Targeting of the Nonprofit Sector

On October 15, The Wall Street Journal reported on detailed plans for changes at the IRS, which would include installing administration allies at the IRS criminal-investigative division, weaken the involvement of IRS lawyers in criminal investigations, and potentially target specific left-leaning groups and donors. This represents a dangerous politicization of regulatory power. See more of Shannon McCracken’s response here.

Members of Congress are responding to these reports, notably with this letter from 14 U.S. Senators to the IRS senior leadership, raising concerns about these plans.

The September 25 Presidential Memorandum titled “Countering Domestic Terrorism and Organized Political Violence” raises significant concerns for nonprofit organizations that echo earlier troubling policy actions and rhetoric taken by this administration and Congressional legislative actions. The memo describes a new National Joint Terrorism Task Force (JTTF) and a resulting law enforcement strategy. The JTTF will investigate participants in “criminal conspiracies” with little justification for how such organizations or participants would warrant such scrutiny. See TNPA’s full statement by Shannon McCracken here.

While this Presidential memo does not represent a legal change, the memo and the planned changes at the IRS are the latest examples of the unwarranted targeting of the nonprofit sector. TNPA continues to raise awareness and concerns through engagement with policymakers, media engagement, and public statements.

July 25, 2025 | Rescissions Package Signed into Law

The $9 billion rescissions package passed the Senate on July 17, the House on July 18, and was signed into law by the President. The funding was primarily for foreign aid and public media. Senators adopted a Republican substitute to take out a $400 million rescission for PEPFAR (President’s Emergency Plan for AIDS Relief) but other amendments to weaken the scope of the overall package failed.

Why this matters:

The rescissions package is another effort by the current administration to “claw back” money for programs, despite Congress’s authority to authorize and appropriate funding. A government shutdown in the new fiscal year beginning October 1 is more likely following this bill’s passage, as Democratic votes will be needed to avoid a shutdown and anger at the rescission cuts remains.

Johnson Amendment

The press has drawn considerable attention to the Internal Revenue Service’s court filing that supports a narrow exception to the Johnson Amendment for religious organizations. The Johnson Amendment was passed by Congress in 1954 and prohibits charities and churches from engaging in political campaign activity. The immediate effect of the case is limited to two churches in Texas (the named plaintiffs) and permits political endorsements so long as they occur in the usual course of communications with congregants. However, there is widespread concern and debate that the permission could subsequently be applied to 501(c)(3) organizations more broadly.

Why this matters:

TNPA reiterates our longstanding support of the Johnson Amendment, as nonprofit nonpartisanship is a foundational principle. We will be watching this case carefully, alert for a final outcome that could encourage those who would attack the Johnson Amendment head-on. Participation in the case has expanded beyond the original parties, likely signaling an extended wait for resolution.

July 4, 2025 | The Tax & Spending Bill Becomes Law

The tax and spending legislation, originally titled “One Big Beautiful Bill,” was signed into law at the White House on July 4 with a number of provisions impacting the broad nonprofit sector.

• Major Win: Permanent charitable deduction for non-itemizers up to $2,000
• Mixed Result: New floors and caps on certain deductions may affect giving patterns
• Success: Several harmful provisions from the House bill were removed entirely
• Bigger Picture: Reductions in government funding for essential safety net programs and social services will force nonprofits to stretch their limited resources to meet growing needs

 

What This Means for Charitable Organizations and Donors

Positive Changes

Permanent charitable deduction for non-itemizers of up to $2,000 for married couples and $1,000 for individuals.

• Opens tax benefits of giving to millions more Americans who don’t itemize

Permanent extension of the 60% AGI limit for cash contributions

• Allows donors to give more with tax benefits
• Avoids unnecessary administrative burden on nonprofits

 

Provisions to Monitor

New floor of 0.5% of adjusted gross income for itemizers claiming charitable deduction

• Midlevel donors may need to give more to receive tax benefits

35% cap on itemized deduction value for high-income donors

• May reduce giving incentives for major donors

1% AGI floor on corporations’ charitable deduction

• Could affect corporate giving strategies

 

Harmful Provisions Successfully Removed

No 10% fee on Combined Federal Campaign contributions

Reduced tax on university endowments (up to 8% versus up to 21% in House bill)

No provision for executive branch overreach to revoke a nonprofit‘s tax-exempt status

No foundation excise tax or “parking tax” on employee fringe benefits

 

Impact on Safety Net Programs

Cuts to essential safety net programs will increase demand for nonprofit services at a time when many organizations are already stretched thin. A strong charitable sector works best alongside robust public support systems for vulnerable communities.

April 22, 2025 | The Threat of Politically-Motivated Revocation of Tax-Exempt Status

The Nonprofit Alliance would strongly oppose any executive order or action that would revoke the 501(c)(3) tax-exempt status of nonprofit organizations based on their misalignment with a current administration’s priorities or values. Such an act would:

• Allow the executive branch to unilaterally penalize organizations without due process, bypassing established legal frameworks
• Create a mechanism for labeling legitimate community organizations as problematic without evidence or judicial review
• Circumvent legislative authority by using executive power to redefine tax exemption criteria established by Congress

The real impact of such action would be felt in communities across America where nonprofits provide essential services. Organizations could be targeted for working with populations or on issues that an administration finds politically inconvenient, and be forced to reduce essential programs and services, reduce operational capacity, divert resources to legal challenges rather than mission fulfillment, and potentially close entirely, creating service gaps in vulnerable communities.

Just as it was wrong in 2013 when the IRS used keywords like “Tea Party” to select organizations for additional scrutiny, an action such as this would institutionalize the weaponization of government authority. It would create a system where any administration could label organizations they disagree with as problematic without substantive proof, and establish a dangerous precedent that could be expanded by future administrations to target an ever-widening circle of organizations.

Tax-exempt status is a legally defined classification, not a political tool that changes with each administration.

The nonprofit sector’s strength lies in its ability to address community needs independently of political pressures.The Nonprofit Alliance believes that presidential administrations must respect the established legal framework governing nonprofit organizations. We urge all federal officials to uphold the sector’s independence from political interference and protect the vital services nonprofits provide in communities nationwide.

February 6 | Executive Action Undermining NGOs

Read TNPA’s press release here.

On February 6, the White House issued an executive action ordering federal departments to stop funding nongovernmental organizations (NGOs) that, in the administration’s opinion, undermine the national interest. The heads of executive departments and agencies are ordered to review all funding to NGOs to align future funding decisions based on the current administration’s priorities.

The Nonprofit Alliance strongly opposes the executive action, which casts a baseless and harmful shadow over the work of NGOs at home and abroad. These organizations are on the front lines addressing critical issues such as disaster relief, public health, education, and human rights—work that aligns with the values and principles of the American people.

Labeling NGOs as undermining national interests while tying funding decisions to undefined and shifting political priorities jeopardizes essential services and vulnerable communities that rely on them. This action introduces uncertainty and political bias into a funding process that should prioritize impact and accountability above ideology.

The nonprofit sector has long been a trusted partner in advancing American values, supporting security, and fostering global stability. We urge the administration to reconsider this misguided policy and instead focus on strengthening the vital partnerships between government and NGOs that serve the best interests of the nation and the world.