By: William Ehart
March 13, 2025
CEO UPDATE
Is the taxman coming for association revenue?
Proponents of extending existing tax cuts and adding new ones, such as those President Donald Trump advocated on the campaign trail, are looking for ways to pay for them.
Some have in their sights trillions of dollars of what is now tax-exempt income for associations and many other nonprofit organizations. Income from dues, events, training and certification, and other areas could be in play.
Trump’s 2017 tax cuts expire at year-end. As Congress works through its budgeting process and struggles to find sufficient savings, there are warning signs for associations, said Ali Bedford, vice president at advocacy firm Integer, LLC.
Integer is working on behalf of a coalition created by Michelle Mason, CEO of the American Society of Association Executives, to forestall such proposals. The Community Impact Coalition has 80 tax-exempt organization members and is co-chaired by Steve Caldeira, CEO of the Household & Commercial Products Association, and Marc Cadin, CEO of financial services association Finseca.
Among the advocates of taxing non-charitable income are the Tax Foundation and the Cato Institute. The Tax Foundation has proposed applying the 21% corporate tax rate on all non-charitable income to entities organized under Section 501(c) of the tax code.
“A reasonable rewriting of the tax-exempt rules should include … subjecting all non-charitable income to taxation,” a June 2024 Tax Foundation report said. “Doing so would protect the charitable income of benevolent organizations while leveling the playing field between nonprofits and for-profit entities.”
Also in June 2024, a Cato Institute report said, “The tax-exempt sector has grown significantly beyond its narrow purposes. For example, program service revenues have been the largest and fastest-growing source of 501(c) (3) nonprofit revenues since 1980. These non-donation, non-grant revenues totaled more than $1.8 trillion in 2019. Nonprofit status should be eliminated for activities where there is a clear for-profit private-sector competitor.”
On the table
“These think tank ideas are percolating on the Hill and are certainly not off the table,” Bedford told CEO Update.
“We certainly know that there are lawmakers who are weighing these types of options as they look for trillions of dollars in revenue for their tax package,” Bedford said. “We’re working to educate lawmakers on the basics on why nonprofits are tax exempt, and why Congress and lawmakers saw the need to put tax exemption into the code. And that really is because these groups are not profit-maximizing. They’re not enriching shareholders or owners.”
In a Feb. 3 letter to Treasury Secretary Scott Bessent, Caldeira said nonprofits fill a gap between services provided by governments and for-profit companies.
“As you know first-hand, nonprofits serve as vital partners in bridging gaps that often fall outside governmental reach,” Caldeira wrote. “They feed the hungry, shelter the homeless, advance medical research, support veterans, serve people with disabilities, and deliver disaster relief.
“They also represent health care providers and school-based instructional support personnel who provide vital services that ensure the health and well-being of Americans at all ages. These mission-driven organizations step in where government and for-profit business cannot or will not. Equally important, nonprofits reinvest revenue into their missions, and truly embody the spirit of public service, empowering communities and improving lives nationwide.”
Cadin noted lawmakers’ desire to extend tax cuts while still being responsible about managing the federal budget deficit.
“We have at a minimum a $4 trillion tax extension to deal with,” Cadin told CEO Update. “We know beyond a shadow of the doubt that there are Republicans in both the House and Senate with concerns about the size of the deficit. We also know that the president campaigned on additional promises — no tax on tips, Social Security and overtime and the like.
“When you add all of that up, it just makes sense for the association community, led by ASAE, not to assume that everybody remembers the story of why 501(c)s have the tax status that they have,” Cadin said.
