Nonprofit Law Prof Blog

Aprill, Lesson from the DOGE-United States Institute of Peace Showdown

Ellen Aprill (Loyola L.A. & UCLA) has a helpful HistPhil post titled “A Very Complicated Entity”: Lesson from the DOGE-United States Institute of Peace Showdown. Here is the Editors' Note:

Ellen Aprill explains why the hybrid nature of the United States Institute of Peace (USIP), both a government and nonprofit entity, was at the heart of the standoff between Department of Government Efficiency (DOGE) and USIP officials earlier this week.

Lloyd Mayer

Branch, Understanding the New Right’s Antipathy toward Civil Society

John Miles Branch (Northwestern University) has an interesting HistPhil post titled Rothbard vs. Cornuelle: Understanding the New Right’s Antipathy toward Civil Society. Here is the Editors' Note:

John Miles Branch explores the feud between two prominent mid-century libertarian thinkers, Murray Rothbard and Richard Cornuelle, as a way of understanding the contemporary right’s growing antipathy toward nonprofits writ large.

Lloyd Mayer

The Impacts of the Recent Executive Orders on Nonprofits (National Council of Nonprofits)

For anyone having difficulty keeping up with the flurry of Executive Orders, related federal executive branch actions, and resulting litigation, the National Council of Nonprofits has a very helpful website titled The Impacts of the Recent Executive Orders on Nonprofits that it is constantly updating based on new developments. While NCN is a party in several of the lawsuits currently relating to various Executive Orders, I found the website to be a relatively unbiased and comprehensive source of information relating to these important developments.

Lloyd Mayer

The Johnson Amendment and Who Controls Civil Society?

Today at Jonesing on Nonprofits.  Plus, Columbia University's crisis is an existential threat to  Civil Society, too. 

Mayo Settles Charity Care Case

Today, at Jonesing on Nonprofits.  Plus, Trump's attack on environmental justice nonprofits.

 

Nonprofits Should Not Die on the DEI Hill

If nonprofits were in a shooting war, they would be taking withering fire from all sides right now. The forces of evil – that’s what they are, evil – have nonprofits triangulated. It almost feels like Custard’s last stand, except nonprofits don’t deserve Custard’s fate. That is why I am writing this post. Nonprofits don’t have to die on the DEI hill. As a Black man who studies the law of Civil Society, I hereby absolve nonprofits of the obligation to die here. I don't speak for all Black people, but hear me out anyway. Nonprofits have my permission to abandon the DEI hill.  Thank you for trying, but I’d rather nonprofits live to fight another day.

The triangulation is brutal. From one angle, nonprofits are taking heavy fire from anti-DEI forces, spurred on mightily by Students for Fair Admission and Fearless Fund. From a second, they are suffering heavy losses from forces claiming to fight against terrorism with indiscriminate accusations, as though they are lobbing ordinance on civilian bystanders. From still a third angle, nonprofits are suffering severe casualties from nativist forces crusading against migrants and not afraid to attack religious places. Despite their determined resistance and perhaps after very high casualties, nonprofits can prevail on only two of those fronts. I am here to tell nonprofits, and especially the white folk who work and believe in Civil Society, that they cannot win the DEI battle nor should they keep trying.  Do not die on this hill.

Nonprofits should abandon the DEI hill and vigorously defend the other two. Nonprofits have the superior moral and legal force and the tactical advantage on the hills from which nonprofits defend religion and speech. The evil forces want to dismantle nonprofits that provide food, shelter, and basic life necessities to authorized or unauthorized migrants. That is a battle that can be won because most of those nonprofits are religious folk armed with the First Amendment’s freedom of religion. That is a powerful sword that has already proven effective. Nativists can and even should secure the border. But inside the border, they cannot penetrate the First Amendment to destroy nonprofits that serve migrants as an exercise of faith. Likewise, nonprofits have a First Amendment defense of a different sort from which to defend their speech even against America’s staunchest ally in the middle east. Their defenses are weakened, of course, by tolerating anti-Semites within their midst. I consider myself a purist, but even I argue that tax exemption and hate speech are mutually exclusive. Nonprofits can strengthen their defenses by showing intolerance to hate speech, but they need not concede that speech contrary to one political side or the other constitutes hate speech or support for terrorism. The First Amendment operates from this hill as well and it should be vigorously defended. These fights can be won and nonprofits should stand and fight.

The same cannot be said of the battle over DEI. Despite heroic and valiant efforts, particularly by Roger Colinvaux whose brave defense of nonprofit DEI has been accepted for publication by Yale Law Journal, and the members of the ABA Accreditation Committee, who are “advancing to the rear” as we speak in defense of DEI accreditation standards, that battle cannot be won. Colinvaux’s efforts are doomed by an Achilles heal. He labels efforts to remediate discrimination “discrimination,” though with the modifiers “charitable remedial.” As in “charitable remedial discrimination.” I have explained elsewhere why that concedes too much.

Law School accreditors are in an even more indefensible position, though try as they might. The Council of the Section of Legal Education and Admissions to the Bar determines, by authority delegated from the U.S. Department of Education, which law schools shall be accredited. Until last month, DOE supported Council accreditation standards that enforced the notion of diversity, equity and inclusion in law schools. Needless to say, that tolerance has run its course. Resistance is futile because the Council’s authority is derived entirely from DOE:

The Section's Council and Accreditation Committee are recognized by the U.S. Department of Education (DOE) as the national accrediting agency for programs leading to the J.D. In this function, the Council and the Section are independent of the ABA, as required by DOE regulations. All state supreme courts recognize ABA-approved law schools as meeting the legal education requirements to qualify for the bar examination; forty-six states limit eligibility for bar admission to graduates of ABA-approved schools.

That authority can be withdrawn, everybody knows that. Years ago, I appeared before an Accreditation Committee “show cause” hearing to defend our Law School’s DEI-motivated admissions policies. FAMU Law’s DEI mission is written into it’s authorizing statute:

(6) The college of law at Florida Agricultural and Mechanical University shall be dedicated to providing opportunities for minorities to attain representation within the legal profession proportionate to their representation in the general population; however, the college of law shall not include preferences in the admissions process for applicants on the basis of race, national origin, or gender.

We were forced to defend our mission because our attrition rate was too high.  We admitted low scoring students but we didn’t lower academic standards. We had what the Council considered an unacceptable attrition rate precisely because we held all of our students to undiluted academic standards. And despite their lower LSAT scores, more than 85% of our students graduated. FAMU Law has always complied with the Accreditation’s bar passage standards. We continue to meet the bar passage standards which have only been tightened in recent years. We successfully defended our mission.

That was then, this is now. Students for Fair Admissions has rendered DEI synonymous with discrimination. Modifiers and good intentions will not change that. What’s more, DOE is bound to enforce rules against discrimination. We might think “discrimination” is too broadly defined so that it now includes affirmative action and DEI, but that issue has been decided against us.

U.S. Attorney Pam Bondi recently delivered a stark and easily enforceable warning to the Council. In response to a threatening DOE Dear Colleague Letter, the Council decided to suspend enforcement of its DEI accreditation standards. Here is the Council’s complete statement:

CHICAGO, Feb. 22, 2025 — The Council of the Section of Legal Education and Admissions to the Bar is currently in the process of reviewing and amending Standard 206 to ensure that it complies with federal law, while still achieving the goal of ensuring access to legal education for all persons. During its February meeting, the Council reviewed the latest draft and considered potential changes to ensure compliance with the recent Executive Orders and the Department of Education’s “Dear Colleague” letter dated February 14, 2025. The Council intends to submit this draft with revisions to the ABA House of Delegates in August, as previously planned, after which it anticipates the new standard will be in full force and effect.

In the meantime, the Council decided to suspend the existing version of Standard 206 until August 31, 2025, when the adoption of the revised standard is anticipated.

These decisions by the Council help to ensure that the revision of Standard 206 continues moving forward, while allowing the Council to integrate legal developments and forthcoming guidance from the Department of Education. The Council’s commitment to ensuring access to legal education to all people, including those who have been historically excluded from the legal profession, has not changed. However, the Council intends to ensure that the schools can comply with this standard consistent with applicable law.

The Council is recognized by the United States Department of Education (ED) as the accrediting agency for programs that lead to the J.D. degree. In this function, the Council and the Section are separate and independent from the ABA, as required by ED regulations.

The Council’s decision to suspend its DEI rule is not enough, according to Bondi:

Standard 206 of the Standards and Rules of Procedure for Approval of Law Schools explicitly requires schools to “demonstrate by concrete action a commitment to diversity and inclusion” including a commitment to “have a student body that is diverse with respect to gender, race, and ethnicity” and “having a faculty and staff that are diverse with respect to gender, race and ethnicity.” That requirement blatantly violates our nation’s civil rights laws and conflicts with the Supreme Court’s decision in Students for Fair Admission, Inc. v. President & Fellows of Harvard college.” Yet for nearly eighteen months since that decision, the Council has knowingly put law schools to a choice between compliance with the law and compliance with the Council’s accreditation standards by shamefully threatening that “the requirement of a constitutional provision or statute that purports to prohibit consideration of gender, race, ethnicity, or national origin in admissions or employment decisions is not a justification for a school’s non-compliance with Standard 206.”

. . .

Thus, while I applaud the Council’s suspension of enforcement, I am writing on behalf of the U.S. Department of Justice to make clear that when the Council revisits the issue, there is just one appropriate course: The Standard must be repealed in its entirety. And there is no reason to wait: the Council should repeal the Standard immediately.

I know people on the Council. I have conveyed my support for their efforts personally. But there is no winning this fight except by forfeiture of the ground already conquered. By that I mean that even despite the elimination of explicit standards, statements and written dictates, there is already in most law schools a thorough culture of diversity, equity, and inclusion; an unstated ethic of nondiscrimination against protected classes, imperfect though it remains. In law schools where that culture does not exist, it will never exist.  The culture does not depend on mandates anymore. And the populations from which the Council derives members are thoroughly vested in that culture, never mind statements and standards. Rather than defend the DEI hill, and risk the Council’s continuing ability to further that culture even in the absence of written mandates, the Council should simply remove the Standard. To fight to maintain a writing that is largely symbolic by now seems a waste. It is either that, or the DOE will get another nonprofit to accredit law schools. One that will not have the cultural ethos the Council has successfully cultivated for many long years. The Council will have heroically sacrificed itself. But it will no longer exist.

The Council’s problem is surely common to other nonprofits in the racial justice space. None of those nonprofits should die on the DEI hill. Live to fight another day.

darryll k. jones*

*This post originally appeared on Jonesing on Nonprofits.

The Growing Threat to Tax-Exempt Status

Yesterday, I blogged about a particular type of nonprofit that finds itself in the political crosshairs: universities. As it turns out, they’re not alone. The proposed funding cuts and potential threats to nonprofit tax exemptions is just the latest indication that all nonprofits have targets on their back.

The tax-exempt status that nonprofits have has historically enjoyed bipartisan support, and it has been justified on the basis of the public benefit nonprofits generate. But as we are now seeing, the perception of nonprofits as ideologically-driven entities has opened them up to targeted policy changes that threaten their financial stability and long-term viability.

The fiscal pressure on nonprofits is coming from multiple angles. Proposed funding cuts threaten to undermine the viability of nonprofit organizations that rely on government grants and contracts. There is mounting scrutiny of tax-exempt status—with some lawmakers openly questioning whether certain nonprofits should continue to enjoy tax benefits. And there are now regulatory efforts to redefine what qualifies as “charitable” activity, potentially limiting eligibility for tax-exempt treatment.

This shift has profound implications, not only for the nonprofit sector but also for tax law itself. If tax exemption becomes subject to political discretion, then one of the fundamental principles underpinning nonprofit tax policy—the idea that these organizations exist outside the partisan fray—may be permanently eroded.

Nonprofits as Political Targets

Many nonprofits are warning that they may be forced to close if current proposals for funding reductions and tax changes advance. This threat is not limited to a single type of nonprofit but extends across the sector, affecting social service organizations, education-focused nonprofits, and even hospitals.

Some of the most striking developments include:

• Legislative proposals to reduce or eliminate certain nonprofit funding streams—with arguments framed around reducing government dependency on tax-exempt organizations.
• Heightened scrutiny of nonprofit lobbying and political activity, raising concerns that certain tax-exempt organizations could be targeted for revocation of their status.
• Renewed efforts to impose additional taxes on nonprofit revenue-generating activities, even when those activities directly support the organization’s mission.

These efforts reflect a broader trend in which nonprofits are no longer shielded from the same political attacks that have increasingly targeted universities, foundations, and other such institutions.

The Erosion of Nonprofit Tax Exemption

From a tax law perspective, what makes this moment particularly notable is the potential shift in how we define the boundaries of tax-exempt status.

Historically, nonprofit tax exemption has been justified by the public goods theory—the idea that these organizations provide services that the government either cannot or will not fully provide. But recent legislative proposals suggest a reassessment of what constitutes “charitable” activity, with some policymakers pushing to narrow the scope of exempt organizations.

For tax scholars, several pressing questions arise. Will we see a statutory narrowing of Section 501(c)(3) eligibility criteria? Could we see a push to impose UBIT (Unrelated Business Income Tax) on a broader range of nonprofit revenue streams? Will lawmakers use tax-exempt status as leverage to shape nonprofit governance, funding allocations, or political activity?

These are not hypothetical concerns. Some nonprofits are already preparing for the possibility of losing their exempt status altogether, particularly those engaged in politically charged areas like immigration, environmental advocacy, and social justice.

Where Does This Lead?

For tax scholars, this moment presents an opportunity—and an obligation—to engage in a broader discussion about the role of tax exemption in a polarized political landscape.

If nonprofits are no longer seen as politically neutral, then tax law will inevitably become a battleground for determining which entities are deemed sufficiently “public serving” to justify their tax benefits. That is a dangerous precedent, one that could lead to selective enforcement of tax-exempt status based on ideological considerations rather than legal and economic principles.

At a minimum, this trend suggests that nonprofit organizations should be prepared for heightened scrutiny, increased compliance burdens, and potentially even taxation of income streams that were previously considered exempt. The larger question is whether the nonprofit sector can withstand this level of politicization—or whether we are witnessing the beginning of a fundamental rethinking of tax exemption itself. One thing is clear: the privileged tax treatment of nonprofits can no longer be taken for granted.

The Endowment Tax and the Political Targeting of Universities

Even if you don’t study the intersection of tax policy and higher education like I do, it has become abundantly clear that universities—particularly elite, well-endowed institutions—are now firmly in the political crosshairs. Recent developments, including efforts to expand the endowment tax confirm what many of us have suspected: higher education is being positioned not just as a policy issue, but as a political battlefield.

This fight isn’t just about tax policy. It’s about the broader role of higher education in American society, the perception that universities have become ideological outposts, and the question of whether they deserve the tax privileges they currently enjoy. The efforts to expand the endowment tax signal that we are entering an era in which the halcyon days of tax exemption for higher education are over. Maybe that era came to an end in 2018, when the legislation known as the Tax Cuts and Jobs Act (TCJA) instituted the endowment tax on private universities with considerable endowment values. But renewed pushes to increase the tax rate and lower the statutory threshold for subjecting a broader group of universities to the endowment excise tax illustrate just how serious the situation is.

How Did We Get Here?

The 1.4% excise tax on net investment income of wealthy private university endowments was enacted as part of the 2017 TCJA, marking the first time Congress successfully imposed direct taxation on university endowments. At the time, it was framed as a modest levy affecting only the most well-resourced institutions—those with at least $500,000 in endowment assets per student. And it brought in a modest amount of revenue: about $380 million in 2023. But its “cliff effect”—subjecting all universities that pass this threshold—to the same percentage of excise tax reflects a rejection of the principles of vertical equity on which many taxes are based.

Now, Congress is pushing to expand the endowment tax. Lawmakers are proposing to:

• Increase the tax rate—some proposals suggest raising it to 21%, the same as the corporate tax rate;
• Expand the pool of affected universities by lowering the asset-per-student threshold;
• And implicitly use the tax as a pressure tactic—as seen in the case of Columbia University, which lost $400 million in federal funding over its handling of campus protests.

None of this is surprising. Elite universities have long been a populist target, and positioning them as tax-privileged institutions hoarding billions while students take on massive debt is a politically effective popular narrative. But if the endowment tax expansion is successful, it will hurt a range of institutions that are earnestly working to make higher education more affordable, especially to the students with greatest need. Last fiscal year, universities increased their endowment spending by about 6%, on average, with nearly half of this increase dedicated to student aid. Thus, the popular narrative just doesn’t hold up.

The Case against the Endowment Tax

To be clear, there is an argument that universities should contribute more to public coffers, particularly if they manage their endowments like investment funds. But simply put, an endowment is not the same thing as a giant investment fund. Rather, an endowment is essentially a trust; many endowments contain specific conditions as to their use, ranging from supporting faculty research to providing student financial aid. Thus, they are the lifeblood for a university’s operation. And taxing the returns they earn means that universities can provide less—not more—vital support for their faculty and students.

In fact, roughly half of endowment spending already goes toward student aid, and diverting money to taxes could limit access to higher education for low-income students. My recent research suggests that universities already affected by the endowment tax have been trimming student aid, among other things, to pay the current excise tax. If one purpose of the tax is to rein in the costs of higher education, the tax will only exacerbate these costs. Students, especially low-income students and their families, will pay the price.

Additionally, donations to universities may be negatively impacted—especially if donors know that a significant portion of their donation will be taxed. And if the tax discourages large donations, this would carry significant consequences that hurt universities far more than it increases tax revenue.

The modest revenue the tax brings in at its current rate is the equivalent of a rounding error compared to the trillions of dollars in tax cuts being debated in Congress. Increasing it to 21%, as some lawmakers have proposed, might raise $70 billion over a decade, but that sum is still minor relative to broader fiscal concerns.

But an increase in the tax rate would be an existential threat to universities on the cusp of paying the tax—or those just beyond the statutory threshold—because of the tax’s cliff effect. These institutions will be forced to make significant cuts to their operations in order to pay the tax. Unless Congress acts to revise the statutory thresholds more fairly, it’s entirely possible that universities in the very areas they represent will fold under the weight of the tax.

What’s Next?

For those of us in higher education, this should be a wake-up call. The financial model of higher education has always relied on its tax-privileged status, and that status is now under attack. While universities will undoubtedly fight these policies vigorously, they may struggle to win in the court of public opinion, where the perception of universities as elite, wealthy, insular, and ideologically one-sided remains potent. Maybe universities will have to accept a higher tax burden as the price of continued legitimacy. If that happens, the real question will be who pays the price—elite institutions, or the students they serve?

Christopher J. Ryan, Jr.

Indiana University Maurer School of Law

How Nonprofits Could Benefit from the Fire Sale

The U.S. General Services Administration (GSA) is preparing to offload hundreds of federally owned properties, including some historic and high-profile assets. The government’s rationale is clear: these properties are “not core to government operations” and represent billions of dollars in unfunded capital liabilities. While the sale of these properties reflects a push for cost-cutting and a more efficient use of federal resources, the ultimate economic and social value of this initiative depends on who acquires the properties and how they are used.

As someone who has written about government property sales before, I see two key takeaways from this moment: (1) tax-exempt entities are uniquely positioned to repurpose these properties in ways that generate more social and economic value than private ownership would, and (2) if the government insists on selling, economic efficiency demands that properties go to their highest and best use—something that is far from guaranteed in a sale process focused on speed and revenue maximization.

 

Tax-Exempt Entities: The Ideal Buyers?

One underappreciated aspect of government property sales is the opportunity they create for tax-exempt entities, including state and local governments, educational institutions, and nonprofits, to acquire real estate assets that they can use more efficiently than the federal government.

But historically, government properties do not always find their way to the private sector. The GSA disposal process prioritizes other federal agencies first, then state and local governments, and only after that are properties opened up for private sale. In theory, this should create opportunities for municipalities, universities, and nonprofit organizations to acquire assets at a discount and use them more efficiently than the federal government ever could. Yet, this isn’t always how it plays out.

As I’ve written before, local governments often struggle to navigate the bureaucratic hurdles necessary to claim these properties, and as a result, assets that could be transformed into affordable housing, educational institutions, or community spaces instead end up in the hands of private developers. This is particularly troubling because tax-exempt entities—unconstrained by the profit motives of private investors—often place greater long-term value on the public and economic benefits of repurposing these properties.

For instance, I wrote (now 11 years ago) about this very process. And my research demonstrated along similar lines how state and local governments struggle with maintaining their public capital infrastructure. Take, for example, school districts, struggling with population shifts and rising maintenance costs, that have been forced to sell off historic school buildings. The sale of these properties to private owners often leads to underutilization, legal disputes over zoning, and inefficient redevelopment that fails to meet the community’s needs. If state and local governments had prioritized acquiring and repurposing these properties for educational or civic uses, we might have seen a more economically sound and socially beneficial outcome. The same risk applies to the current federal property sale: if these assets fall into private hands without consideration for their highest and best use, the long-term economic and social benefits will be lost.

But the GSA’s standard disposal process does offer some preference to state and local governments through public benefit conveyances (PBCs)—where properties can be transferred at a discounted price (sometimes even for free) if they are used for specific public purposes. However, this mechanism is often underutilized due to bureaucratic hurdles and limited awareness. As my research suggests, state and local governments should prioritize these acquisitions as a strategy for addressing infrastructure challenges rather than developing new facilities from scratch.

 

The Pitfall of Short-Term Cost Cutting

From a law and economics perspective, public real estate assets have significant long-term value that may be undervalued in a direct sale. The decision to liquidate assets assumes that these properties are a financial burden rather than a potential investment. However, if repurposed effectively, these assets could generate long-term economic and social benefits—such as job creation, community revitalization, and increased accessibility to public services.

My analysis of government property sales in Kentucky underscores this tension. In some cases, selling surplus properties to private entities resulted in long-term legal and financial challenges, such as zoning conflicts and increased tax burdens that undermined the efficiency gains sought by the sale. Similar risks exist in the federal property sale process, particularly if properties are sold to private investors who fail to develop them in ways that align with local economic needs.

Above all, in its strategy to sell federal properties, the government is effectively admitting failure in its long-term real estate strategy. Instead of asking how to better manage and utilize these assets, policymakers are resorting to liquidation—an approach that is, at best, an admission of mismanagement and, at worst, a fire sale that will enrich private investors at the public’s expense.

 

Ensuring Highest and Best Use

While selling off surplus federal properties may appear to be an economically “efficient” move, it is also a short-sighted approach if the properties are not directed toward their highest and best use. If the government is committed to selling real estate assets, maximizing economic efficiency requires that these properties go to their highest and best use—a principle well established in economic theory. This means that instead of simply selling to the highest bidder, the GSA should implement policies that encourage adaptive reuse by tax-exempt entities and local governments that can transform these properties into productive community assets.

To be sure, there is an argument that inefficiently held public assets should be transferred to the private sector for more productive use. But economic efficiency only follows if these properties actually go to their highest and best use—something that is far from guaranteed when the primary goal is merely to reduce the federal footprint. The risk, of course, is that the government undervalues these assets in its rush to dispose of them, offloading valuable properties for less than they are worth in the long run.

Consider the GSA’s approach in this instance. The agency has already removed its initial list of properties slated for sale, suggesting uncertainty in how these assets will be marketed and valued. If history is any guide, this suggests that the government is focused more on streamlining the sale than on maximizing the efficiency of the property’s future use.

 

Concluding Thoughts

If the federal government is going to offload these properties, there are ways to ensure that they actually enhance economic efficiency rather than simply pad the budget in the short term.

First, the government should prioritize tax-exempt buyers who are better positioned to deliver long-term public value. PBCs, which allow state and local governments to acquire surplus federal properties at a discount, should be streamlined and expanded. Right now, this process is underutilized because of bureaucratic red tape, but the benefits could be substantial—particularly for municipalities struggling with deteriorating infrastructure and rising costs.

Second, the GSA should adopt a more sophisticated pricing model that reflects the long-term economic potential of these properties rather than simply their short-term sale price. The highest bidder is not always the best user, and an auction-based approach risks steering properties toward speculative developers who may sit on the assets rather than develop them productively.

Finally, policymakers should consider public-private partnerships that blend private investment with public interest objectives. If redevelopment is necessary, structuring deals that include mixed-use projects—where a portion of the property remains devoted to public purposes—could preserve some of the value that might otherwise be lost.

Christopher J. Ryan, Jr.

Indiana University Maurer School of Law

2025's assault on nonprofits

We're seeing (in my view) an unprecedented (at least in my lifetime) assault on civil society by the federal government. Through a wide range of actions--many of which appear to be lawless--the federal government has threatened, investigated, and cut off funding to any number of nonprofits for simply following their lawful mission. Civil society is *appropriately* not ready to go down without a fight -- more than 100 lawsuits have been filed (usually by nonprofits) challenging the legality of various actions taken over the past 2 months by the federal government in ways that harm the nonprofits or their members.

For example, just today, two nonprofits filed a lawsuit challenging the release of confidential, private information filed by taxpayers who are suspected of having undocumented status. IRS has long kept this information confidential, recognizing the obvious benefits to the federal government if immigrants without lawful status pay taxes. Indeed, in any given year perhaps $100 Billion of revenue comes into the treasury from undocumented workers, even though these workers are categorically ineligible for virtually all federal benefits.

Other lawsuits have challenged the abrupt and apparently lawless rescission of funding to government grantees who have often already performed services pursuant to contracts with the government.

In response to civil society expressing its opposition, the federal government has doubled down on oppressive tactics. To start, the current administration, smarting from a lot of highly publicized losses, has stated that it will ask courts to impose bonds when a preliminary injunction is issued under Fed. R. Civ. P. 65(c) as a way to "deter[]" litigation brought by "activist" groups. This is, of course, silliness on top of silliness. Determining the amount of a bond would only be needed when a preliminary injunction is actually entered, which requires a federal court to find, among other things, that plaintiffs are likely to prevail in the action and would face irreparable harm without the injunction. These are, by definition, not frivolous cases.  And there is a very long and well-established practice of federal courts, across the circuits, from declining to enter bonds -- or setting only a nominal bond amount -- when dealing with structural injunctions brought by public interest organizations in pursuit of constitutional or civil rights.

But oppressive tactics have lead to other heavy-handed measures. The federal government has, at best arbitrarily, and at worst maliciously/discriminatorily, threatened, promised to investigate, or cut off funding to countless nonprofits across the country.

Nonprofit, particularly religiously affiliated, universities have been among the targets, with countless programs and other funding rescinded. And some of the attacks have been decidedly specific. Today, for example, the federal government announced that it was rescinding $400 million in federal funding, without any semblance of process, to Columbia University. Ostensibly, but only laughably, the reason was that Columbia failed to act "in the face of persistent harassment of Jewish students." Earlier this week, the place where I work, Georgetown University Law Center, received a letter from the Interim United States Attorney for the District of Columbia, stating that DOJ would no longer hire law students based on curriculum at the Catholic and Jesuit law school that the Interim US Attorney thought was "unacceptable." The Dean responded: "Your letter informs me that your office will deny our students and graduates government employment opportunities until you, as Interim United States Attorney for the District of Columbia, approve of our curriculum. Given the First Amendment’s protection of a university’s freedom to determine its own curriculum and how to deliver it, the constitutional violation behind this threat is clear, as is the attack on the University’s mission as a Jesuit and Catholic institution." 

Whatever excesses and flaws the nonprofit sector may have, the nonprofit sector has the power and the right to resist intrusions on nonprofits' pursuit of their missions. And I for one am glad to see them take up the fight.

-Joseph Mead

2025's assault on nonprofits

We're seeing (in my view) an unprecedented (at least in my lifetime) assault on civil society by the federal government. Through a wide range of actions--many of which appear to be lawless--the federal government has threatened, investigated, and cut off funding to any number of nonprofits for simply following their lawful mission. Civil society is *appropriately* not ready to go down without a fight -- more than 100 lawsuits have been filed (usually by nonprofits) challenging the legality of various actions taken over the past 2 months by the federal government in ways that harm the nonprofits or their members.

For example, just today, two nonprofits filed a lawsuit challenging the release of confidential, private information filed by taxpayers who are suspected of having undocumented status. IRS has long kept this information confidential, recognizing the obvious benefits to the federal government if immigrants without lawful status pay taxes. Indeed, in any given year perhaps $100 Billion of revenue comes into the treasury from undocumented workers, even though these workers are categorically ineligible for virtually all federal benefits.

Other lawsuits have challenged the abrupt and apparently lawless rescission of funding to government grantees who have often already performed services pursuant to contracts with the government.

In response to civil society expressing its opposition, the federal government has doubled down on oppressive tactics. To start, the current administration, smarting from a lot of highly publicized losses, has stated that it will ask courts to impose bonds when a preliminary injunction is issued under Fed. R. Civ. P. 65(c) as a way to "deter[]" litigation brought by "activist" groups. This is, of course, silliness on top of silliness. Determining the amount of a bond would only be needed when a preliminary injunction is actually entered, which requires a federal court to find, among other things, that plaintiffs are likely to prevail in the action and would face irreparable harm without the injunction. These are, by definition, not frivolous cases.  And there is a very long and well-established practice of federal courts, across the circuits, from declining to enter bonds -- or setting only a nominal bond amount -- when dealing with structural injunctions brought by public interest organizations in pursuit of constitutional or civil rights.

But oppressive tactics have lead to other heavy-handed measures. The federal government has, at best arbitrarily, and at worst maliciously/discriminatorily, threatened, promised to investigate, or cut off funding to countless nonprofits across the country.

Nonprofit, particularly religiously affiliated, universities have been among the targets, with countless programs and other funding rescinded. And some of the attacks have been decidedly specific. Today, for example, the federal government announced that it was rescinding $400 million in federal funding, without any semblance of process, to Columbia University. Ostensibly, but only laughably, the reason was that Columbia failed to act "in the face of persistent harassment of Jewish students." Earlier this week, the place where I work, Georgetown University Law Center, received a letter from the Interim United States Attorney for the District of Columbia, stating that DOJ would no longer hire law students based on curriculum at the Catholic and Jesuit law school that the Interim US Attorney thought was "unacceptable." The Dean responded: "Your letter informs me that your office will deny our students and graduates government employment opportunities until you, as Interim United States Attorney for the District of Columbia, approve of our curriculum. Given the First Amendment’s protection of a university’s freedom to determine its own curriculum and how to deliver it, the constitutional violation behind this threat is clear, as is the attack on the University’s mission as a Jesuit and Catholic institution." 

Whatever excesses and flaws the nonprofit sector may have, the nonprofit sector has the power and the right to resist intrusions on nonprofits' pursuit of their missions. And I for one am glad to see them take up the fight.

-Joseph Mead

Nonprofit Jonesing This Week

 

On Monday, I told you that like Lionel Richie when he left the Commodores, I am going solo with a new nonprofit blog called Jonesing on Nonprofits.  "Jonesing," by the way, is word from the 70's drug scene.  It was used by hippies in Haight-Ashbury to describe their intense urge for  psychedelic drugs that would transport them to "Cloud 9."  That's how I feel about nonprofits.  I'm always jonesing for nonprofits.  Later, Cheech & Chong made a song called "Basketball Jones," a song that sadly described the singer's complete addiction to basketball.  The singer had a "Basketball Jones." The song was a riff on a 70s silky soul song called "Love Jones," describing a high schooler's inability to think about anything other than his high school crush. I thought about calling my new blog "A Nonprofit Jones" because its all I ever think about anymore.  

All the posts on Jonesing this week were in front of the pay wall.  It was the introductory week so everything was free.  Readers of this blog will recognize the writing.  I am not always right, sometimes I am terribly wrong as I admit in the post this week regarding Catholic Charities Bureau v. Wisconsin.  Oral argument in that case is March 31 and Wisconsin hasn't a snowball's chance in hell. 

Why should people pay for the blog?  Because a brother gotta eat.  And because the posts are written by a lifelong student of nonprofits and always contain links to primary sources (statutes, regs, opinions, petitions, briefs, etc.) so scholars, researchers, practitioners and stakeholders can read the law for themselves. Or at least have a leg up on their own research. I usually won't post a story unless I have hunted down the primary source documents.  And, as usual, I will admit to all my liberal and sometimes conservative biases as appropriate.  As long as they let me, I will post a list of Jonesings  to this blog once a week. But starting next week readers will need to subscribe to read.  A brother gotta eat. Besides, subscription prices are cheaper than anywhere else. 

Here are [free] links to Jonesing for this week:

1. Administration Sues Illinois for Encouraging DEI in Nonprofits. Continuing effort to erase black people.

2.  Solicitor General Wants to Present Oral Argument in Catholic Charities Bureau v. Wisconsin. Wisconsin doesn’t have a snowball’s chance in hell.

3. Supreme Court Affirms District Court Order to Release USAID Funds: Alito Presages Constitutional Crisis

4. Court Denies Musk Preliminary Injunction Against OpenAI (c)(3). Orders “expedited trial” on “toss up” contract claim.

5. Tax Exempt Orgs & Corporate Jets. TIGTA Report Advises Solutions Without Problems

6. Taking “Unrelated” Out of the Unrelated Business Income Tax. Solely as a revenue raiser, not a fundamental norm.

7. Nonprofits Were Shy About Advocacy Even Before the Trump Cataclysm. They Hunker Down and Shut Up Even More Now.

8. Catholic Charities Bureau v. Wisconsin: Briefs are In.  CCB should win easily because religion is more than proselytizing.

I gotta nonprofit jones.

darryll k. jones

The Supremes, USAID and Constitutional Crisis

Read the opinion and my analysis tomorrow. Jonesing on Nonprofits.

Court Rejects Musk Preliminary Injunction Effort vs. OpenAI(c)(3)

Read the order and my analysis, tomorrow morning.  Jonesing on Nonprofits.

Jonesing on Nonprofits

Good morning nonprofit law prof blog readers.  Today, I am announcing that my part of this blog is moving to Substack.  When this blog first started – it was David Brennen’s great idea years ago -- the plan was that a group of law professors would rotate through a blogging schedule, with each of us posting for one week at a time. The blog went through occasional doldrums, during which times it contained very few posts for weeks.  Eventually, I became convinced that our day jobs and our varied schedules would not allow our blog to gain the consistency that would make it a “go to” source.  So I began to blog daily. 

For the last two years, I have been blogging consistently every weekday; blogging about nonprofit law has become a labor of love and I hope my posts have matured.  The blog is consuming more and more time and yet I still enjoy it very much.  Even as I migrate my part of this blog to Substack I hope to continue contributing to the Nonprofit Law Professor Blog, but only during my assigned week. If that becomes too much along with my own blog, I will have to let it go.

My Substack publication is called “Jonesing on Nonprofits” and my goal is to make it the daily rag for those who follow and practice nonprofit state and federal tax and non-tax law.  As with this blog, Jonesing will include a sprinkle of international news as well.  My goal is to make it more intensely useful and entertaining to readers.

Currently, the Substack page is configured without a paywall and all posts are free and open to the public.  I spent the weekend becoming familiar with the platform and there is one post up now – a story borrowed from this blog.  New stories will appear starting tomorrow.  After a week or two, the blog will be entirely subscription-based (because a brother has bills!), with different rates for commercial (.com) and nonprofit (.org and .edu) subscribers.  I am not quite sure how to accept paid advertising yet, but I hope to gain that capability soon.  As always, my posts will include links to primary source documents – petitions, briefs, cases, statutes, final and proposed regs, administrative rulings, and all the things that contribute to the entire body of nonprofit law.  It will also include analysis and commentary, as the spirit moves me. 

I must seem arrogant to think that people will pay to read my posts, but others – namely the pioneering Paul Streckfus, who declined my invitation to join together – have traveled this path before me.  I figure why not me too.  Even Tax Notes must have started off as a crazy arrogant idea. Who would ever want to read a magazine about taxes anyway?    

The Nonprofit Law Prof blog has nearly 200 subscribers. And I am told that members of the Exempt Org Committee get weekly emails with links to new posts.  I never really worried about that stuff before.  Far more people than just subscribers or listserv members read the blog daily.  Currently, the blog is averaging about 1500 clicks per day from a low of about 250 per day three years ago.  The number of unique visitors has steadily increased to about 550 per weekday.  The blog has regular visitors from 8 or 9 different countries, IRS attorneys, large and small firms, accountants, practitioners, state AGs, scholars, and even Senate staffers every now and again. 

I hope that readers will follow me to my new blog, while also continuing to read the NLPB. 

darryll k. jones

Leff, on Donor Advised Funds

Ben Leff posted an interesting and prodigious article on donor advised funds this week. Here is the abstract:

Donor-Advised Funds (“DAFs”) have been the subject of a vigorous critical scholarship in the past two decades. DAFs have been called “virtual private foundations” because they share some aspects of private foundations but were treated for legal purposes as public charities. In 2006, Congress enacted legislation that both formally recognized DAFs for the first time, and subjected them to several new regulatory burdens that do not apply to other public charities. In some cases, Congress subjected DAFs to the same regulatory burdens that apply to private foundations; in some cases, it continued to permit DAFs to enjoy the more lenient regulatory burden and generous tax benefits that apply to public charities; but in other cases, Congress crafted a new regulatory regime for DAFs that was more restrictive than the one that already existed for private foundations. There has been commentary about the justifications for subjecting DAFs to the private foundation rules and continuing to permit DAFs public charity treatment, but there has to date been no serious scholarly discussion of the justifications for holding DAFs to a higher standard than private foundations, as the 2006 legislation does in key areas. This issue has become urgent because the Treasury Department released Proposed Regulations in November 2023 for the first of four areas, including those for which the legislation crafted new, especially strict, rules for DAFs.

This Article argues that the extra-strict regime for some aspects of DAFs is beneficial not because DAFs are especially susceptible to abuse, the way private foundations are, but because extra-strict rules provide bright lines that enable DAF providers to reduce costs and make charitable giving more efficient. Understanding this purpose of the extra-strict regime has implications for the regulation of DAFs. There is an egregious remaining loophole—called the “public support test” or “conduit” loophole—in the extra-strict regime that enables donors to pass donations through DAFs to privately controlled charities. It is essential for forthcoming Treasury Regulations or legislation to close this loophole. This Article examines how this loophole should be closed.

darryll k. jones

Court Enjoins DHS Raids and Stakeouts of Religious Places

From Judge Freezes ICE Raids at Quaker & Cooperative Baptist Churches

We reported late last month that several Quaker Meetings filed suit to enjoin DHS's new policy regarding immigration enforcement actions around places of worship.  Georgia Cooperative Baptists and Sikhs from California later joined. On Monday, the Court issued a preliminary injunction, necessarily concluding that the plaintiffs are likely to prevail on their claim that the policy burdens their First Amendment right to practice their religions. 

Essentially the order reinstates the Biden Administration policy regarding immigration enforcement activities around "protected areas."  Under a memorandum issued by former Secretary Alejandro Mayorkas, protected areas include schools, hospitals and health care facilities, playgrounds and child care centers, crisis centers and places of worship or religious study." The memorandum states:

To the fullest extent possible, we should not take an enforcement action in or near a location that would restrain people’s access to essential services or engagement in essential activities. Such a location is referred to as a “protected area.”

Absent exigent circumstances, an Agent or Officer must seek prior approval from their Agency’s headquarters, or as you otherwise delegate, before taking an enforcement action in or near a protected area. If the enforcement action is taken due to exigent circumstances and prior approval was therefore not obtained, Agency headquarters (or your delegate) should be consulted post-action.

To the fullest extent possible, any enforcement action in or near a   protected area should be taken in a non-public area, outside of public view, and be otherwise conducted to eliminate or at least minimize the chance that the enforcement action will restrain people from accessing the protected area. Enforcement actions that are within the scope of this guidance include, but are not limited to, such actions as arrests, civil apprehensions, searches, inspections, seizures, service of charging documents or subpoenas, interviews, and immigration enforcement surveillance. 

This guidance does not apply to matters in which enforcement activity is not contemplated. As just one example, it does not apply to an Agent’s or Officer’s participation in an official function or community meeting.

The plaintiffs sought a nationwide injunction, but the Court refused and instead made the injunction applicable only to the plaintiffs' religious activities.  The complaint is available here. The motion for a Temporary Restraining Order and Preliminary Injunction was filed on February 4, 2025, and is available here.

darryll k. jones

"The Samaritan with The Guillotine"

Here is an interesting read concerning the old debate whether private and public charity do more harm than good.  I added the links in the authors' abstract of "The Samaritan with The Guillotine:"

Fifty years ago James Buchanan introduced the idea of the “Samaritan’s Dilemma” whereby the charity provided by a Samaritan results in perverse effects due to moral hazard problems. Writing three decades before Buchanan, Isabel Paterson also sought to understand how the desire to engage in charity could do harm. In “The Humanitarian with the Guillotine,” she discussed how embracing the humanitarian impulse could undermine individual freedom and result in tyranny. This paper connects Paterson’s humanitarian and Buchanan’s Samaritan. We identify five themes that remain relevant today. These include: (1) the nature of charity (the transfer of existing wealth versus the production of wealth), (2) the difference in the sources of charity (private versus state) and their implications, (3) dependency and its social costs, (4) self-governance and an ethic of individual responsibility, and (5) the importance of rules for overcoming the Samaritan’s dilemma and protecting individual freedom.

darryll k. jones

Story Suggests Pittsburgh is Losing in Effort to tax Charitable Properties

Local news in Pittsburgh focused on efforts by the Mayor to challenge the exemptions of large nonprofits in the community. Appears those efforts have been unsuccessful.

From the story:

"It's been nearly two years since Pittsburgh Mayor Ed Gainey vowed to challenge tax exemptions for large nonprofits, hoping to raise millions in tax revenue. Action News Investigates has learned the city has won only a small fraction of those challenges. "The ones that are living up to their obligations of being purely public charities, OK, but the ones that are not, they need to pay their fair share," Gainey said in March 2023. Gainey targeted some of the city's most prominent nonprofit properties, including UPMC Children's Hospital, Allegheny General Hospital and Pitt's Petersen Sports Complex.

His lawyers argued that these and dozens of other properties – including UPMC Magee Women's Hospital, Magee-Women’s Research Institute and Duquesne University's parking garage – did not meet state requirements for so-called purely public charities. However, Allegheny County assessment officials do not agree with the mayor's argument.

Records show that nonprofit properties challenged by the city are assessed at $877 million. However, the city won challenges for properties assessed at just $11.7 million – less than 2% of the total challenged."

Philip Hackney

IRS Now Routinely Rejects NIL Collectives, but Routinely for The Wrong Reason

After an initial period during which the IRS routinely granted tax exemption for NIL Collectives, the Service  is now routinely denying tax exemption to NIL Collectives.  But routinely for the wrong reason.  The reason routinely given is that student-athletes do not a charitable class make.  But if that is true, why is it ok to give students scholarships to study and play football? Even wealthy students like Archibald "Arch" Manning, grandson of Archie and nephew of Eli and Peyton.  If Arch is not part of a charitable class, shouldn't it be private benefit to give him a scholarship to play football?  Anyway, here is an excerpt from the latest denial letter released last week:

Based on the facts presented in your application and supporting documentation, the primary beneficiary of your activities will be the Y athletes. Your funds will be used to pay the Y athletes for their NIL and NIL services after the terms of the agreement are met. These athletes are not themselves a recognized charitable class. You would be serving a private rather than a public interest because your benefits and resources would primarily flow to the Y athletes for their NIL and NIL services. Paying for the services is not clearly incidental to the overriding public benefit. To qualify for exemption under Section 501(c)(3), you must serve a public, rather than private interest, as described in Section l.50l(c)(3)-l(d)(l)(ii). Because your primary expense is for the use of the NIL of IC athletes from Y with whom you contract, you operate substantially for a substantial private interest, rather than a public interest.

I tell my students that its not enough, certainly not on a multiple choice bar exam, to select an answer with the correct outcome. To pass, students have to select the answer with the correct outcome and the right reason.  By the way, it's not private benefit for the University of Texas to give Arch a football scholarship because the UT is not a 501(c)(3).

Right outcome, right reason.  

darryll k. jones