It’s only been a month since President Donald Trump was sworn into office, and it’s clear campaign promises for big changes are coming to fruition. Presidents are typically judged on their actions within their first 100 days in office, and the new administration may set records for change enacted via executive orders and legislation.
For nonprofit organizations across America, the post-election to present timeframe has produced ripple effects in fundraising and advocacy efforts (as outlined in our 2017 Association Predictions) across the sector – exemplified by the record donations and new memberships experienced by the American Civil Liberties Union.
This first wave, initiated at the grassroots level, is quite impactful to charitable contributions, but what other, larger legislative or regulatory changes are anticipated moving forward?
Just about all Americans are familiar with one important area impacting millions of Americans and employers across the country, including in the nonprofit sector – the Affordable Care Act (ACA). Repealing former President Obama’s key legislative accomplishment has been front and center on the GOP platform for years. Comprehensive replacement of the ACA and its marketplace structures for purchasing medical insurance is not likely coming soon – it could very well take until 2018 to accomplish this.
On January 20, however, President Trump did release an executive order intending to reduce some regulatory and fiscal burdens surrounding the ACA. Interestingly enough though, this executive order did not specifically mention employers at all, leaving many wondering about their compliance duties for the ACA. During late January through March there are key compliance forms (for example, Forms 1095-C and 1094-C) that are due to employees and the IRS. Employers are expecting to still continue with their ACA compliance efforts, though I imagine many wouldn’t mind date extensions.
The executive order instead could likely result in individual penalties for purchasing insurance being deferred, as might employer fines for not providing enough coverage. This would have a positive expense benefit for many nonprofits that fell under the classification of large applicable employers (ALEs), but didn’t offer enough “minimal essential coverage” to employees and faced a penalty. Nonprofit employers will need to stay tuned to further developments as the executive order is just the first salvo in the battle to repeal and replace the ACA.
While ACA repeal efforts are no surprise to Americans, many Americans were surprised when President Trump signaled during the 64th Annual National Prayer Breakfast in early February that he may seek to repeal the Johnson Amendment, long standing legislation that puts a firewall between politics and tax-exempt nonprofits primarily 501c(3)s. To be fair, the GOP platform had also included this, but it hadn’t garnered media attention until President Trump said he “… will get rid of or totally destroy the Johnson Amendment” in the context of a meeting with top religious leaders.
The Johnson Amendment was introduced more than 60 years ago by Democratic Senator Lyndon B. Johnson who later became VP then President and ushered in many key social programs within the government sector. His 1954 Amendment was attached to a bill and codified within the IRS Code absolute provisions on engaging in political activities within tax-exempt organizations with the risk of loss of their tax-exempt status if violated.
Historically, the Johnson Amendment has been viewed through the lens of religious nonprofits – Americans attending churches are familiar with their preachers not vocalizing support for specific candidates or policies specifically. Naturally though, it restricts all tax-exempt nonprofits from overtly participating in politics – and the support of politicians or parties with money they’ve raised from their constituents.
When President Trump announced his intent at the prayer breakfast, he was setting the stage for a big deregulation of money funding political campaigns. So, in addition to Super PAC funding, the GOP and Democratic parties could see unrestricted money from national or even local religious organizations pouring in. This is potentially a windfall for many nonprofits, but sets the stage for debates on transparency in campaign funding, since a nonprofit structure could be used to mask or anonymize major contributions from individuals beyond current Federal Election Commission limits.
Deregulation efforts impacting nonprofits are similar in effect to what happens in the private sector – there are immediate winners, some negatively impacted, and landscape changes that unfold over time. It’s not easy to predict the long-term changes and consequences that deregulation will create.
Nonprofit leaders everywhere will be watching closely to these areas and more (for example, potential tax reforms impacting the charitable deduction). If partisan gridlock in Washington, D.C. has taught us anything, though, it’s that campaign promises are easy to make and hard to push through. In the meantime, at least the “Trump-era surge” in fundraising should continue for many nonprofits across America!