How Nonprofits Can Prepare for a Second Trump Presidency
With a second Trump presidency on the horizon, nonprofit leaders and boards are likely considering how to sustain their missions in an uncertain political landscape as well as weighing the potential impacts on their organizations and the communities they serve.
This blog aims to offer a clear roadmap for nonprofit organizations concerned with potential political changes. The key is resilience, preparedness, and adaptability: by anticipating challenges and adapting strategies, your nonprofit can continue to make a positive difference.
During his first term, the nonprofit sector navigated changes in tax policy, funding cuts, and increased demand for advocacy and social/human services. Now, with Project 2025, a comprehensive policy plan from the Heritage Foundation and over 100 conservative organizations, nonprofits must assess how this agenda for a second term could reshape their operational and funding landscape, as well as demand for services.
While some nonprofits thrived during Trump’s first term, others faced challenges due to shifts in tax policies, regulatory changes, and reduced government funding. In particular, the impacts of the Tax Cuts and Jobs Act of 2017, combined with the economic downturn following COVID-19, led many nonprofits to rethink how they secure funding and maintain operational stability.
In the sections that follow, Common Great offers practical strategies for nonprofit executive directors, fundraising teams, and marketing staff to safeguard your organizations in the face of possible federal policy changes, decreased government funding, and evolving donor behaviors.
What happened in the nonprofit sector from 2017 to 2020?
We can’t predict the future, as much as we wish we could. But we can look at the impact of Trump’s first term on the nonprofit sector. For example:
Reduction in Donor Tax Incentives: The 2017 Tax Cuts and Jobs Act doubled the standard deduction, significantly reducing the number of Americans itemizing deductions from 30% to 10%. Consequently, many donors lost the tax incentive to give, and some nonprofits saw a drop in smaller individual donations.(Source: Knowledge at Wharton). The Tax Policy Center initially estimated that the 2017 tax act could decrease charitable giving by between 4.5% and 9%, amounting to about $13.4 billion to $26.1 billion (Source: Alford Group).
Increased Donations to Advocacy Organizations: Advocacy and civil rights organizations, such as the ACLU, witnessed a surge in donations following the 2016 election. For example, the ACLU received approximately $7.2 million from individual 120,000 donations within five days of the election—highlighting the potential for mission-driven organizations to mobilize donor support during politically charged times (Source: Knowledge at Wharton).
Government Funding Concerns: Proposed budget cuts for social services during Trump’s first term created funding uncertainty for nonprofits reliant on federal support. This heightened the importance of financial resilience and diversified funding streams (Source: Urban Institute).
Additionally, during his first presidency, the nonprofit sector experienced several notable giving trends. Nonprofits reported that fewer, often higher-income donors were providing the bulk of contributions (Source: Philanthropy Roundtable).
Overall Increase in Charitable Giving: The figures below show a consistent annual growth in the total dollar amount donated to nonprofits during this period (Source: Giving USA)
Decline in the Number of Donors: While the total dollar amount increased, the number of individual donors declined (Sources: Nonprofit Source, Candid), as shown in the chart below. This decline suggests that while overall donations grew, they were increasingly concentrated among fewer, often higher-income, donors. This study is only conducted every two years.
Growth in Donor-Advised Funds (DAFs): Donor-advised funds saw significant growth during this period. The number of DAF accounts also grew, indicating a rising preference for this giving vehicle among donors (Source: NP Trust):
2017: Contributions to DAFs totaled $29.23 billion, a 16.5% increase from 2016.
2018: Contributions rose to $37.12 billion, a 27% increase from 2017.
2019: Contributions reached $38.81 billion, a 4.5% increase from 2018.
2020: Contributions were $47.85 billion, a 20.6% increase from 2019. This was an all-time high.
In summary, during Trump's first term, the nonprofit sector experienced growth in total charitable giving, a decline in the number of individual donors, increased use of donor-advised funds, and notable impacts from tax policy changes.
The Elephant in the Room: Project 2025
Project 2025, authored largely by the Heritage Foundation, is a roadmap for a conservative federal government restructuring, with substantial changes proposed for social welfare, civil rights, and regulatory policies. For nonprofit leaders, understanding these potential shifts can help organizations prepare and adapt. Key elements include:
Cuts in Federal Funding: Project 2025 proposes reducing government spending and eliminating or restructuring several federal agencies, like the Department of Education. This could affect nonprofits reliant on federal grants, especially in areas like housing, healthcare, education, and social services. Diversifying revenue streams will be crucial to mitigating potential funding gaps.
Challenges to Diversity, Equity, and Inclusion (DEI) Initiatives: The initiative includes proposals to end DEI programs within federal agencies. This may influence nonprofits that focus on social justice and equity, as DEI work may face reduced funding and institutional support.
Increased Demand for Services: Rollbacks in federal welfare programs could increase the burden on nonprofits to provide essential services. This may particularly affect organizations serving marginalized communities, who may face heightened needs amid reduced governmental support.
Shifts in Regulatory Environment: Proposed changes under Project 2025 aim to reduce regulations, including environmental and labor protections. Nonprofits involved in environmental advocacy or workers' rights may need to adjust their strategies to operate within a less-regulated landscape.
Additionally, there is currently a Republican-sponsored bill seeking to increase federal power over nonprofits. At the time of writing this (11/11/24), the House of Representatives is preparing to vote on H.R. 9495, called the Stop Terror-Financing and Tax Penalties on American Hostages Act. The bill would provide tax relief for U.S. nationals and their spouses who are unlawfully or wrongfully detained or held hostage abroad but also includes legislation to terminate the tax-exempt status of "terrorist-supporting" groups. H.R. 9495 has long been on the radar of the American Civil Liberties Union:
“[This bill] would give the incoming Trump administration a new tool they could use to stifle free speech, target political opponents, and punish groups that disagree with them. This broad, vague bill is an open invitation for abuse.” (Source: ACLU)
Ryan Costello, policy director at the National Iranian American Council Action, which opposes the law, shared:
"It basically empowers the Treasury secretary to target any group it wants to call them a terror supporter and block their ability to be a nonprofit. So that would essentially kill any nonprofit's ability to function. They couldn't get banks to service them, they won't be able to get donations, and there'd be a black mark on the organization, even if it cleared its name." (Source: The Intercept)
Project 2025 and bills like H.R. 9495 are bad news for the nonprofit sector. Reduced federal spending, restructuring agencies, deregulation, challenges to DEI initiatives, coupled with the ever increasing demand for services offered by nonprofits, will result in unprecedented challenges for the nonprofit sector.
Update to this blog: On 11/12/2024 the House of Representatives voted on H.R. 9495. It did not pass. (Source: ACLU)
Update to this blog: On 11/21/2024 the House of Representatives voted for a second time on H.R. 9495. It passed the House and will be voted on in the Senate. (Source: Congress)
Seven Strategies for Nonprofit Resilience
Nonprofit leaders can take proactive steps to protect their organizations. Here are seven strategies that can help your organization stay strong and resilient, regardless of federal policy shifts or funding reductions.
Diversify Revenue Streams: Nonprofits heavily reliant on government funding may face vulnerabilities during federal cutbacks. Diversifying funding sources can help reduce these risks. Explore alternative revenue options such as corporate partnerships, foundation grants, and earned income models. Nonprofits that develop a strong individual giving program also tend to fare better in economic downturns, as they are less dependent on any single funding source.
Build Financial Reserves and Strengthen Financial Management: Establishing a financial reserve can act as a cushion during times of reduced funding or increased expenses. Nonprofits should aim to maintain at least three to six months of operating expenses in reserve. Strong financial management practices, including transparent reporting and budgeting, can increase donor trust and provide stability. This financial cushion is especially helpful in times of economic uncertainty or policy-driven funding fluctuations.
Strengthen Advocacy and Mobilize Grassroots Support: If a new administration introduces policies that impact your organization’s mission, advocacy can play a crucial role. Mobilizing grassroots support enables organizations to amplify their voice on critical issues. Educate supporters about policy changes relevant to your cause, and create accessible ways for them to get involved. Joining coalitions with similar organizations can also broaden your reach and strengthen advocacy efforts.
Enhance Donor Retention through Targeted Engagement: With fewer people donating but with donations growing in dollar amount, nonprofits should focus on deepening relationships with existing supporters. Implement strategies to improve donor retention, like consistent communication and meaningful engagement. Monthly giving programs are especially effective, providing a steady stream of funds and increasing donor loyalty.
Invest in a Strong Digital Presence: The rise of online giving is a trend nonprofits can leverage to enhance revenue streams. Ensure that your website’s donation platform is user-friendly and mobile-optimized. Data-driven campaigns can help you better understand your donors’ preferences and behaviors, allowing you to tailor your outreach and improve engagement.
Prepare for Policy Shifts and Evaluate Contingency Plans: Regularly monitor federal policy changes that could affect your funding or programs. Consider potential scenarios and adjust your strategies accordingly. Scenario planning is a proactive way to be prepared for shifts in social program funding or tax incentives that could affect nonprofit donations.
Cultivate Strong Community Relationships: Local partnerships with community organizations, government bodies, and volunteer groups provide additional layers of support. Building local partnerships may also open up new funding opportunities and help expand your reach. During times of financial strain, a dedicated community base can be an invaluable source of support.
Final Thoughts: Strength Through Adaptability
A second Trump presidency will bring continued shifts in policies and funding availability for nonprofits, underscoring the importance of adaptability and resilience. By diversifying funding, investing in digital engagement, strengthening advocacy, and preparing for policy changes, nonprofits can better protect your missions and continue serving your communities. The nonprofit sector has shown remarkable resilience in times of change, and by implementing the strategies shared above, your organization can sustain its impact, regardless of the political landscape.
This blog post was authored by Common Great Senior Consultant, Kirsten Rogers. Learn more about Kirsten here and click here to book a Power Session with her. A Power Session is a 60-minute, on-demand meeting that can be used to address your nonprofit’s priorities, ask questions, discuss barriers, and more.
