From AI to Policy Shakeups: What Nonprofits Need to Know About 2024's Wins and 2025's Challenges

As we reach the midpoint of 2025, nonprofits continue to demonstrate resilience—adapting, problem-solving, and delivering impact under pressure. This year's significant policy shifts and evolving philanthropic landscape demand strategic thinking and proactive planning.

Here's an analysis of 2024's biggest trends, the current policy environment, and actionable strategies nonprofits should implement to sustain momentum and navigate uncertainty.

2024: A Year of Innovation, Disruption, and Donor Evolution

Artificial Intelligence Empowered Fundraisers

Contrary to fears that AI would eliminate jobs, 2024 proved that artificial intelligence became a powerful tool for amplifying messaging. Organizations that successfully integrated AI into fundraising focused on three key areas:

1. Improved donor modeling

2. Automated follow-up communications

3. Personalized stewardship programs

   
   

The key is maintaining authentic human connection while leveraging technology to scale efforts more efficiently.

Monthly Giving Emerged as the Revenue Stabilizer

While total online revenue experienced a slight decline, monthly giving surged and now represents nearly one-third of all online donations. This shift toward subscription-style philanthropy provides organizations with more predictable revenue streams, reducing dependence on one-time major gifts and seasonal campaigns.

Generation Z Redefined Giving Patterns

Generation Z demonstrated a distinctive approach to philanthropy: micro, frequent, and purposeful giving. This demographic seamlessly integrated charitable giving into their daily lives through TikTok fundraisers, Venmo drives, and peer-to-peer campaigns. Organizations that successfully engage Gen Z donors emphasize co-creation, transparency, and continuous engagement rather than traditional solicitation methods.

The Tale of Two Donor Bases

2024 highlighted a concerning paradox in philanthropy. While mega-gifts from philanthropists like Michael Bloomberg and Ruth Gottesman generated headlines with billion-dollar donations, the total number of individual donors continued to decline. This trend underscored a critical challenge: how to simultaneously cultivate major gift prospects while building sustainable grassroots support.

Sector-Specific Success Stories

Several sectors demonstrated notable growth:

• Arts & Culture organizations

• Environment & Animals

• Health-focused nonprofits

These increases were largely attributed to compelling storytelling techniques and increased data transparency in impact reporting.

Alternative Giving Vehicles Gained Momentum

Cryptocurrency philanthropy quietly crossed the billion-dollar threshold, and most of the top 100 charities now accept Bitcoin and other digital assets. Additionally, Donor Advised Fund (DAF) grantmaking maintained strength at over $54 billion, while IRA Charitable Rollovers (QCDs) surged due to the increased cap and age-70½ eligibility.

Trust-Based Philanthropy Entered the Mainstream

More foundations adopted unrestricted, multi-year funding models with simplified application processes. This shift toward relationship-based giving allowed nonprofits to focus resources on impact rather than administrative compliance, demonstrating the sector's move toward greater trust and partnership.

2025: Navigating New Policy Realities

Understanding the Tax Policy Changes

The most significant development affecting nonprofits in 2025 is the expansion of the State and Local Tax (SALT) deduction cap. The cap increased from $10,000 to $40,000, making itemization more attractive, particularly in high-tax states including Illinois, California, New York, New Jersey, and Connecticut. This change is particularly relevant for nonprofits because increased itemization typically correlates with higher charitable deduction utilization.

Key details include:

• The cap will grow 1% annually through 2030, then revert unless extended

• For individuals earning over $500,000, the cap gradually phases back down to $10,000

• The change is temporary, requiring nonprofits to plan for potential future reversals

Potential Operational Impacts

Current legislative proposals include a 21% excise tax on all nonprofit employees earning over $1 million, not just the top five executives as in previous iterations. This could significantly impact hospitals, universities, and larger organizations. Additionally, there are proposals to revive taxation on fringe benefits like parking, meals, and transportation under the Unrelated Business Income Tax (UBIT), which would add administrative and financial burdens.

Federal Funding Uncertainty

Early 2025 saw a temporary pause on new federal grants, particularly those tied to diversity, equity, and inclusion (DEI) and community-based programs. While courts issued injunctions, the disruption created ripple effects including delayed reimbursements, program uncertainty, and increased caution among funders.

Workforce and Operational Challenges

The nonprofit sector has experienced significant workforce reductions, with education, healthcare, and social service organizations reporting job losses in the first quarter of 2025. This has stretched the remaining staff thin, creating risks of burnout and potential impacts on program quality. Nonprofits need to ensure employees are taking their time off and prioritizing self-care.

Strategic Recommendations for Nonprofits

Strengthen Donor Relationships Through Technology

Organizations should leverage AI and automation to scale their efforts while maintaining authentic human connections. The goal is efficiency that enhances, rather than replaces, personal relationship building.

Diversify Revenue Streams

Make it easy for donors to contribute through various vehicles including stock gifts, cryptocurrency, DAF grants, and QCDs. Regularly communicate these options to your donor base and provide clear instructions for each giving method.

Balance Major Gift and Grassroots Strategies

Avoid over-reliance on either major gifts or grassroots fundraising. A balanced approach that cultivates both high-capacity donors and broad-based support provides greater stability and growth potential.

Monitor Policy Developments

Ensure leadership and finance teams stay informed about ongoing policy changes. Consider engaging with sector advocacy organizations and maintaining relationships with policymakers who understand nonprofit operations.

Prioritize Legacy Giving Programs

The most sustainable long-term revenue often comes from planned gifts and tax-efficient giving strategies. Investment in legacy giving programs can provide significant returns while helping donors achieve their philanthropic and financial goals.

Looking Forward

The year 2024 demonstrated that innovation, technological advancement, and transformational gifts can coexist with challenging realities like declining donor participation and workforce pressures. As 2025 continues to unfold, nonprofits face policy uncertainties, economic pressures, and evolving donor expectations.

Success in this environment requires balancing innovation with proven fundamentals, maintaining donor relationships while exploring new revenue streams, and staying informed about policy developments while focusing on mission delivery. Organizations that embrace this multifaceted approach will be best positioned to navigate the challenges and opportunities ahead.

The nonprofit sector's resilience and adaptability have been tested repeatedly, and 2025 presents another opportunity to demonstrate these strengths. By learning from 2024's successes and proactively addressing current challenges, nonprofits can continue advancing their missions while building sustainable organizations for the future.

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I help nonprofits raise more money through training, coaching, and strategic planning. If your organization is ready to strengthen its fundraising strategy, diversify revenue streams, or develop a comprehensive legacy giving program, I'd love to discuss how we can work together. Connect via email: rkrit@ronkritconsulting.com