The reelection of Donald Trump as President and control of the U.S. House and Senate by Republicans are anticipated to usher in changes that could financially impact the not-for-profit sector. Whether and to what extent your organization will be affected will depend on your mission, funding sources and other factors. But in general, you may want to keep an eye on the following issues.
Exempt status of “terrorist supporting organizations”
On Nov. 21, 2024, the Republican-led House passed legislation that would enable the U.S. Treasury Department to revoke the tax-exempt status of nonprofit organizations that it claims support terrorism. The Council on Foundations, Independent Sector, National Council of Nonprofits and United Philanthropy Forum have formally opposed the bill, referring to it as the “nonprofit killer.” They say it would give the Secretary of the Treasury unilateral discretion to designate nonprofits (including humanitarian charities and labor unions) as “terrorist supporting organizations” without having to share evidence of such activities. Once Republicans take over the Senate and the White House, the bill could easily pass into law; after which, accused nonprofits would be given 90 days to appeal any “terrorist supporting” designation.
Spending cuts and funding opportunities
President Trump’s campaign promises to slash spending could also affect funding availability for nonprofits that depend on federal grants and contracts. Making the situation more challenging, organizations that provide social and other essential services could experience more demand if vulnerable people lose food and housing assistance benefits. Environmental, social justice, civil liberties charities and organizations that prioritize diversity, equity, and inclusion (DEI) initiatives also are expected to encounter fewer resources and increased government scrutiny. On the other hand, certain faith-based organizations may receive greater support under the new administration. This could enable them to provide more assistance to such groups as the homeless, food-insecure, and formerly incarcerated at the community level. Educational nonprofits whose programming aligns with Trump’s priorities — including school choice, STEM education and vocational training — could also receive new funding and support.
Tax cuts and extensions
The higher standard deduction under Trump’s Tax Cuts and Jobs Act (TCJA) is scheduled to expire after 2025, but it is likely to be extended or made permanent. Why is this relevant for a nonprofit? With the increased standard deduction under TCJA, fewer taxpayers itemize their deductions. Since charitable contributions are typically deducted through itemizing, this means many people who would have previously deducted charitable contributions may no longer be able to, as the standard deduction is now more advantageous.
- Before TCJA: Taxpayers could claim charitable deductions by itemizing. The limit was 50% of AGI for cash donations to public charities.
- After TCJA: The increased standard deduction means fewer taxpayers itemize. For those who do itemize, the limit for cash donations to public charities is increased to 60% of AGI.
Here is a brief illustration of TCJA’S status and its potential impact.
| Aspect | Before TCJA | After TCJA |
|---|---|---|
| Standard Deduction | Lower, so more taxpayers itemized | Higher, leading to fewer taxpayers itemizing |
| Cash Donations Deduction Limit | 50% of AGI | 60% of AGI (temporary for 2018–2025) |
| Non-Cash Donations Deduction Limit | 30% or 50% of AGI, depending on the type | No change, remains the same |
| Charitable Contributions by Non-Itemizers | Allowed if itemizing | No deduction unless itemizing |
In summary, for most taxpayers the increase in the standard deduction means fewer people itemize, so they may not be able to deduct charitable contributions. For high-income earners or those who still itemize the higher 60% cash donation limit provides more flexibility in maximizing charitable deductions.
Plan now
If you are a nonprofit organization that depends, even in small part, on federal funding or if your organization has a mission that makes you vulnerable to political scrutiny, speak to your accounting professional and start planning now. Note that additional tax legislation could affect your ability to raise funds and fund programs. New state, local and private foundation grants may become available to you or there may be other untapped sources of revenue and opportunities that could cut your expenses. Stay updated about changes in policy and, should you receive notice from the IRS or another government agency proposing an investigation into your finances or activities, contact your accounting professional or legal counsel for guidance.
This material has been prepared for informational purposes only, and is not intended to provide or be relied upon for legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.
