2025 Midyear Nonprofit Industry News
I. Legislative and Policy Changes
Beneficial Ownership Information (BOI) Reporting:
The Corporate Transparency Act (CTA) requires certain entities to report beneficial ownership information. While most 501(c) nonprofits (organizations exempt from federal income tax under section 501(c) of the Internal Revenue Code) are exempt, some, like social and recreational clubs (501(c)(7)), may not be.
Impact on Business Owners: Nonprofit leaders must determine if their organization is exempt. Non-compliance can result in substantial penalties (approximately $591 per day). A federal court injunction has temporarily halted enforcement, but this may change. Organizations should stay informed and prepare for potential compliance.
California's Charitable Fundraising Platform Regulations:
California's Assembly Bill 488 introduces new rules for online fundraising platforms and their charity partners, effective January 1, 2025.
Impact on Business Owners: These regulations aim to increase transparency and protect donors. Nonprofit leaders who utilize online platforms for fundraising should ensure that their platforms and practices comply with these new requirements. This may involve changes to agreements with platforms or internal processes.
The Charitable Act:
The Charitable Act has been reintroduced in Congress with bipartisan support (S. 317 and H.R. 801). This act seeks to incentivize charitable giving through a universal charitable deduction. Its success depends on its inclusion in a larger tax package, with a critical deadline of December 31, 2025, when provisions from the 2017 Tax Cut and Jobs Act expire.
Impact on Business Owners: If passed, this act could significantly impact nonprofit fundraising. A universal deduction might increase donations, but changes to other tax provisions could have offsetting effects. Nonprofit leaders should advocate for this act and stay informed about the broader tax legislative landscape.
Federal Government DEI Policies:
The Trump administration has begun to implement executive orders that end government programs and initiatives related to DEI, and aim to end what it views as discriminatory DEI practices in federal agencies.
Impact on Business Owners: Nonprofits should carefully review their DEI programs and policies to ensure compliance with the new executive orders. Seek legal counsel to understand the specific implications for your organization, and be prepared to adapt your practices as the situation evolves.
II. Economic and Operational Challenges
Nonprofit Job Losses:
The nonprofit sector has experienced job losses, with significant reductions in areas such as international, foreign affairs & national security, healthcare, and human services.
Impact on Business Owners: Nonprofit leaders should proactively assess their financial situation, explore options for cost reduction, and prioritize core programs. Consider collaborative partnerships with other organizations to share resources and reduce redundancies. Explore diverse funding streams to mitigate financial risk.
Financial Pressures:
Nonprofits face increasing financial pressures due to inflation, the end of pandemic relief funds, and declining donations. This has led to program cuts, layoffs, and closures in some cases.
Impact on Business Owners: Nonprofit leaders should develop a comprehensive financial sustainability plan. This includes diversifying funding sources (e.g., grants, individual donations, earned revenue), implementing strict cost-control measures (e.g., renegotiating vendor contracts, reducing travel expenses, implementing energy-efficient practices), and exploring new revenue models (e.g., offering workshops or training programs, selling branded merchandise).
III. Technology and Innovation
AI Adoption:
Nonprofits are increasingly adopting AI to streamline operations, enhance programming, analyze data, and personalize donor engagement.
Impact on Business Owners: Nonprofit leaders should identify specific areas where AI can improve operations. For example, AI can be used to automate donor communication, predict which donors are most likely to give, or personalize program content for individual clients. Develop a clear AI strategy that prioritizes ethical considerations and data privacy. Invest in training for staff to effectively use AI tools.
Fundraising with Influencers:
Nonprofits are partnering with social-media personalities to reach new donors.
Impact on Business Owners: Nonprofit leaders should develop a comprehensive digital marketing and social media strategy. Identify relevant influencers who align with your mission and target audience. Create clear guidelines for influencer partnerships, ensuring transparency and ethical practices.
IV. Data Security
With the increasing reliance on technology and digital data, data security has become paramount for nonprofits.
Impact on Business Owners: Nonprofit leaders must prioritize protecting sensitive donor and client information. Implement robust data security measures, including encryption, access controls, and regular security audits. Ensure compliance with relevant data privacy regulations.
V. Other Developments
Charitable Giving Incentives:
There are ongoing discussions about tax policies that incentivize charitable giving, including potential changes to deductions.
Impact on Business Owners: Changes in tax laws can significantly affect donor behavior. Nonprofit leaders should stay informed about these discussions and educate donors about tax-efficient giving strategies.
Minimum Wage Increase in California:
California's minimum wage increased to $16.50 per hour on January 1, 2025, which also affects the minimum salary for exempt employees.
Impact on Business Owners: Nonprofits in California will face increased labor costs. Leaders need to plan their budgets accordingly and ensure compliance with the new wage laws.
VI. Focus on Privacy Legislation
There is a growing momentum towards comprehensive bipartisan privacy legislation.
Impact on Business Owners: Nonprofits will need to stay updated on the changing privacy landscape.