President Trump’s Potential Impact on Nonprofits

The country is in the process of what may be a lOOday paradigm shift in government, private foundation, and individual funding for tax-exempt organizations. U.S. has been, for decades, the most generARCHIBALD oils nation on Earth in corporate and individual giving to nonprofits.

Our Medicare, Medicaid, and Social Security programs are, as entitlement programs, growing at a pace that far exceeds federal, state, and local governments' ability to sustain these programs at historical levels. Keep in mind that we have an aging population, with about 10,000 Baby Boomers retiring every day for the next 15 years. People over the age of 65 consume triple the amount of health-care services of individuals under 65.

Consider the following proposals that could be considered in about the next 100 days of the new Trump Administration and Congress.

Tax policies

* Eliminate the estate tax

This change, if enacted, will result in a reduced benefit incentive for wealthy taxpayers to leave legacies and bequests in their estateplanning process.

* Establishing an arbitrary limit on charitable-contribution deductions

The Trump tax proposal provides for a cap on individual charitable-contribution deductions of $100,000 for individuals and $200,000 per couple. If enacted, this will significantly decrease the incentive for individual charitable contributions. With charitable contributions in the U.S. exceeding $300 billion every year, this one change, along with elimination of the estate tax, may have a nuclear effect on literally thousands of tax-exempt, charitable-service providers.

* Income-tax reductions

The pro-growth tax policy of providing corporate and individual tax-rate reductions, immediate expensing of capital purchases, and elimination of the alternative minimum tax, among many others, will undoubtedly put more cash in Americans' pockets. Unfortunately, the federal budget depends heavily on corporate and individual income-tax payments. The question of how the reduction in federal tax revenues will impact government expenditure's is still unclear. However, one must remember that spending for Medicare, Medicaid, and Social Security represents about 74 percent of total federal expenditures.

Entitlement policies

* Repeal and replace Obamacare, or the Affordable Care Act (ACA)

More than 20 million people are covered by ACA, which admittedly has a number of flaws that need to be corrected. But I believe repeal and replace will result in higher bad debts, negative cash flow, and increased financial stress on all health and human-service providers to ACA enrollees.

* Transfer of Medicaid responsibility to the individual states

This is commonly referred to as "block granting Medicaid." As the number one state in the country in per-capita Medicaid spending to over 6 million New Yorkers, this will undoubtedly shift a significant amount of financial risk to the New York State budget in order to control the current $60 billion program. It is unfortunate that the New York State Medicaid population is also aging, requiring more health-care services, while the state budget has a spending cap.

Economic and foreign policies

* Immigration control and building the wall on the Mexican border

Our nation is in the process of a demographic shift in which our Caucasian population will be in the minority for the first time in the country's history by 2040. We already have great difficulty in filling nonprofit direct service positions. A dramatic shift in immigration controls will only exacerbate recruitment and retention issues as well as demand for higher compensation and salary levels.

* Infrastructure spending of $ 1 trillion on roads and bridges

The country had a national debt of $20 trillion as Obama passed the reins of power over to Trump. An infrastructure spending of $1 triDion will undoubtedly have a conneapcBiding negative impact no die entitlement spending programs of Medicaid, Medicare, and Social Security.

* Trade agreements, tariffs, and border taxes

The stated policy of the new administration is "America First." There have been a plethora of proposals to encourage and/or force corporate America to bring jobs back to the states as well as keeping and expanding employment on American soil. This particular policy initiative will require very tense and complicated negotiations with countries across the globe. One of the key reasons that manufacturing jobs have left the U.S. since the 1970s is the availability of significant amounts of cheap labor in virtually every other country.

All of the above proposals provide potentially significant challenges to the future fiscal viability and stability of tax-exempt, charitable organizations. The breadth of the impact across multiple charitable-service sectors beyond health and human services may result in a staggering blow to cash flow, the life blood of fiscal viability, and stability for nonprofits.

Nonprofit board and management team members must closely watch the policy changes enacted in the first 100 days and the full tenure of the Trump Administration. The next 100 days, or certainly sometime in calendar 2017, is an ideal time for addressing the following strategic core-competency areas for your nonprofit:

1. Mission, vision, and values statements

2. Board governance and oversight

3. Environmental / service-sector dynamics

4. Leadership and management

5. Organizational and administrative infrastructure

6. Community engagement and branding

7. Data-driven decision-making

8. Financial stability and viability

In my 40 years of philanthropic and professional involvement with tax-exempt charitable organizations, 2017 appears to present the most significant challenges to the economic and service infrastructure of nonprofit charitable organizations across the country.

I do believe that change is good. Addressing the challenges and opportunities resulting from change is what differentiates success from failure for your organization. *