many African-Americans in urban areas felt both candidates neglected their priorities.
“They didn’t see themselves in this agenda,” she says. “Part of the failure of this election is we didn’t respond to really hard-core, longstanding racial injustice in cities.”
Ms. Liu says foundations should concentrate on the broader issue of economic insecurity, regardless of whether it is felt by someone who drives a pickup truck or rides a city bus.
“I would hate philanthropy to play identity politics,” she says. “This is a moment philanthropy can focus on shared challenges and not divide us any further.”
Refugees, International Aid, and Human Rights
Introduced in an April policy speech, Donald Trump’s “America First” slogan took wing on Twitter, where, adorned with a hashtag, it became shorthand for policies and a mind-set that worry many international groups.
#AmericaFirst was followed by suggestions that, as president, Mr. Trump might block refugees from entering the United States, end some collaboration with the United Nations, and cut foreign aid. “I know the outer world exists,” he told The Washington Post, “and I’ll be very cognizant of that, but at the same time, our country is disintegrating.”
Without details of what’s to come or who will fill key positions in the State Department, some advocacy groups are pointedly challenging Mr. Trump to step back from his campaign positions. Margaret Huang, executive director of Amnesty International USA, said in a statement after the election that the “poisonous rhetoric … must not become policy.”
Michele Alexander, deputy executive director for development at Human Rights Watch, says Mr. Trump’s statements have alarmed supporters of the organization as well as millions of others worldwide whose vision of individual freedoms and an open society clash fundamentally with those of the president-elect and some European leaders. To raise its profile with those individuals, the organization has begun shifting its communication strategy, particularly on social media, where it has one of the largest followings of any nonprofit. “There’s a lot of rhetoric online from the far right, but there’s not a cohesive message from a nonpartisan, rights-based values approach,” says Ms. Alexander.
In the past, Human Rights Watch has been effective in communicating policy views and research to politicians and the media, Ms. Alexander says. “Now we have to speak more broadly about the values system we’re trying to defend.”
Humanitarian groups responding to the election have generally taken a moderate tone. “It’s still early,” says Dara Royer, chief development officer at Mercy Corps. “We’ll watch as things unfold.”
Mercy Corps, which gets most of its revenue from U.S. government grants, won’t change its messaging to donors. “We know our donor base is really diverse, and we’re a nonpartisan organization,” Ms. Royer says. “This isn’t the moment when we need to take any kind of stand.”
Consultant Joy Portella says many international groups will be tweaking their end-of-year fundraising campaigns. “We’ve been talking to some groups about weaving in messaging that’s not overtly political but has a kind of renewed urgency,” she says. “Next year’s going to be critical.”
Sam Worthington, CEO of InterAction, an alliance of international groups, says many organizations in recent years have seen declines in the number of donors (though not in dollars raised). That trend could continue if the country looks more inward under Mr. Trump, he says.
Multinational corporations eager to promote a global outlook may step up to fill the gap, and several bigger nonprofits have diversified fundraising by tapping donors abroad. Still, finding new donors will be hard, Mr. Worthington says. “It certainly won’t happen easily given the political headwinds we’re facing.”