Pearl River      There’s a long chapter in the autocrats’ playbook on going after the nonprofit sector.  In India, Russia, Turkey, Hungary, Morocco, and countless other countries, first you attack and cut off foreign funding.  Next you investigate them forcibly and publicly with uniformed police, guns drawn, and seize records, computers, phones, and bank accounts.  Finally, you bar their activity, delist them, take away any exemptions, and maybe even interrogate and jail their staff.  Not all countries follow this line of march.  Sometimes the steps are in a different order.  Sometimes they go farther and sometimes they pull back from some of their options.  The objective is always the same: either bending them to the government line or putting them out of business.

Could this happen in the United States?

I have counseled many nonprofits like our own that it wouldn’t be easy.  For years, until the Biden administration, the IRS had been a special target of the Republicans in Congress, especially the nonprofit, tax exempt division.  Biden opened up the spigot to collect more revenue, but their budget had been stalled for years.  The dubious allegations that tax exemptions had been difficult for some of the Tea Party groups to obtain was part of it, though that had also been true of some of the ACORN successor organizations, like the one in Pennsylvania during the same period.  Now, their staff count is being reduced by some 22,000 workers to the degree some observers wonder if there will be problems even collecting taxes.  Add those pieces together, and I have thought it would be hard to weaponize the IRS against nonprofits and make it seem anything other than discriminatory and political.

I started to have second thoughts when President Trump was brazen and blatant enough to start threatening the tax exemption for Harvard and other universities.  The law is clear that the President cannot direct such an order.  Harvard was finally willing to step up and oppose the actions, where some other universities had gone to their knees.  This just seemed a loser for the president who was just bloviating in frustration that Harvard had opposed his dicta.

Reports now in the Wall Street Journal seem to argue that the Trump administration is making all of this more of a priority than I had been wagering.  Seems some lawyers being put in critical policy positions are claiming they have a “list” of organizations they want to target.  Other lawyers seem to be leading discussions on how they might change the regulations to restrict exemptions more aggressively or deny exempt status to groups on the other side of new rules.

Changing the criteria for approving exemptions is a perilous for nonprofits.  The IRS has never been a transparent organization.  The Service, as they refer to themselves, doesn’t normally say why you win an exemption, or why you are denied one.  Given the opaque nature of their operations, an organization could be clueless if they found they were on the losing end of an application, if the internal assessments had been weaponized.

Then, there are IRS investigations, which are wildly burdensome and difficult.  Decades ago, when the nonprofit division was more robust, investigations were more routine and expected.  Fifty years ago, we certainly lived through several of them in the early history of ACORN, as they tried to sort out the relationships been ACORN, which was not tax exempt, but simply a plain vanilla nonprofit, and other organizations that were 501c3 or other classifications that maintained a different status.  IRS auditors would sit at a table in the office for weeks and weeks, until suddenly, coming up empty handed, they would disappear.  It’s burdensome and expensive.  More recently, this is less common.  To the degree organizations were targeted as they have been in other countries, those with deep pockets might be able to win back constitutional protections and maintain their rights, but others could be endangered.

The administration’s executive power play is knocking on the door of autocracy and definitely seems to be reading the playbook from other countries.  It still won’t be easy.  There is some strength in numbers.  USAFacts notes that Nonprofit organizations play a significant role in the US economy. In 2022, there were 1.97 million nonprofits operating in the US, including 1.48 million 501(c)(3) tax-exempt organizations, according to the IRS.”

Unfortunately, as we have seen on the attack on universities, getting nonprofits to act together to oppose weaponizing the IRS would be like herding cats.  The attack on ACORN was a good example of the too typical cut-and-run tendency to save yourself first or hide in the shadows, rather than organize solidarity and defense.  Maybe this time it will be different? They seem to be mustering their forces, so hopefully there are many nonprofits doing the same.