Will This Impact Me?
Dear Erin,
Just in case you are sharing this with friends, let me state what you already know. I am not a lawyer. I am not a politician. I am not a lobbyist. I am not a community organizer. I get my news from the mainstream media, focusing on absorbing as much center-of-the-road, objective journalism as I can find.
What I am about to say is my opinion - what I would say to you if you were sitting here with me. It is not meant to guide other nonprofit executives’ decision-making.
So that’s my caveat.
Here’s what I want to tell you: there are rumors across the nonprofits sector, to which you belong, that the President will issue Executive Orders threatening the tax exempt status of many nonprofits and even their very existence. Many nonprofit folks are asking whether this will impact their own organizations and what to do about it.
The threat is credible, as the Administration has already threatened Harvard University and it has used the Department of Government Efficiency (Elon Musk’s DOGE) to crush another organization. As I write this on April 24, I will say that many people expected something to come out on April 22, Earth Day, but that did not happen. That doesn’t mean it’s not going to happen. And, of course, chaos and uncertainty along with a fair amount of “whoops” has been the tenor of Executive Order implementation. If something does happen, expect a wild ride.
Here’s what we know:
The Executive Orders to which I’m referring are designed to eliminate Federal support for any organizations that are deemed to be supporting illegal activities. That’s already the case - you cannot maintain 501c3 status if you are breaking the law. What is changing is recent Executive Orders (EOs) that are declaring certain causes illegal, very much linked to partisan interpretation.
I’m not interested in even typing out the words of what the federal government now says is illegal. You would have to be living under a rock to not know what the President finds offensive. Let’s just say that there are many, many nonprofits committed to social and humanitarian causes that are in conflict with the President’s values. If you are a nonprofit focused on these causes, you may be targeted. Call me if you want to talk this through.
There are lawsuits contesting these EOs. But that will take time.
You are going to hear two similar-sounding terms: nonprofit status and tax exempt status. The first is how you are incorporated as a business within your State. The second is whether or not you have to pay income taxes and whether donations to you are tax deductible; this is Federal. It is the second one that could be impacted by Executive Orders.
Technically, the Executive Branch cannot with the stroke of a pen cancel your 501c3 tax exempt status, even if they don’t like what you do. They can call for an IRS audit (known as an “examination”) if you are suspected of violating the law. If the examination finds you wanting, you may need to make changes or be shut down entirely. You can appeal, but that is expensive.
At the same time, federal grant funding has already been pulled or halted from organizations and causes that the current administration finds problematic. Unfortunately, as you know, the administration already signaled the discontinuation of federal arts funding.
What to do?
Well, as best I can tell, your nonprofit is unlikely to fall in the crosshairs of forthcoming EOs, given your mission and activities. However, there is language and words and causes that are common in your specific sector that will. If you choose to do work to advance these ideas, then you absolutely should (First Amendment and all), but go in with eyes wide open.
Regardless, keep your compliance activities spot-on perfect. File your forms on time. Beware “unrelated business income” on your 990. (I do not believe you have any, but let’s talk about it.) Follow your by-laws. Keep good records of your Board meetings. Your donor records should be pristine. Do a risk assessment of your social platforms, your website, your collateral, and your public documents.
If you find yourself targeted via a letter from DOGE or the federal government, first call your lawyer. Then call your mother.
Let’s hope it doesn’t come to that.
Love, Mom
