Tax-exempt organizations are on edge amid the Trump administration’s latest threats to go after left-wing groups in the wake of the killing of conservative activist Charlie Kirk.
Administration officials have vowed to strip groups of tax-exempt status as part of its clampdown on those they say are promoting political violence. Tax-exempt status is typically only taken away after an audit, and it’s illegal for the president or vice president to direct the IRS to audit any taxpayer. Though earlier this year, President Donald Trump suggested he could take Harvard University’s status away, and in the days after Kirk’s death, Vice President JD Vance singled out the Open Society Foundations and Ford Foundation.
There are also other strategies the administration could take to make it easier to take away tax-exempt status.
1. What caused the most recent threat to organizations’ tax-exempt status?
President Donald Trump, without evidence, has blamed progressive groups for promoting political violence after Kirk was shot and killed earlier this month during a university event. Politicians and other figures of both parties have been targeted by political violence.
Vance hinted the administration may attempt to revoke the tax-exempt status of some groups in the days after the shooting. House Ways and Means Chairman Jason Smith (R-Mo.) said the committee would continue scrutiny of nonprofits, saying there’s “huge abuse” of groups in the sector initiating violence.
Trump said in a Wednesday social media post that he would designate Antifa as a terrorist organization, though there’s not a legal framework to designate domestic terror groups and Antifa isn’t a single entity. Antifa refers to a left-wing, anti-fascist movement. Conservatives often invoke the term to describe militant leftist protesters.
2. How are nonprofits responding to the administration’s considerations?
Almost 150 foundations in an open letter Wednesday condemned using political violence to go after ideological differences with nonprofits. The Open Society Foundations and Ford Foundation were among the signers.
Universities and groups focused on diversity and environmental issues have faced enhanced scrutiny from the Trump administration in the past year.
Concern about IRS scrutiny spurred many groups to wipe diversity, equity, and inclusion references from their websites, and led environmental groups to prep for a possible order that could strip away their tax benefits.
3. How could the Trump administration circumvent the typical process for revoking tax-exempt status?
The IRS must conduct an audit, which could take years and includes an appeal process, before revoking a group’s tax exemption.
But under Section 501(p) of the Internal Revenue Code, it’s easier to revoke the tax-exempt status of terrorist organizations. A terrorist organization can be designated by an executive order if a group is deemed to be “supporting or engaging in terrorist activity” or “supported terrorism,” as defined by the Immigration and Nationality and Foreign Relations Authorization acts.
If Trump designates Antifa as a terrorist organization and shows an organization has supported Antifa, that could jeopardize its tax-exempt status under this provision. It is unclear, however, whether Antifa, since it’s not a single entity, could be designated in this way.
Organizations can’t challenge the suspension under 501(p). There are nine organizations that have had their status suspended under this code section, according to the IRS. Losing tax-exempt status means donations are no longer tax deductible.
4. What’s next for tax-exempts?
The Trump administration’s threats to liberal groups could deter donors and make it harder for nonprofits to enact their missions, tax professionals said.
There has yet to be an official change to how tax-exempt status is granted or revoked, though there have been some attempted changes.
For example, an earlier version of the GOP’s massive tax package included a provision that would have given the Treasury Department heightened power over nonprofit organizations. That provision would have allowed the Treasury secretary to suspend the status of “terrorist-supporting organizations,” which nonprofit advocates said gave the department too much power.
The tax-exempt enforcement division is also down workers and has a vacancy in its top position, according to the IRS organization chart’s most recent Aug. 27 update.
The division lost more than a fourth of its workers amid the agency-wide workforce cuts, and Robert Choi, acting commission of the division, was put on administrative leave earlier in August.
Read More:
- Trump Readies Tax Audits, Criminal Probes of Liberal Groups
- Trump Administration Signals Changing Standards for Tax-Exempts
- What Is Tax-Exempt Status and How Groups Can Lose It, Explained
- Environment Groups Prep for Possible Attack on Nonprofit Status
- Trump’s Harvard Threat Raises Specter of IRS Nonprofit Crackdown
- GOP Drops Measure to Boost Treasury’s Power Over Tax-Exempts
- Three Top IRS Leaders Put on Leave in Second Wave of Removals
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