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The tax-exempt status of non-profit organizations has been a foundation of their operations, allowing organizations to focus on their missions and serve their communities. However, this foundation is under threat as several provisions of the 2017 Tax Cuts and Jobs Act (TCJA) are set to expire at the end of 2025. The looming expiration has sparked important conversations about tax reform, raising concerns about how potential changes could jeopardize the financial sustainability of non-profits and their ability to make a meaningful impact.
Understanding the threat
What’s changing? The TCJA, enacted in 2017, introduced sweeping tax reforms across sectors, including for non-profits. While not all the provisions were directly related to tax-exempt organizations, many organizations have been indirectly affected by changes to unrelated business income (UBI) and other categories of non-donated revenue. With several provisions set to expire, Congress is exploring ways to compensate for the revenue shortfall, leading to proposals that could further disrupt the non-profit sector.
Most concerning is the suggestion to tax all non-donation revenue streams for tax-exempt entities at the corporate rate. This includes membership dues, sponsorships, investment income, and revenue from educational programs. The proposal signals a shift in how lawmakers and policymakers view the role of organizations in the broader economy.
Non-profits rely on diverse revenue sources such as memberships, sponsorships, and service fees to fund their operations and carry out their missions. Taxing these revenue streams could significantly reduce the funds available for programmatic efforts, forcing organizations to scale back on the services they provide. For many, these programs are vital and losing them could create a ripple effect of disadvantage.
The Call to Action for Non-Profits
Protecting the tax-exempt status of non-profit organizations requires collective advocacy. Here are strategic ways for non-profits and organizations to take action now.
1. Get Active in Advocacy
Advocacy is essential for influencing legislative decisions. Non-profits should educate policymakers about the tangible ways they serve communities, including specific programs and their outcomes, helping lawmakers understand the positive impact of tax-exempt organizations.
Encourage leaders and staff within your organization to participate in advocacy campaigns and events, such as ASAE's Legislative Fly-In scheduled for March 25-26, 2025. This event provides an opportunity to engage with Congressional members and explain how non-profits contribute to their districts.
2. Join Industry Coalitions
Advocacy as a collective is more powerful than isolated efforts. Joining an established coalition like the ASAE (American Society of Association Executives) Tax Reform Action list ensures your organization’s voice is amplified alongside others. Together, coalitions are better equipped to meet with policymakers, raise awareness, and push for legislation that protects non-profits.
3. Reach Out to Legislators
Coordinate efforts to engage directly with lawmakers and their aides. Personalized correspondence that highlights how tax-exempt status enables your organization to succeed in its mission is impactful. Provide clear, real-world context to make the issue tangible to lawmakers who may not understand the nuances of non-profit business models.
4. Educate Your Community
Non-profits should not only educate Congress but also their stakeholders and supporters. Equipping your network with information about the potential threat can mobilize a broader base of advocates. Empower these individuals to amplify the message and support your efforts through petitions, public statements, and other actions.
5. Invest in Strategic Communications
To better position your organization within these advocacy efforts, prioritize clear and compelling messaging. Use press releases, case studies, and testimonials to reinforce your position. Leverage media partnerships to inform the public about the importance of preserving organizations’ focused and mission-driven operations.
Protecting the tax-exempt status of organizations goes beyond safeguarding financial health; it's about preserving the power of collective action and societal progress. Every scholarship funded, disaster response initiative mobilized, and educational program delivered showcases the invaluable role of organizations in driving change.
Now, more than ever, it’s time for the non-profit sector to unite. Advocate directly with Congress and provide lawmakers with the insights they need to make informed decisions. Together, we can demonstrate the immeasurable benefits non-profits provide and ensure they continue to thrive for generations to come. Need guidance on where to start? Join forces with us and ensure your non-profit continues to drive change and support communities for generations to come. Reach out to AOE today.