Government and Regulation

Nonprofit Leaders Express Worries Over Tax Law and Possible Recession

By Dan Parks

December 13, 2019

Fifty-eight percent of nonprofit leaders believe tax-law changes have hurt giving to their organizations, according to a new survey. Nonprofit leaders are also deeply worried about the potential for a recession and a lack of preparedness for an economic downturn, the poll found.

The survey, conducted by the Center for Effective Philanthropy, gathered responses from 419 nonprofits with annual expenses ranging from $100,000 to $88 million. The surveys were completed by CEOs, development directors, or finance directors. The organizations had received at least one grant from a foundation that gives $5 million or more a year.

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The 2017 federal tax overhaul roughly doubled the standard deduction, resulting in millions fewer households itemizing their income-tax returns. Those households no longer have a financial incentive to donate to charity. Estimates on the potential impact on giving varies, but one recent study estimated charities would lose $19.1 billion annually.

Forecast for Revenue

Forty-six percent of respondents expect their revenue to be higher this fiscal year than the previous one, 31 percent expect it to be the same, and 23 percent expect it to be lower.

If revenue declines, nonprofit leaders are most likely to respond by reducing services, freezing hiring and wages, or laying off employees.

The potential for a recession was cited as a concern by 90 percent of the leaders. Sixty-four percent said a recession would increase demand for the services they provide, while 33 percent said they have a plan for dealing with a recession.

Only 4 percent said they have discussed with grant makers who support them how their aid might change during a recession, while 89 percent said they would like to have that discussion.

The center is analyzing the data, and the Chronicle will report on the findings in future months — including data on gift-acceptance policies, perceptions of donor-advised funds, and more.

Dan Parks is the Chronicle’s senior editor for digital and data.