As summer approaches, it is time to take a look and see if any large issues are on the horizon for NFP organizations. Of course, the biggest one will be how to cope with reopening after the COVID pandemic. Many NFPs have been financially weakened by the enforced shutdowns and social distancing. Finding employees and volunteers may prove to be difficult in the “New Normal”. The final accounting for the Payroll Protection Plan (PPP) loans will also be looming on the horizon. Nevertheless, as NFPs fight for their survival in the post pandemic era, there are some other interesting developments on the horizon management may wish to keep an eye on. .
The first is the United States Supreme Court has recently heard oral arguments in a major NFP case, Americans for Prosperity Foundation v. Rodriquez. The State of California requires NFP organizations to disclose major donors. The petitioner is backed by a large donor to the Republican Party causes and opposed the Constitutionality of the California law, claiming it is a restriction on the freedom of association and could put a chilling effect on donors to potentially unpopular causes. California has responded by claiming the collection of this information is one way to combat fraud. What makes this case so interesting is not only its implications for NFPs but the unusual alignment of groups for or against this particular law. For instance, the ACLU has come out in support of the petitioner, a group largely composed of Republicans. It is difficult to predict how the Court will rule on this case and a decision is expected by June, 2020.
All NFP development personnel need to keep an eye on the Biden Administration tax proposals. The proposed increase in the capital gains rate for wealthy Americans as well as the proposed change in the inheritance tax law (elimination in the stepped-up basis) would make gifts of appreciated property significantly more attractive to potential donors. There are a lot of things that can change between now and Congress adopting the new taxes and there is no certainty the proposed changes will even be adopted given the slim Democrat majorities in both houses of Congress. Nevertheless, the effective dates of any new tax legislation will probably be January 1, 2022. Therefore, NFPs have to be ready to discuss these possibilities this year in order to generate additional donations. Wealthier individuals will need to do tax planning this year to minimize future taxes. NFPs will have to get up to speed very quickly in order to take advantage of this fundraising opportunity.
The third development is the pending divorce of Bill and Melinda Gates. While I have been critical of his business practices, I have also applauded his charitable work. It is truly sad that anyone would get divorced, but we are all happy to hear the soon to be former couple will still cooperate and continue to run their foundation. It has done a lot of good for a lot of people. I wish them good luck in their personal lives.