President-elect Donald J. Trump and Congress could change the calculus on a host of issues of critical importance to the nonprofit world. As the nation waits for word on whether Republicans will have full control of Congress — or whether Democrats will control the House of Representatives — we preview key questions and what’s at stake.
Should all Americans get a tax deduction for their charitable gifts? Only about one in 10 taxpayers itemizes their taxes, which means most donors get no tax break from their giving. That is a contributing factor in the decline in the number of everyday donors — an issue that draws bipartisan concern, as the mega-wealthy increasingly set the tone in the philanthropic sector. During the pandemic, non-itemizers were allowed to deduct a small amount. Independent Sector and a broad coalition of advocacy organizations will push to see that provision revived and expanded when Congress rewrites federal tax policy next year.
Is the 1969 law governing foundations still effective? The 1969 Tax Reform Act imposed a mandatory payout rate for the first time, amid concern that wealthy individuals were hoarding wealth in foundations without paying taxes. The current environment — full of concern about the influence of dark money and massive endowments — has again sparked populist ire.
Some experts believe Congress may impose new regulations on foundations next year, when expiring tax cuts are expected to spark a re-examination of the tax code. Vice President-elect J.D. Vance, a critic of large foundations and private colleges that he considers liberal, once proposed requiring institutions with endowments worth more than $100 million to pay out 20 percent of the value each year. Other critics have called for taxing some forms of nonprofit revenue or endowments and examining whether certain types of charities, such as nonprofit hospitals, are deserving of tax-exemption. Congress will also look to rein in foreign donors who move funds between foundations, 501c(4)s, and political action committees.
Should donor-advised funds be forced to pay out assets annually? Donor-advised funds are a fast-growing giving vehicle that can function as a mini-foundation. They’re managed by registered charities, including community foundations and the charitable arms of asset-management companies.
Unlike private foundations, DAFs don’t have an annual payout requirement — prompting concern about the warehousing of assets that would otherwise flow to operating charities. Although the Internal Revenue Service has explored tightening restrictions on DAFs, Congress would have to pass legislation to impose payout requirements — something that DAF critics will likely push for in 2025.
Will the White House focus on the nonprofit world? The nonprofit sector is the third-largest work force in the country, but the White House has no office focused exclusively on its well-being. The White House Office of Faith-Based and Neighborhood Partnerships, established in 2001 by President George W. Bush, still exists but seems to morph with every new administration.
Independent Sector continues to push for someone in the executive branch to work with federal agencies to help ensure a healthy nonprofit sector. “That is something that we’ve been trying to advance by way of executive order and legislation,” says Jeffrey Moore, Independent Sector’s chief strategy officer.
Trump’s opposition to progressive elements of the sector makes such an addition unlikely.
What is the future of national service? Since George H.W. Bush’s “points of lights” program, nearly every president has promoted some form of national service. Trump was a notable exception during his first administration, when he proposed budgets that would have eliminated or sharply cut AmeriCorps. This summer, the House proposed a 64 percent cut next year to spending levels, although the Senate proposed a modest increase. States have been doing their part: Many have started new programs that include incentives — ranging from tuition waivers to hiring preferences — that make participation in national service more rewarding. But any federal cuts may impact the already meager living allowance AmeriCorps members receive.
