Deregulation under the Trump Administration and Its Impact on the Non Profit Sector

Deregulation under the Trump Administration and Its Impact on the Non-Profit Sector
Introduction
President Trump touted deregulation as one of the issues he would push for during his campaign leading up to the 2016 election. Once placed in the White House, he held true to his push for deregulation and that policy has had some impact on the non-profit sector in the US. This paper will show how that impact has benefited the nonprofit sector in some ways and how in other ways it remains to be seen whether negative fallout will occur or not. Specifically this paper will explain how deregulation under the Trump Administration is impacting the non-profit sector in various beneficial ways, such as
by allowing nonprofits to keep anonymous the names of donors; and by capping the amount federal agencies can force nonprofits to spend—the idea being that this will prohibit agencies from shifting costs for regulatory ambitions onto nonprofits and other organizations. It will also explain, however, that there are always unforeseen consequences to deregulation that can have adverse impacts on nonprofits, particularly those in the environmental sector, and so one must see what these outcomes are over time.
Disclosure of Donors’ Names
Under the Trump Administration’s deregulation policy, certain tax-exempt organizations—those described in section 501(c), excluding those described in 501(c)(3) and section 527 organizations—are no longer required to file personally identifiable details of their contributors in their annual tax returns (Brookings Institute, 2020). This means that donors can stay anonymous and organizations do not have to disclose who is giving financial support to them unless they are directly compelled to by the government. They must keep this information in their records, but they are not longer required to report these records annually. That is a big win for nonprofits because the loss of anonymity can sometimes prevent big donors from making the kind of donations that can make a big difference to these companies.
The fact that some nonprofits will no longer have to identify all their donors for the IRS is a win for these organizations also because it means that they have more autonomy and independence. However, this rule only impacts 501c organizations, which can receive unlimited donations from individuals, corporations and unions. Now these nonprofits no longer have to disclose those identities in their tax filings—but they still have to maintain them in their records and provide them if requested. This means that big donors can collaborate more closely with nonprofits without worrying that every donation they make will be made public, which is good for nonprofits because it allows them to act more independently from the government. In a free market system, independence from the state is one of the most important factors. Big donors can help nonprofits to have a greater influence in society and are more inclined to do so the more independent they perceive these organizations to be.
Executive Order 13771
Another beneficial way deregulation under the Trump Administration positively impacts nonprofits can be seen with Executive Order 13771. Executive Order 13771 calls for a new regulatory budgeting process that will aim to control the overall cost of every agency’s regulations: President Trump wants an “annual cap on the additional cost burdens that an agency is allowed to impose on the U.S. economy” (Belton & Graham, 2019, p. 15). Belton and Graham (2019) show that President Trump’s deregulation with EO 13771 is aimed at curbing the abuses of federal agencies by capping their ability to put costs on nonprofits and other organizations. The reason for this cap would be that agencies are capped in terms of public funding—i.e., money they can spend allotted them via Congressional appropriations—and so in order to achieve their own policy ambitions these agencies shift these costs onto nonprofits and other organizations. The EO intends to put a stop to that practice and thus liberates nonprofits from the iron grip of regulatory agencies that, in Trump’s eyes, hinder economic growth.
This EO essentially limits the extent to which the various agencies and departments at the federal level can restrict nonprofits with prohibitive costs associated with their own regulatory schema. The Trump Administration is dedicated to deregulation is it is believed that overly regulated organizations are inefficient. Thus, this EO stops the federal government from attempting to regulate through hidden costs that they apply in their own policies. The less money nonprofits have to pay under agency fees and fines, the more money the nonprofit can make and reinvest in itself and in the community it serves.
Unforeseen Ramifications
Still, not every pursuit of deregulation is seen as positive. As Morrow (2017) states, “Deregulation efforts impacting nonprofits are similar in effect to what happens in the private sector – there are immediate winners, some negatively impacted, and landscape changes that unfold over time.” In other words, not every nonprofit is treated equally under deregulation. Some benefit more than others, depending on their sector and their positioning in the sector. Some nonprofits rely upon regulation of a sector, whether it is for research grants or funding. Deregulation can have direct and indirect impact on nonprofits, and so a cursory glance only of deregulation’s impact is limited and neglectful of scope. Some indirect effects cannot be evaluated for years after the implementation of deregulation: “It’s not easy to predict the long-term changes and consequences that deregulation will create” (Morrow, 2017). Consequences may be seen immediately in some sectors but not in others.
Benson, Stadler and Pontell (2019) take these cautionary words a step further and explain that President Trump is moving ahead with deregulation that will negatively impact several areas of life, “including consumer financial protections, environmental controls, and workplace safety among others” (Benson et al., 2019, p. 1063). The researchers argue that the Trump Administration’s rapid focus on deregulation is bound to have negative collateral damage for organizations because of the risk associated with deregulation. Regulation is often implemented because it is an exercise in risk management. Easing up regulation can create a riskier environment than what should be seen.
Nonprofits will be impacted by deregulation under the Trump Administration in various ways, but it will take time to see what the net effect is. Some sectors will be hit, such as environmental and Planned Parenthood, but others may benefit from deregulation, depending on what services they provide for the public. Indeed, Weaver (2018) argues that the benefits of regulation for nonprofits exceed the costs of deregulation, and that deregulation is not as good for the nonprofit sector as proponents of Trump’s deregulation reform suggest it would be. Weaver’s (2018) concern is that “proponents of deregulation would argue that there are simply too many regulations that result in high costs and regulatory burdens on regulated entities including businesses, universities, hospitals, labor unions, and nonprofit organizations.” The emphasis of supporters of deregulation is all on the cost that organizations have to pay in order to comply with regulations. What these individuals do not see is that there are other costs that regulation can save them. They are only looking at one set of numbers in other words. They are not looking at all the data but rather only at cherry-picked data. This is why Weaver (2018) argues that “legal scholars question the validity of such data, weakening the notion that these numbers are indicative of a systemic problem.” Cherry-picked data never tells the whole story. It leaves a great deal out that would provide better understanding of the benefits and costs of regulation and deregulation. And as Weaver (2018) finally points out, “proponents of deregulation overlook the fact that, according to OMB, benefits far exceed costs” (Weaver, 2018, p. 500). How so? Benefits of regulation include added security, guidelines for managing risk, and reduced risk of law suit if something goes wrong. Thus, how deregulation actually impacts a nonprofit oftentimes is not seen for years until something does go wrong and the true costs of deregulation are finally exposed.
Conclusion
The arguments show that deregulation can be a mixed bag with some positive benefits for nonprofits and some questionable outcomes for others. The fact is that not all nonprofits are the same, have the same objectives, or can benefit from deregulation in the same way. Some actually benefit more from regulation. In other cases the actual cost of deregulation is uncertain and cannot be known for a number of years until effects are finally felt in force. Without context, time and understanding, the true impact of deregulation under the Trump Administration is far from certain.
References
Belton, K. & Graham, J. (2019). Trump’s Deregulatory Record: An Assessment at the Two-Year Mark. Retrieved from http://accf.org/wp-content/uploads/2019/03/ACCF-Report_Trump-Deregulatory-Record-FINAL.pdf
Benson, M. L., Stadler, W. A., & Pontell, H. N. (2019). Harming America: Corporate Crime in a Context of Deregulation. Victims & Offenders, 14(8), 1063-1083.
Brookings Institute. (2020). Tracking deregulation in the Trump era. Retrieved from https://www.brookings.edu/interactives/tracking-deregulation-in-the-trump-era/
Morrow, D. (2017). Deregulation in the Trump Administration will likely impact nonprofits. Retrieved from http://blog.abila.com/deregulation-trump-administration-impacting-nonprofits/
Weaver, H. L. (2018). One for the price of two: the hidden costs of regulatory reform under executive order 13,771. Administrative Law Review, 70(2), 491-512.
Annotated Bibliography
Belton, K. & Graham, J. (2019). Trump’s Deregulatory Record: An Assessment at the
Two-Year Mark. Retrieved from http://accf.org/wp-content/uploads/2019/03/ACCF-Report_Trump-Deregulatory-Record-FINAL.pdf
The authors argue that Trump’s deregulation with EO 13771 is aimed at curbing the abuses of federal agencies by capping their ability to put costs on nonprofits and other organizations. The reason for this cap would be that agencies are capped in terms of public funding—i.e., money they can spend allotted them via Congressional appropriations—and so in order to achieve their own policy ambitions these agencies shift these costs onto nonprofits and other organizations. The EO intends to put a stop to that practice and thus liberates nonprofits from the iron grip of regulatory agencies that, in Trump’s eyes, hinder economic growth.
Benson, M. L., Stadler, W. A., & Pontell, H. N. (2019). Harming America: Corporate
Crime in a Context of Deregulation. Victims & Offenders, 14(8), 1063-1083.
The authors explain that President Trump is moving ahead with deregulation that will negatively impact several areas of life, “including consumer financial protections, environmental controls, and workplace safety among others” (Benson et al., 2019, p. 1063). The authors argue that the Trump Administration’s rapid focus on deregulation is bound to have negative collateral damage for organizations.
Brookings Institute. (2020). Tracking deregulation in the Trump era. Retrieved from
https://www.brookings.edu/interactives/tracking-deregulation-in-the-trump-era/
Some nonprofits will no longer have to identify all their donors for the IRS. This rule impacts 501c organizations, which can receive unlimited donations from individuals, corporations and unions. Now these nonprofits no longer have to disclose those identities in their tax filings—but they still have to maintain them in their records and provide them if requested.
Morrow, D. (2017). Deregulation in the Trump Administration will likely impact
nonprofits. Retrieved from http://blog.abila.com/deregulation-trump-administration-impacting-nonprofits/
Nonprofits will be impacted by deregulation under the Trump Administration in various ways, but it will take time to see what the net effect is. Some sectors will be hit, such as environmental and Planned Parenthood, but others may benefit from deregulation, depending on what services they provide for the public. This source is helpful for explaining the differences.
Weaver, H. L. (2018). One for the price of two: the hidden costs of regulatory reform
under executive order 13,771. Administrative Law Review, 70(2), 491-512.
The author argues that the benefits of regulation for nonprofits exceed the costs of deregulation, and that deregulation is not as good for the nonprofit sector as proponents of Trump’s deregulation reform suggest it would be: “Proponents of deregulation would argue that there are simply too many regulations that result in high costs and regulatory burdens on regulated entities including businesses, universities, hospitals, labor unions, and nonprofit organizations. The factual basis for their argument is heavily reliant on numbers. However, legal scholars question the validity of such data, weakening the notion that these numbers are indicative of a systemic problem. Moreover, these proponents of deregulation overlook the fact that, according to OMB, benefits far exceed costs” (Weaver, 2018, p. 500).