By Ben Gose
January 22, 2025
The Chronicle of Philanthropy
More than 60 nonprofit associations have formed a lobbying coalition to influence Congress, as the broader tax-exempt sector braces for increasing scrutiny of nonprofits that are business-like in function.
The Community Impact Coalition aims to educate Congress about the social and economic benefits of associations, charities, and other tax-exempt organizations. Lawmakers are expected to consider additional taxes on nonprofit organizations — especially those like hospitals, insurance companies, and trade associations that have close competitors in the for-profit sector — as they look for revenue sources to help pay for extending the 2017 tax cuts.
“The nonprofit community cannot stand idly by while the critical contributions of the nonprofits that affect all Americans are jeopardized by potential and punitive taxation,” says Steve Caldeira, chief executive of the Household & Commercial Products Association, and a co-chair of the new coalition. “This is an existential threat to the tax-exempt sector and the vital services it provides.”
The American Society of Association Executives is the primary sponsor of the coalition. Caldeira said members are invited to contribute any amount they choose.
The funds will be used to lobby members of Congress, especially new lawmakers. “We are trying to connect the dots between the tax status of these organizations and the important public good that they’re providing, not just at a national level, but equally important, at the local level,” Caldeira says. “They’re responding to disasters in California, training the workforce, addressing needs of communities.”
But the coalition’s narrow membership — most are not 501(c)3 charities, but rather tax-exempt trade associations representing the business interests of their members — raises the question of how the broader nonprofit sector will respond should Congress decide to target nonprofits that are primarily business-like in function.
The nonprofit sector is vast and diverse. The Internal Revenue Service lists about 2 million nonprofit organizations, but only about three-quarters of those are 501(c)3s that are structured to serve the public good.
Will charities that house the homeless, counsel troubled youths, and raise contributions from the public stand with trade associations and other nonprofits on the hot seat, such as nonprofit hospitals, credit unions, and the NCAA? It’s probably too early to tell — but advocates for greater taxation are clearly trying to draw a line between “benevolent” charities and more “business-like” nonprofits.
“This is hardly a coalition of food banks and women’s shelters,” says Scott Hodge, president emeritus of the Tax Foundation and one of the leading voices calling for greater taxation of nonprofits that are business-like in function. “It is another K Street astro-turf organization trying to defend corporate interests.”
In a report released last summer, Hodge called the unrelated business income tax rules that were implemented in 1950 to rein in the nonprofit sector “toothless.” He has proposed subjecting all “non-charitable income” to a new tax rate of 21 percent — a change that would bring in $40 billion in tax revenue per year.
Caldeira responded that trade associations and other membership organizations employ more than 1 million people and already pay nearly $28 billion a year in federal, state, and local taxes. “We are a vital component of America’s job market,” he says.
Sandra Swirski, a longtime lobbyist who works for foundations and nonprofits, said late last year that the Hodge proposal and a similar call for taxation from the Cato Institute may resonate with revenue-seeking lawmakers. She sees the calls for greater taxation as the greatest legislative threat to the nonprofit sector since 2000.
The Community Impact Coalition does include some 501(c)3s, including the American Heart Association and the National Association of College and University Business Officers.
Another member is Faith & Giving, a Washington lobbying coalition that represents a number of faith-based charities.
“We’re concerned by the destructive precedent that this type of taxation would create,” says Brian Walsh, the firm’s executive director. “Once Congress gets an appetite for taxing a sector it tends to return to that sector when it needs additional revenue — and Congress always needs additional revenue.”
