From Public Interest to Political Target
The legal environment for nonprofits has undergone significant changes under the Trump administration. These changes are not overt bans or direct defunding but rather subtle tactics—referred to as “lawfare”—that weaponize compliance regulations, redefine national security parameters, and blur the line between advocacy and extremism.
This article explores the evolving challenges nonprofits face, from traditional regulatory frameworks to the emerging threats of today. It also provides practical strategies for enhancing organizational resilience.
Related article: Nonprofits and the Public Interest
Historical restrictions and the legal foundations of risk
The tension between nonprofit advocacy and government control has existed since the inception of the modern charitable system. Section 501(c)(3) of the Internal Revenue Code grants tax-exempt status to organizations “operated exclusively for charitable, religious, or educational purposes,” but it imposes strict limitations on lobbying and political campaigning.
Lobbying by 501(c)(3) organizations must remain “insubstantial,” a vague term that has led to inconsistent enforcement and a chilling effect on advocacy. The IRS’s discretion in defining “insubstantial” has further complicated compliance.
Political campaigning is “absolutely prohibited” for 501(c)(3) organizations, which are barred from endorsing candidates or engaging in direct political activities.
Following the September 11, 2001, attacks, the Patriot Act’s “material support” provisions expanded legal risks for nonprofits. Humanitarian groups operating in conflict zones were sometimes accused of indirectly supporting terrorism, with even minor associations—such as shared vendors or financial transactions—leading to investigations or asset seizures. These practices normalized conflating dissent, international aid, and humanitarian engagement with subversive activity.
Current flashpoints
National Security Memorandum (NSPM-7)
In October 2025, the administration issued the National Security Presidential Memorandum on Countering Domestic Terrorism and Organized Political Violence (NSPM-7). While presented as a framework for interagency coordination, its broad language allows for sweeping interpretations. References to organizations whose advocacy could allegedly be “exploited by extremists” open the door to heightened scrutiny of civil-rights, environmental, and humanitarian groups whose work challenges government policies.
NSPM-7 permits agencies like the Department of Justice, the Treasury’s Financial Crimes Enforcement Network (FinCEN), and the IRS Criminal Investigations division (IRS-CI) to share data on tax-exempt entities. This coordination risks eroding the boundary between legitimate oversight and intrusive monitoring, especially if investigations are politically motivated.
The “Nonprofit Killer Bill” (H.R. 9495)
H.R. 9495, dubbed the “Nonprofit Killer Bill,” proposes conditioning tax-exempt status on a certification that an organization “does not materially contribute to political unrest.” Its vague language mirrors NSPM-7, framing public dissent as potential disorder. Legal scholars fear that even if the bill is not enacted, its proposal signals bipartisan willingness to politicize nonprofit oversight.
Politicization of the IRS-CI Unit
The Wall Street Journal reports that there are plans to restructure the IRS Criminal Investigations division to target “left-leaning” nonprofits and donors. Internal documents allegedly list philanthropists like George Soros as potential targets, equating progressive philanthropy with “terror finance.” Such changes could transform tax enforcement into a tool for political retribution, allowing Treasury and Justice to refer nonprofits for prosecution with minimal evidence.
Labeling advocacy as terrorism
Advocacy on issues like Palestine, climate change, and racial justice is increasingly portrayed as extremism, creating reputational damage akin to official actions. Donors withdraw, partner organizations hesitate, and a chilling effect sets in. Nonprofits now face the burden of proving their innocence, with congressional inquiries demanding donor lists and internal records to exhaust resources and discourage participation.
Effect on the public interest mission
Chilling effect
Even preliminary inquiries silence advocacy. Community groups remove DEI materials from websites, scrub references to “equity” or “racial justice,” and avoid political labeling. Lawyers report clients declining to sign coalition letters or participate in demonstrations for fear of IRS retaliation.
Funding disruptions
Financial institutions under federal oversight are increasingly conservative about transferring funds to advocacy organizations, especially those operating internationally. Foundations face “derisking” measures reminiscent of post-Patriot Act banking compliance, effectively deputizing grant makers as enforcement agents.
Mission drift and self-censorship
Faced with uncertainty, many nonprofits retreat to “safe” programming. Environmental groups shift from policy advocacy to tree-planting; human-rights organizations focus on education rather than litigation. This narrowing of civic imagination mirrors tactics used by restrictive regimes elsewhere.
Erosion of public trust
Unsubstantiated allegations corrode credibility. Once a charity’s name is linked with “terrorism” or “domestic extremism,” the reputational cost lingers. In a polarized media environment, accusation itself becomes conviction.
The burden of legal uncertainty
Ambiguous terms like “political unrest” or “advocacy exploited by extremists” leave enforcement to administrative discretion. This ambiguity prompts organizations to over-comply and discourages challenges to authority.
Lessons from the field
Several cases illustrate these patterns:
University-based nonprofits hosting protests over Gaza or environmental divestment face threats to their tax-exempt status.
Humanitarian groups report frozen transfers and heightened vetting demands.
Coalitions promoting voter registration and police accountability are subpoenaed for donor lists under congressional “oversight” inquiries.
Strategies and other paths forward
Governance and compliance
Conduct periodic audits of lobbying, political, and foreign-funding activities.
Maintain board oversight committees for legal risk management.
Document program rationales to demonstrate alignment with charitable purposes.
Related article: Nonprofit Management: Legal Challenges Galore
Transparency and documentation
Transparency is the best defense against mischaracterization. Publicly accessible impact reports, audited financials, and clear policy rationales build trust. However, transparency must be strategic to protect the privacy and security of staff and beneficiaries.
Legal preparedness and partnerships
Develop connections with experienced legal advisors, especially a nonprofit lawyer, and collaborate with nonprofit networks to share expertise and resources. Pooling legal support lowers costs, promotes consistency, and strengthens collective readiness.
Strategic communications
Develop a crisis-response plan that emphasizes values and facts, not defensiveness. Engage sympathetic media outlets and community leaders early. Train staff to handle inquiries without speculation.
Collective action
Fragmentation is vulnerability. Sector-wide alliances amplify advocacy for due-process protections and raise public awareness of the stakes. As one legal analyst observed, the best defense against isolation is collective strength—building solidarity across legal, financial, and storytelling fronts.
Conclusion: reclaiming the public interest
Nonprofits have always walked a delicate line—independent yet regulated, outspoken yet accountable. The present moment is marked by a systematic effort to redraw that line in favor of political control, with agencies once tasked with enabling charitable trust now policing ideology.
Today’s organizations must document their integrity, build alliances, and demand fairness. Legal compliance is necessary, but the path forward requires vigilance and courage—qualities that have long defined the nonprofit tradition. In reaffirming their role as guardians of the public interest, nonprofits affirm something larger: that a free and democratic society depends on the freedom to serve it.


