TANGO Partners Perspective – January 2025

2025 Outlook for Nonprofits:  Insights from FML CPA’s: 

Written by –
Amber Tucker, CPA
Partner, Assurance & Advisory Services
FML

Fiondella Milone & Lasaracina (FML)

As we enter 2025, not-for-profits are navigating an increasingly complex landscape. With potential changes in tax laws, economic uncertainty, and evolving donor expectations, not-for-profits must be proactive to remain sustainable and impactful. Here are a few key considerations that organizations should be aware of in the upcoming year.

  1. Navigating Tax Law Changes

In 2025, there are anticipated updates in federal tax regulations that could affect nonprofit organizations’ financial planning. Some key areas to watch include:

  • Unrelated Business Income Tax (UBIT): As the IRS continues to scrutinize nonprofit revenue streams, it’s critical for organizations to stay on top of what qualifies as unrelated business income and the tax implications. UBIT remains a key area where not-for-profits sometimes face unexpected liabilities. In 2025, we expect more clarity on how to handle digital advertising and other evolving revenue sources that not-for-profits may rely on.
  • Charitable Giving Incentives: While the specific incentives may fluctuate depending on changes in federal and state policy, not-for-profits should be proactive in understanding potential changes to donor tax incentives. Tax laws can affect individual and corporate giving, and understanding these nuances can help organizations better plan their fundraising strategies.Setting up a meeting in calendar
  1. Economic Impact and Fundraising Challenges

Inflation and shifting economic conditions may continue to present challenges for not-for-profits in 2025, particularly with regard to fundraising. Donors may have less disposable income, and competition for philanthropic dollars can be fierce. To counter these challenges:

  • Diversify Funding Streams: Not-for-profits should consider broadening their funding base by diversifying revenue sources. This might include expanding major donor programs, creating new partnerships, exploring earned revenue opportunities, and tapping into new online donation platforms.
  • Digital Fundraising: As more people give online, having an optimized digital fundraising platform is a necessity. Explore tools that allow for peer-to-peer fundraising, mobile giving, and recurring donations. It’s also essential to have secure platforms that protect donor data.
  • Increase Efficiency: Tight budgets mean that not-for-profits must continue to be more strategic with how funds are allocated. Tightening internal controls, investing in technology that improves efficiency, and regularly reviewing financial statements can help ensure that resources are being used most effectively.
  1. Compliance and Governance

Governance and compliance remain top priorities for not-for-profits in 2025. Changes to federal and state regulations, including those around donor privacy and reporting requirements, will continue to evolve.

  • Regular Audits and Reviews: Organizations should maintain up-to-date audits and reviews of their financial practices to ensure compliance. Even small lapses in compliance can lead to larger issues down the line, including loss of tax-exempt status.
  • Board Engagement: A nonprofit’s board is integral to both financial oversight and the organization’s strategic direction. Ensure that your board members are well-informed about their fiduciary duties and the evolving regulatory landscape.
  1. Focus on Mission Impact and Community Engagement

Lastly, as we move into 2025, not-for-profits will continue to be judged not just by financial results but by their broader societal impact. In an increasingly transparent world, organizations must demonstrate the value they are creating for the communities they serve.

  • Impact Reporting: Not-for-profits that can show measurable, tangible outcomes from their work are more likely to retain and attract donors. Whether it’s through annual reports, donor newsletters, or digital storytelling, focus on communicating your organization’s impact effectively.
  • Engagement and Partnerships: Building strong relationships with community stakeholders, including other nonprofit organizations, local businesses, and government entities, will be critical in maximizing impact and sustainability.

Conclusion
The landscape for not-for-profits in 2025 will undoubtedly present both challenges and opportunities. By staying informed about changes in tax law, diversifying revenue sources, and focusing on transparency and impact, Not-for-profits can continue to thrive and fulfill their missions. FML CPAs is here to help organizations navigate these complexities, ensuring they have the financial foundation and strategic guidance necessary to succeed in a dynamic environment.

CONTACT OUR
TANGO PARTNER

Amber Tucker, CPA
Partner, Assurance & Advisory Services

 

P: 860-657-3651 ext. 223
C: (860)705-5828
E:
atucker@fmlcpas.com

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