We have been collecting reports about recent threats to nonprofit organizations, especially those focused on climate advocacy, immigration and international aid. Many are also concerned about potential challenges to Harvard’s tax-exempt status.

These concerns are real, and your questions are valid, but much of what’s circulating about sector-wide impacts is rumor. That said, some rumor may evolve into concrete threat. Trust that we are keeping an eye on issues that may impact our clients.

Remember, there are laws in place. Many threats, if acted upon, may not be lawful and will likely be challenged.For peace of mind, please remember:

A President cannot unilaterally revoke tax-exempt status

  • To date, the IRS is required to follow a formal process before revoking tax-exempt status or taking other punitive action.
  • That said, the legal definition of “charitable” activity could be changed.

The Administration cannot unilaterally freeze bank accounts

  • While the Secretary of State may designate certain organizations as “foreign terrorist organizations,” which can lead to frozen funds, that determination is on an individual basis and subject to appeal.

As we think about these issues, we see clues about how the administration might try to define “non-charitable” activity. A recent Executive Order, Restoring Public Service Loan Forgiveness, identified certain “substantial illegal purposes” that could be deemed non-charitable, including:

  • Aiding or abetting violations of federal immigration law;
  • Supporting terrorism, including by facilitating the funding or operations of designated Foreign Terrorist Organizations or by engaging in violence to obstruct or influence federal government policy;
  • Child abuse, including chemical or surgical castration or mutilation of children, or trafficking children to so-called transgender sanctuary states for purposes of emancipation from lawful parents;
  • Engaging in a pattern of aiding and abetting illegal discrimination; or
  • Engaging in a pattern of violating state tort laws, including trespassing, disorderly conduct, public nuisance, vandalism, or obstruction of highways.

Again, it is unlikely the President can unilaterally determine an organization has engaged in “substantial illegal purposes.” Historically, that determination lies with the IRS, and must be based on an individualized investigation and adherence to formal procedures.We’ll continue to monitor the situation. In the meantime, if you have questions about your organization’s status or any other concerns, don’t hesitate to contact us.

As we’ve advised in recent months, review and implement your document retention policies, assess the language you use in your documents and communications to avoid language that could be misconstrued or seen as “code” words, and document your processes to establish there is no “illegal discrimination.”