One word shot through Beth Gazley’s mind when she heard about a nonprofit coalition’s response to President Trump’s federal funding freeze.
“Hallelujah,” thought Gazley, a professor of public affairs at Indiana University, explaining that as executive orders streamed out of the White House during Trump’s first weeks in office, she was uncertain whether nonprofits would fight administration actions that threatened their revenue and mission.
The National Council of Nonprofits filed a federal complaint that sought to halt the Office of Management and Budget’s spending freeze at lightning speed in late January. Joining with American Public Health Association, Main Street Alliance, and SAGE in a coalition called Democracy Forward, the lawsuit prompted the Office of Management and Budget to rescind its order within a day while the issue was considered in court.
Then came a torrent of other lawsuits from organizations and coalitions contesting Trump’s claims of additional executive powers. But as the cases are argued in the nation’s courts, nonprofit support from the federal government — charitable giving tax policies and regulations that social sector organizations must abide by — will likely be decided in Congress, where lawmakers are starting to craft a budget and debate key tax legislation.
The question, however, is whether nonprofits can engender sufficient support from members of Congress. Over the past decade, nonprofit lobbying activity has dwindled. In 2022, less than a quarter of nonprofits had lobbied for any legislation, down from three quarters of organizations five years earlier, according to a survey conducted by Independent Sector, a national membership organization and advocate for nonprofits and philanthropies. A follow-up survey underwritten by Independent Sector and released in October suggested that nonprofits are holding back on their public advocacy, citing among other things, a rancorous political environment.
Trump’s series of orders threw many nonprofits for a loop, said Pat Cave, senior vice president of policy at Enterprise Community Partners, a national nonprofit that works to increase the housing supply. But tax and spending policies generally belong to the legislative branch of government.
“The White House is important, but so is the Congress,” he said.
With the GOP in control of both chambers of Congress, and Trump in the White House, government spending in many areas will be reduced this year, to the detriment of many nonprofits, said Steve Taylor, a principal at Integer, an advocacy firm in Washington, D.C., specializing in economic and nonprofit policy. While Taylor believes nonprofits don’t have much of a chance blocking many cuts in federal outlays, they do have an opportunity to shape policy decisions coming out of Capitol Hill.
To have any sway, nonprofits must increase their efforts to educate conservative lawmakers, said Taylor, who served as United Way Worldwide’s top D.C. lobbyist for more than a decade and previously worked as general counsel to Republican Senator Chuck Hagel of Nebraska.
“Being at the table means having influence and dialogue with Republicans,” he said. “If the nonprofit sector links arms with their Democratic allies in Congress, and if fighting is their only approach, then they aren’t at the table.”
Nonprofits have significant ground to regain in Congress. Leading up to the November election, members of the Trump administration called for large increases in taxes on investment gains to be levied on large foundations, nonprofits, and university endowments. Members of the House GOP investigated political involvement of left-leaning donors and seemed poised to impose new regulations on donors and the advocacy nonprofits they support.
Since taking office, Trump has launched a full-bore attack on nonprofits that support causes he dislikes, including LGBTQ advocacy and diversity, equity, and inclusion programs.
An alternative to intense lobbying is for nonprofits is to rely on decisions from the courts. Taylor doesn’t have much faith in that approach.
“The sector is not going to be able to litigate its way to success over the next two years,” he said.
Lobbying ‘Above a Partisan Lens’
While many Republicans are firm in their plans to cut government spending, they may not be able to ignore pleas from nonprofits that benefit residents in their districts and partially rely on federal funds.
Issues that affect charities are often “above a partisan lens,” even in a time of extreme political volatility, said Arshi Siddiqui, co-founder of Bellwether Government Affairs, a lobbying firm that represents nonprofits on Capitol Hill.
“Nonprofits have a really unique perspective on the ground in terms of how policies in Washington can impact local communities,” she said, and have been working to help lawmakers regardless of party to make that connection. Previously, Siddiqui worked in the office of former Speaker of the House Nancy Pelosi, a Democrat.
Another challenge, according to Gazley, the Indiana University professor, is that since Trump’s election to a second term, it is not clear how many House and Senate GOP members want to assert their independence from policies emanating from the other end of Pennsylvania Avenue — or Mar-a-Lago.
Said Gazley: “We really don’t have three branches of government right now.”
Innovating, Not Blocking, Policy Changes
Despite the decline in nonprofit lobbying, nonprofits have blocked legislation viewed by some as detrimental to the philanthropic status quo.
A decade ago, then-House Ways and Means Committee Chairman Dave Camp, a Michigan Republican, was talked out of introducing modest changes in regulation that would have required set payouts from donor-advised funds. Then as well as now, donors can take an immediate tax deduction with no rules for how long money can sit in a DAF account before being directed to an operating charity.
Again in 2021, Sens. Chuck Grassley, an Iowa Republican, and Angus King, a Maine Independent, introduced a bill that would have placed payout requirements on donor-advised funds and also prohibited foundations from meeting their annual requirement to disburse 5 percent of their assets to charity by making gifts to donor-advised funds. Faced with opposition from nonprofits — including donor advised funds related to financial firms and funds managed by community foundations — the bill went nowhere.
Perhaps the most significant policy for nonprofits coming out of Washington in the past decade was in Trump’s first rewrite of the tax code, in which the standard deduction tax payers could claim was doubled. The larger standard deduction wiped out previous incentives for most taxpayers, save the very wealthy, to make charitable gifts that qualified for itemized-deduction tax savings.
When a temporary “above the line” charitable deduction was put in place, which allowed tax payers claiming the standard deduction to also claim charitable gifts up to $300, the value of deducted donations totaled about $10 billion, according to 2020 Internal Revenue Service data compiled by the Tax Foundation.
Kathleen Enright, president of the Council on Foundations, is pushing for a permanent above-the-line deduction. She hopes lawmakers agree that doing so would be a small cost to the U.S. Treasury compared with extending current tax policy, which would cost $400 billion per year in lost revenue.
“There are dollars much bigger than the dollars at play for philanthropy,” she said.
Nonprofits should offer policy alternatives and be willing to be flexible, said Lindsay Plack, partner at FGS Global, a lobbying firm with nonprofit clients. In a time of intense polarization and the promise of wide-ranging policy change, Plack, who previously worked for Rep. Joe Knollenberg, a Michigan Republican, advises nonprofits to try to come up with innovative ideas and new coalition partners to drive new policy. In recent years, she said, nonprofits have mostly used their clout to block changes.
“Republican lawmakers are really sick of everyone just saying no,” she said, adding that nonprofits have a very powerful grassroots network at their disposal. “If they use it too regularly, they’re just walking themselves out of the room.”
