For many nonprofits, President-elect Joe Biden will bring a much-appreciated calming presence to the causes they care about. But a still-divided Congress and the all-consuming task of overcoming the pandemic means charity advocates will need to be both vocal and strategic to get their messages heard in Washington.
With Republicans expected to retain control of the Senate, progressive proposals — not to mention Biden’s plan to ratchet up taxes on the rich — are unlikely to become law. The anticipated blue wave sweeping Democrats into control in Washington failed to materialize, which means that a wide swath of nonprofit organizations — focused on issues such as immigration, the environment, and racial justice — will need to revise their plans and press Biden to help their causes through executive actions and other regulatory changes.
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For many nonprofits, President-elect Joe Biden will bring a much-appreciated calming presence to the causes they care about. But a still-divided Congress and the all-consuming task of overcoming the pandemic means charity advocates will need to be both vocal and strategic to get their messages heard in Washington.
With Republicans expected to retain control of the Senate, progressive proposals — not to mention Biden’s plan to ratchet up taxes on the rich — are unlikely to become law. The anticipated blue wave sweeping Democrats into control in Washington failed to materialize, which means that a wide swath of nonprofit organizations — focused on issues such as immigration, the environment, and racial justice — will need to revise their plans and press Biden to help their causes through executive actions and other regulatory changes.
The American Civil Liberties Union, which is putting special emphasis on racial justice this year, will urge the Biden administration to use local post offices to deliver low-cost banking services in minority neighborhoods. The ACLU also will ask Biden to offer clemency to entire groups of nonviolent drug offenders.
“We anticipate pushing really hard to make changes through the administrative channel, while periodically trying to be opportunistic on legislation,” says Ronald Newman, the ACLU’s national political director.
Biden is seen as a moderate Democrat; plenty of charity leaders preferred the more progressive platforms put forth by other Democratic candidates. Biden is expected to roll back what some view as the most harmful Trump-era policies — he has said on day one, he will rejoin the Paris climate agreement and end the ban on travel to the United States from 13 mostly Muslim countries — but charities say it will take a lot of work to actually move their agendas forward.
With a divided Congress likely and the pandemic still raging, nonprofits will need to be vocal to get their messages across.
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Kevin Douglas, director of national programs at Grantmakers Concerned With Immigrants and Refugees, says that many immigrant-rights groups are hoping not only to end Trump-era restrictions but also to push Biden toward new and inclusive policies for immigrants.
“In the Biden administration, a lot of causes and communities will be looking to advance their issues and concerns,” Douglas says. “It will be hard fought. We will have to work with a sense of urgency to actually have the administration act.”
Fallout From a Stalled Stimulus
The most immediate consequence of the political divide in Washington is that it throws into doubt the size — and the timing — of the next Covid-19 stimulus package. The stimulus is expected to include funds for state and local governments, some of which would trickle down to nonprofits, but Democrats and Republicans remain far apart on how big the package should be. As Congress wrangles over its size, charities around the country have been forced to furlough staff or reduce the length of workweeks to stay afloat.
With a divided Congress likely and the pandemic still raging, nonprofits will need to be vocal to get
their messages across.
Brian Gallagher, president of United Way Worldwide, says it’s unfortunate that providing support to the states has turned into a partisan issue — and that nonprofits are losing out as the package stalls.
“Most public funding is federal money coming through state and local government,” Gallagher says. “As long as states are under water, they’ll continue to cut nonprofit services.”
In New York, organizations have suffered as the state holds back 20 percent of its payments to nonprofits, telling them they’ll only get paid in full on contracts when the state receives substantial federal support. Some New York charities say state and local governments are also holding back financial support from groups that received funds under the Paycheck Protection Program. And many are still unsure whether their PPP loans will be forgiven.
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The myriad uncertainties mean that managing cash flow at many charities “has become like playing three-dimensional chess,” says Doug Sauer, CEO of the New York Council of Nonprofits.
Sauer would like to see Democrats in the House of Representatives accept a smaller package that includes another round of funding for the Paycheck Protection Program — and wait to push for a bigger stimulus until Biden takes office in January.
“Every day that goes by,” Sauer says, “we’re losing nonprofits that provide valuable services.”
Ken Kies, a longtime Washington lobbyist whose clients include nonprofit groups, says he thinks the only way a deal will get done soon is if Biden were to call House Democrats and tell them to accept a smaller package. “It will take Biden asking,” Kies says.
Biden has pushed the two sides to reach a deal but so far continues to back the more than $2 trillion package sought by Democrats. Senate Republicans have offered a scaled-down plan worth just $500 billion.
Expanded Charitable Deduction
Biden’s pre-election tax agenda offered a mixed bag for nonprofits and foundations. He proposed a sharp increase in taxes on those making $400,000 a year or more, which would raise significant revenue — and help offset the huge spending required in the fight against Covid-19. That might put the government on firmer footing to support nonprofits when the pandemic finally ends. But another part of his plan called for sharply cutting the percentage of each gift that wealthy people could deduct on their taxes.
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Arthur Brooks, a professor at Harvard University and former president of the American Enterprise Institute, says the deduction limitation would reduce giving by the wealthy. Others say that might be worth it.
“You have to think about these things holistically,” says Aaron Dorfman, president of the National Committee for Responsive Philanthropy. “Higher marginal tax rates on the highest earners in this society might decrease their giving, but if it produces exponentially more revenue to allow government to play its proper role in society, that’s a good tradeoff.”
ALEX WILLIAMSON FOR THE CHRONICLE
For now, it’s unclear whether Biden’s tax proposals will make it into law. If Republicans continue to control the Senate, it is unlikely that many will. But Kies points out that Biden may get another shot in 2023 after midterm elections if Democrats gain more sway in Congress.
“It could be a three-year event to figure out exactly how this plays out,” Kies says.
On the tax front, the top priority for many charity advocates is expanding charitable deductions for people who don’t itemize on their tax returns. The 2017 Tax Cuts and Jobs Act doubled the standard deduction, which sharply cut the number of people who itemize and receive a financial benefit from their charitable gifts. The Cares Act, passed this year, took a small step toward restoring giving incentives, allowing individuals who don’t itemize to deduct $300 of gifts to active charities on their 2020 taxes.
In June, a bipartisan group of senators introduced legislation that would expand the charitable deduction for people who don’t itemize to a third of the standard deduction — $4,000 for individuals and $8,000 for couples.
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Tax experts say a major expansion is unlikely to make it into law until Congress gets a chance to examine the impact of this year’s $300 deduction. Mark Mazur, an economist and director of the Urban-Brookings Tax Policy Center, says the bigger deduction might be considered in 2022 or 2023 — but only if this year’s more modest change were found to have stimulated new giving.
“How many additional dollars will get donated because of that, and what is the revenue cost?” says Mazur, who served as the Treasury Department’s assistant secretary for tax policy in the Obama administration. “My intuition is that not a lot of extra dollars will get donated and that you’ll end up paying for all the people who would have donated $300 anyway. But you’d want to have a serious conversation about that.”
Push for More Grant Making
For some foundations, there’s fear that any re-examination of charitable tax incentives may also lead to consideration of proposals to require private foundations and donor-advised funds, commonly known as DAFs, to pay out more of their assets. This month, on GivingTuesday, the billionaire philanthropist John Arnold and Boston College law professor Ray Madoff formally unveiled a plan to use both carrots and sticks to get private foundations and DAFs to give away more money faster. The effort, supported by a coalition that includes the Ford, Hewlett, and Kellogg foundations, aims to persuade Congress to act at a time when many charitable needs remain unmet.
David Kass, vice president for government affairs at the Council on Foundations, said at the council’s virtual policy summit following the election that proposals to increase payout rates were the “top tax issue” facing foundations. Kass says requirements to spend more “will hurt philanthropy’s ability to respond to the next crisis. As terrible as this one is, we know there’s going to be another one.”
The effort led by Arnold and Madoff supports — and apparently aims to piggyback on — the broader interest in legislation that would offer incentives for giving to middle- and low-income Americans. Roger Colinvaux, a law professor at Catholic University and a member of the coalition, says that as Biden and Congress consider expanding charitable-giving incentives, “they will also look at improving incentives to give from DAFs and foundations. The system of private financing of charitable causes needs fixing; it should not be a partisan issue.”
‘Cabinet-Level Agency’
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For conservative organizations, Biden’s win will put them in the role of underdog. In a post-election discussion sponsored by Columbia University’s nonprofit management master’s program, Patrice Onwuka, senior policy analyst at the conservative Independent Women’s Forum, said she thinks criminal justice is one area on which both Democrats and Republicans might find common ground on a reform agenda.
“It’s going to be difficult being on the defensive compared to being on the offensive over the last four years,” she said. “What’s great for nonprofits to realize is that your opponent on one issue could very well be your ally on another issue.”
Incoming presidents often create new offices that support nonprofits — think George W. Bush’s Office of Faith-Based and Neighborhood Partnerships or Barack Obama’s Office of Social Innovation and Civic Participation. Charity advocates say they will lean hard on the Biden administration to create something more permanent.
“What we’re asking for is a formal agency-like configuration, not unlike the Small Business Administration,” says Dan Cardinali, president of Independent Sector. “We employ 12 million people and have a $1 trillion economic impact. The fact that we don’t have a formal office is really an opportunity cost that the American public is paying. We’ve made very strong overtures to say it’s time.”
Rusty Stahl, president of Fund the People, a charity that seeks to maximize investment in the U.S. nonprofit workforce, says the creation of the Paycheck Protection Program highlights the downside of the nonprofit world’s lack of representation. Initial drafts of the legislation disadvantaged nonprofit groups, and a lobbying effort led by the National Council of Nonprofits and other advocacy groups was required to fix the bill.
“We need a cabinet-level agency in the executive branch that would bring together support for philanthropic giving and national and community service and support for civic engagement and nonprofit organizations,” Stahl says. “It ought to be something that can be supported in a bipartisan fashion.”
Biden has vowed to “restore the soul of America” and to be a president for all Americans — a message that the United Way’s Gallagher hopes will encourage people to move beyond the partisan “chaos” that led up to the election. In local communities, people need to set aside political divisions and work together with charities to help the country recover from the pandemic, Gallagher says.
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“We have to put a pin in this divisiveness, slide it back under the rock from which it came, and get back to building things.”
Ben is a senior editor at the Chronicle of Philanthropy whose coverage areas include leadership and other topics. Before joining the Chronicle, he worked at Wyoming PBS and the Chronicle of Higher Education. Ben is a graduate of Dartmouth College.
