After November 5, What Next?

Many Americans were anxious in the run-up to the United States elections earlier this month. With each change in presidential administration, there are downstream effects on institutions and donors, and the increasing political polarization in America can add to the unease. Although the new administration won’t officially assume control of the federal government until January 20, 2025, it’s not too soon to reflect on potential impacts on philanthropy in the coming years.

Tax policy
The Tax Cuts and Jobs Act of 2017 (TCJA), passed during President-elect Donald Trump’s first term, contained a number of provisions that impacted giving. According to the Tax Policy Center, the TCJA reduced the value of charitable gifts by lowering marginal income tax rates and doubling the standard deduction, which significantly decreased the number of U.S. households that itemize expenses on their tax returns.

Although many donors don’t make gifts primarily for tax benefits, some do. Researchers at Indiana University and the University of Notre Dame found that the standard deduction triggered a $20 billion decline in charitable giving in 2018, followed by a $16 billion permanent annual drop in charitable giving. Conversely, Congress allowed a modest $300 deduction for individuals ($600 for joint filers) in 2020, after which the Fundraising Effectiveness Project found a 7.5 percent increase in individual gifts of $300. This provision ended in December 2021.

If the TCJA is extended in its current form, focusing on donor engagement, the non-monetary case for giving, and the impact of philanthropic dollars will be vital in the coming years.

The TCJA also roughly doubled the estate tax exemption to $12.92 million for single filers and twice that for married couples. Again, assuming a TCJA extension of that provision, this will continue a tax incentive for some high-net-worth (HNW) individuals and families to keep resources within their families through their estate plans. Marts&Lundy recommends expanding conversations with planned giving donors to encompass the full range of often overlooked charitable vehicles, including qualified charitable distributions from Individual Retirement Accounts, Donor Advised Fund and family foundation distributions, and life income gifts.

Federal funding will be hard to predict, can philanthropy fill any gaps that emerge?
In a video posted to social media in 2023, President-elect Donald Trump pledged to close the Department of Education and disperse authority for educational policy to state governments. The Department itself was created by an act of Congress, so legal scholars predict that the president will need Congress to dissolve the organization. Likewise, many of the responsibilities of the Education Department involve funding that was separately approved through congressional action, like Title IX, which will take time if the president-elect wants to shrink or eliminate such programs.

Under the Biden administration, the Department of Education expanded protections of Title IX, which prohibits sex-based discrimination in any school or any other education program that receives funding from the federal government. A controversial provision among social conservatives provides protection of sexual orientation and gender identity – interpretations that the president-elect has pledged to reverse. In addition, Trump has declared his support for school vouchers and limiting how schools teach about race and gender.

If the new administration succeeds in these goals, the impacts on schools, colleges, and universities are unpredictable, and could impact donor sentiments around philanthropic support. Gallup has reported a specific decline in public sentiment about college, with the percentage of Americans who report very little or no confidence in higher education nearly tripling since 2015. If education is viewed as an ideological extension of government, this could discourage some donors.

Marts&Lundy recommends emphasizing the value of education not just to its direct beneficiaries, but as a public good to society. An educated populace provides workforce development and furnishes society with leaders who bring critical thinking skills, in addition to being major employers in their communities. Even national nonprofits will benefit from emphasizing the local benefits of giving to charity.

Temporary increases in “rage giving”
The Chronicle of Philanthropy has reported that some nonprofits are experiencing a bump in giving following the presidential election. In particular, areas that are seen as threatened by the proposed policies of the new administration are observing increased giving: those related to global climate change, social justice, and civil rights organizations. Cygnus Applied research published a study that calculated a 155 percent increase in contributions to liberal-leaning charities after the 2016 election.

It’s too soon to conclude that the magnitude of this bump will match what was observed in 2017. For nonprofits that see themselves as an outlet for donors who are angry or frustrated by the outcome of the election, it’s essential for organizations to position themselves as countervailing forces to what they perceive as unsound public policy. Schools, colleges, universities, health systems, and cultural institutions are positioned to amplify the validity of science, the nation’s need for civil society and digital literacy, and an enduring commitment to the arts and humanities.

Time will tell
Although the president-elect is moving faster to announce his cabinet nominations than during his first term, it’s too early to accurately predict the potential impacts on society of his second term. So, what can be done in the meantime?

Advancing the charitable sector is about hope, aspiration, and possibility. Nonprofits must continue to do the important work outlined in their mission statements and work toward their vision of a better world.

Many charities are struggling to help their supporters understand the implications of the national political landscape on their organizations, but this much is clear: since before the founding of our republic, the United States has committed itself to a strong and vibrant nonprofit sector. At Marts&Lundy, we are proud of the role we play in helping organizations achieve their philanthropic goals. We stand ready to support our partners as they negotiate both the expected and unexpected changes yet to come.