4Thought Blog

If your nonprofit managed to keep staffers employed throughout the COVID-19 pandemic, there could be a tax reward.

Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, employers may be entitled to claim an Employee Retention Credit (ERC) for wages paid between March 13, 2020, and December 31, 2020. In December of 2020, the Consolidated Appropriations Act (CAA) enhanced and extended the credit through June 30, 2021.

And on March 11, 2021, the American Rescue Plan Act (ARPA) extended the ERC until December 31, 2021. In addition, the IRS recently issued guidance (Notice 2021-20) for employers — including nonprofits — that may claim the ERC.

What can nonprofit organizations expect in 2021 and beyond? One recent report, "11 Trends in Philanthropy for 2021," offers some answers. Produced by the Dorothy A. Johnson Center for Philanthropy at Grand Valley State University, the 32-page report pinpoints trends such as the growth of social justice funding and new opportunities to build public trust.

We look at five of the trends that are most likely to affect your nonprofit's fiscal health. We also explain how these developments could provide opportunities to build greater resilience and efficacy.

The sweeping second federal stimulus included two extended provisions nonprofits should pay particular attention to: a tax break for donors of smaller charitable gifts and one that will be advantageous to big donors. The new law also extends tax breaks for corporate donors. 

This is good news for some nonprofits that have struggled financially over the past year. But you can't assume that your supporters know about these changes in the law. Educate them about tax benefits as you solicit new donations.

So you think investment policies are only for nonprofits with millions to invest? Not true. If your organization holds funds in reserve — for example, to cover emergencies or meet long-term goals — it's prudent to have investment policies.

Such policies will help ensure that you manage reserve funds responsibly according to their purpose and take steps to minimize investment risk.

As your nonprofit strives to use its resources as effectively as possible, you might at some point consider outsourcing the functions that fall under your accounting and financial umbrella.

But wait: You'll first need to weigh the possible benefits and pitfalls.

Over the years, #GivingTuesday has grown from a hashtag to a global movement connecting nonprofits with donors around the world and helping them sustain mission-driven growth.

While the day has traditionally been a benchmark for an organization’s end-of-year campaigns, 2020 has added pressure for nonprofits to maximize the giving season.

As COVID-19 became a global health and economic crisis, nonprofits were called to the frontlines. While this surge in demand allowed some organizations to grow their staff, donors and visibility, others were faced with deep financial hardships.

If your nonprofit's staffers can work from home during the COVID-19 pandemic, they probably are. But what about when the crisis ends?

As workers have become accustomed to remote work, many now prefer it. In fact, several recent surveys have found that approximately half of U.S. employees would rather work from home. This is particularly true of parents with younger children.

Many employers also like remote work. They're finding that employees are as productive — if not more productive — now. And if staffers remain at home after the pandemic ends, your organization may be able to break its office lease or sell its facility and save a bundle on operational costs.

Before you take that step, however, consider what the costs and risks may be.

Nonprofits have at least one thing in common with for-profits: Only the strong survive.

The nonprofit sector is extremely competitive and even a relatively small shift of fortunes can threaten an organization's future. When events such as the death of a major donor or the loss of grants, organizations turn to their leaders to minimize the damage and restore stability. But all too often there is no plan in place to tackle risks.

Astute nonprofit leaders don’t wait for a storm. By making a risk analysis and confronting the possibilities ahead of time, they prepare their organization to weather rough times.

Several months into the COVID-19 crisis, most nonprofit organizations have formulated at least temporary plan for sustaining operations. But short-term solutions should be complemented by long-term strategic planning that reprioritizes objectives.

Specifically, your nonprofit needs to focus on three areas: social impact, economic viability and capacity to deliver. Let's take a look.

During these financially challenging times, many nonprofit organizations have had to get creative to raise adequate revenue to sustain operations.

But new activities, however well-intentioned, can lead to tax trouble. Your nonprofit risks exposure to the unrelated business income tax if it operates outside its usual charitable scope.

Here's how to avoid unwanted tax exposure.