Four Ways the Nonprofit Sector Can Tell the Trump Administration to F**k Off

(Legally, at least for now)

With only three weeks of the Trump administration down, the amount of illegal, unconstitutional, amoral, unethical, and inhuman acts that the gang of criminals, political hacks, and Broligarchs of the Beltway has set in motion is breathtaking. And there are about 206 weeks left of this sh*t-show. As Heather Cox Richardson and Robert Reich remind us, now on a daily basis, the Trump administration, powered by the Heritage Foundation, is smashing American Democracy and moving us ever closer to a Christian authoritarian state.

So far, my impression of the nonprofit sector’s response is not encouraging, in particular from the halls of its most powerful philanthropic institutions–a mixture of cautious side-eye and recumbence mixed with some furtive pandering and anticipatory appeasement. I suppose such is to be expected, as those who hold the most (money and power) have the most to lose, philanthropy in particular. Indeed one of the flurry of Executive Orders (“EO” has now officially entered the casual lexicon) targets the largest philanthropies and public charities. Per the best up-to-the-hour summary for the nonprofit sector, maintained by the National Council of Nonprofits, one of the EOs “requires a report by the Attorney General and each agency to identify up to 9 potential investigations of corporations, large nonprofits or associations, or foundations with assets of $500 million or more or state and local bar and medical associations and higher education institutions with endowments of $1 billion or more.” We’ve also seen the the freezing and unfreezing of federal funding, destruction of USAID, an all-out assault on “DEI” and anything serving the most vulnerable among us, and most recently yesterday, the targeting of the independent nonprofit/NGO community by the White House, and as a fittingly absurd and petty finale to the week, the artistic takeover of the Kennedy Center for the Performing Arts and the NEA’s grantmaking.

The whip-lash and general maelstrom of attacks is, of course, intentional and meant to induce confusion, catatonia, and despondency. We have to resist. We have to keep on, keep our friends and neighbors safe, engage in self care, and keep showing up, as the march of resistance will be long. We have it on good authority from the national nonprofit advocacy community that the Heritage Foundation’s Project 2025 strategy is to “flood the zone” with actions in the hopes of depleting emotional and financial resources in the first two years, saving the truly democracy-smashing moves for the second half of the administration when the collective war chest is empty.

I would hope that the largest and most powerful institutions in our sector could be our Justice League, but unfortunately, I also understand the wicked political calculus of scale that now reigns. The Muskrat’s targeting of USAID and myriad other federal agencies is not actually about saving money, as everything under his current consideration is a vanishingly small part of the federal budget, but extraordinarily important to the beneficiaries on the other end. No, this is pure performativity and culture-war politics. If you are a large nonprofit, foundation, or federal institution, like the National Gallery of Art or Smithsonian Institute, you’re already on the radar and destined for some manner of dust-up. Is it really worth outward resistance and tempting fate of a bigger bruising this early in the fight? For those institutions that are genuinely pro-civil society, the game for now is to stay out of the wandering, power-drunk, and vacuous gaze of the Great Orange Eye and try to hold the line in other ways more subtle and subversive, I think. There will likely come a time when we all need to show up guns-ablazing, at least those charities that have not fallen under the right-wing thrall of a large swath of the uber-wealthy.

Like many of the great battles that have scarred the landscape of history, this one is likely going to be best fought not from the top down, but from the bottom up. The extraordinary consolidation of power by private interest and the Oligarchic Class in this country seems to be the destiny of American Capitalism in the 21st century. Since the dawn of Movement Conservatism and the first Reagan Administration, the tyranny of neoliberal, supply-side economics, abetted by the fabricated Republican boogeyman of bogus socialist conspiracy has yielded a level of socioeconomic disparity not seen since the Gilded Age. Between 1981 and 2021 $50 trillion moved from the bottom 90% of our country’s population to the top 1%. Welcome to the Siliconed Age. Not only has private interest and wealth been successfully consolidated, it has also greatly infiltrated the halls and commandeered the levers of power at the top of both government and the charitable sector, largely through structures of governance from the chambers of Congress, to nonprofit boardrooms. I would not expect much relief from those in power.

Despite the provocative title of this post, the degree of permanent f**king off that we can hope to achieve for the nonprofit sector is, in fact, limited within the bounds of the law-abiding behavior. There is no Kevlar vest against the mendacity of this administration and its enablers, particularly as they throw the constitution and its accompanying laws out the window. Until we are forced to consider the same wanton flouting of the law in the name of civil disobedience, we can engage in our own bit of legal dodging and weaving as the torrent of gratuitous violence continues.

Before we get to our dodges I want to note that in the topsy-turvy realm of the today’s UpsideDown, some things that a couple months ago I would have called faults and foibles of the nonprofit sector may now be fortes–tools of resistance and aids in lawfare for those who still believe in justice and civil society. These are essential prefacing for the tactics to follow.

We are legion. If you’ve been a reader, you know that I both marvel and lament at the massive size and fragmentation of our sector: nearly 1.9 million nonprofits and counting, 89% of which operate below $500,000/year. Much of this scale has been motivated by the same neoliberal right turn mentioned above. The dissolution of the pro-social government apparatus built during the New Deal didn’t begin with Trump. It’s been happening for forty years. Now it is compressed and accelerated, and accompanied by an assault on the very constitutional basis of our government. As the Republican establishment has pushed more and more civil society functions out of government, many have landed in the private sector, and likely more have landed in the nonprofit sector. Despite all of the neoliberal nonsense about the ability of the free market to solve all problems, much of what the government does you can’t (or shouldn’t) make money doing. So, per its charge, the nonprofit sector picks it up. In the coming game of nonprofit Wack-A-Mole, there are many moles to wack.

Private donors and foundations can hide. Generally, I’m in favor of radical transparency in our sector and believe that if you’re getting a tax break for giving to an organization, you shouldn’t enjoy absolute public anonymity. However, nonprofits only have to report their largest contributions by amount, but not the identities and addresses of the donors. Since the Citizens United vs. Federal Election Commission decision in 2010, we’ve added even more protections for super rich contributors. In 2018, IRS guidance rendered away donor disclosure for (c)(4) and (c)(6) organizations. More significant to sector non-transparency than IRS reporting requirements is the controversial explosion of Donor Advised Funds (DAFs) over the last 20 years, which both high-net-worth donors and private foundations use to hide their identity in giving. (By the way, the right uses this dodge as much if not more than the left.) Since DAF’s are managed by 501(c)(3) public charities, they don’t have to disclose donor identities, and the gifts that flow from DAF accounts to operating nonprofits are often under invented account names, like the Fat Chance You’ll Find Me Fund. Some of this legal non-transparency is meant to be corrected in the reforms of the proposed Accelerating Charitable Efforts (ACE) Act, which is unlikely ever to see the light of law.

Government oversight of nonprofits is anemic. While this may change in the coming months, at the moment there is a small band of staffers, a dog, and cat holding down the fort at the Exempt Organizations Division of the IRS, the part of the agency that handles nonprofits. Nobody’s really minding the store. This is in part the result of the IRS purge Trump led during his first administration, as well as the reaction to the 2013 scandal involving then Exempt Orgs head Lois Lerner, who revealed that her staff was applying extra scrutiny to conservative-appearing applications, honing in on terms like “tea party” and “patriot”. There was a political rumble; she was fired, some of the house was cleaned. Today, there are allegedly only three examiners for 1.9 million nonprofits. I am hearing, however, that new IRS Form 1023s (the application for federal tax exemption) are getting enhanced scrutiny, this time for key words like “DEIA” and “movement building”. (I doubt Lois’s successor will be fired.) And the Texas Attorney General’s office (state AGs have purview of nonprofit matters) has deputized its staff to be IRS examiners for the Lone Star State. Thus it begins.

The Four Dodges

In the event that this post should be discovered by an eager Reichs-intern of Hauptsturmfürer Miller, note that I am not an attorney, and nothing I am saying here constitutes legal counsel. Please consult an actual attorney, if you have concerns or questions, and if, at that point, we still have a legal system that matters.

1. Operate under a fiscal sponsor.

Whether you are running a new charitable project that has yet to seek nonprofit status or an established nonprofit organization, fiscal sponsors can offer many benefits, including a degree of safe harbor and portability–two important dimensions of offense and defense. The fiscal sponsorship field, in which I work, has grown immensely over the last two decades, largely in response to our general state of polycrisis and increasing cadence of climate change, socioeconomic disparity, natural disaster, and socio-political unrest. Fiscal sponsorship is an effective way to move philanthropic funds to front-line workers and organizations, as well as a means to stand-up and operate charitable work quickly and more efficiently.

There are a number of models of fiscal sponsorship, but two predominate. The most commonly known Pre-approved Grant or Model “C” form is a regranting model aimed at permitted charitable donations and grants to flow legally to individuals and entities without tax federal exemption that are engaged in legitimate charitable work. A 501(c)(3) sponsor organization receives contributions on behalf of the “project”, allowing the donor a tax deduction or the foundation its qualified distribution, and then regrants the funds to the person or entity doing the charitable work. Sometimes erroneously called the “passthrough” model, Model “C” is an essential resource for the dodges to follow. The other model, the Comprehensive or Model “A” form of fiscal sponsorship, true to its name, makes the sponsored project into an in-house program of the nonprofit, where it shares all of the essential backbone management of the sponsor, but retains independence of identity, decision making, and right to exit. The sponsor maintains fiduciary control and compliance responsibility for the project.

In all of the fiscal sponsorship models, the dodge of portability through the process of “spinning out” of one sponsor and “spinning into” another sponsor or stand-alone nonprofit is an essential attribute. I think we will see established, stand-alone nonprofits that come under attack as well as sponsored projects doing a lot of spinning in the years to come, fleeing or keeping ahead of adversaries of civil society. It is also notable that sponsored projects can change their names very easily and overnight, without the need to file corporate or other official name changes, as they are just a program of the sponsor, not the registered legal entity. The fiscal sponsorship community could become a kind of present-day Underground Railroad for the nonprofit community.

The Comprehensive model also has a variant, the Model “A-L” Disregarded Entity relationship, in which the project gets the same management support as a regular Model “A” but is contained in a sole-member LLC subsidiary under the sponsor. This affords the sponsor some legal protections and risk allocation, while allowing the project to be even more portable: if the project or sponsor has to pull the red lever, spinning out is simply a matter of changing charitable ownership of the LLC, without the need for complex asset transfers.

Using any of the above models, donors and foundations can achieve the other dodge, namely some degree of remove from politically sensitive work, while still remaining compliant. They can make unrestricted gifts to the sponsor, if they (and the project) trust the sponsor to allocate the funds to the project in question. So, to support the sponsored project, Friends of Things Trump Hates, a funder might make an unrestricted gift to the Friends via its relationship with Acme Fiscal Sponsor without ever naming the intended beneficiary. Likewise, sponsored projects have the flexibility to modulate the degree of public exposure they have in day-to-day work: they can choose how publicly visible they are while remaining legally compliant, since their activities are grossed up into the sponsors and reported on its IRS Form 990. And I will note again that we may anticipate more giving by private foundations via DAFs in an attempt to fly under the radar.

2. Go private, stay small.

One of the vulnerabilities of our sector is its tether to the federal government via the tax exemptions under which we operate. As noted earlier, multiple kinds of investigative, litigative, and legislative threats hang like so many Swords of Damocles over the sector, all stemming from this fragile tether of tax exemption. So why not remove that from the equation? The size and presence of the US nonprofit sector often leads to the public misconception that charitable or pro-social, humane work can only happen under a nonprofit. Not remotely true. Good and just work happens every day and everywhere under for-profit (taxable) structures of all kinds, from cooperatives and B-Corps, to garden-variety small businesses and mutual aid groups. You don’t have to be tax-exempt to treat people with dignity and offer a helping hand. So what if you pay some taxes in the name of doing good? It is true that the administration is going after for-profits, like Costco, but those challenges are harder to land and may become politically complicated, as they risk defiling the Holy of Holies of American Capitalism, private enterprise. Given the roaming Orange Eye and those of its minions, it’s also probably better to stay small and fly low. Reflecting the point earlier about the size of the nonprofit sector, the US is home to 33 million small businesses. Good luck in wacking all those moles.

Regarding how you support such work without charitable status, contributions can still be part of your resourcing strategy. There is no law against John or Jane Q. Public (or private foundations for that matter) making a contribution to you as an individual or your business, so long as you are clear and transparent that the gift is not charitable or tax deductible. (If you solicit funds under the false pretense that they are going to a nonprofit, or use charitable funds for private gain, that is charity fraud and a criminal offense, something the Commander in Cheat has also been convicted of.)

Moreover, we have greatly normalized giving outside of nonprofit frameworks through decades of living with crowdfunding through sites like Kickstarter and the growing preponderance of platforms like GoFundMe, neither of which are charitable. From a tax standpoint, these are “personal gifts” and corporate/individual income, pure and simple. There is an old saying that nobody gives for the tax deduction, they give because they believe in and want to participate in the work. Only the most rarefied income brackets tend to worry about deductibility, and even then it’s not the primary motive. Finally, for those individuals or institutional funders that insist on making a charitable gift, there’s always Model “C” fiscal sponsorship. Support is one re-grant away.

3. Go informal, nurture networks.

In times like this, we cannot overlook the informal sector to be a force of good and path of resistance. This is not an official sector in the manner of government, nonprofit, or private, but it is an ancient, pervasive, and tremendously resilient undersector that transcends and works outside of legal formations, laws, and state and national borders. As such, it is hard, if not impossible to track and target, but is a vast thoroughfare, like the mycelial networks that nurture our forests. The informal sector manifests in communities helping each other in simple, mutual ways (making meals, minding children, repairing homes), gift and barter economies, providing financial support to undocumented immigrants in hard currency, offering homes and businesses for shelter, providing expertise and advice to those in need without compensation.

In many immigrant communities, much of the work of support happens informally, such as in the Afro-Carribean practice of sou-sou, and many models of mutual aid. Intentional communities–often circumscribed by a faith traditions–have flourished for centuries in the US under almost entirely self-sufficient, informal economies: Hasidic communities, Schwartzentruber Amish, the Conservative Mennonites, the Shakers, Buddhist sangha, and despite being subjected to a carceral state, the many indigenous communities of Indian Country, to name a few. Those of us not of such communities might do well to start reading up on and leaning into such economies. As if on cue, I’m seeing the famous Antonio Gramsci quote appear everywhere in the media: “The old world is dying, and the new world struggles to be born: now is the time of monsters.” I might say, “Now is the time of models ancient”.

4. Start a religion.

If you thought the previous dodge was going a bit out on a limb, buckle up, because organized religion is the ultimate and perhaps the largest formally informal economy in the US. Owing to the unique position that religion has held in the American experiment, it is the only federally recognized charitable activity that is fully de facto exempt in the eyes of the IRS. Yes, you heard that right. You DO NOT need to petition the IRS for tax exempt status to start a religion. I could wake up tomorrow, rent a storefront, declare a catechism for the Sacred Temple of Squire, and start welcoming members and tax-deductible donations without so much as a legal formation or permission from the IRS. And I would also have zero reporting or accountability to the IRS or any other public authority, forever. This is the reason that private foundations often exclude religious organizations from their support. Some of that is rooted in politics, but a lot is owing to the lack of accountability requirements. Religion in the US is a vast unaccounted and unaccountable landscape of resources.

How else do we countenance the legion of fly-by-night, storefront churches across the country, rural revival tents, and the staggering range of faiths from Islamic and Judeo-christian sects, to Scientology, Mormonism, and Prosperity Gospel? The only way a religion gets “religion” from the IRS, is if someone calls the faith community onto the carpet by legally challenging their exemption. This happened to Scientology at the apex of its popularity. The courts made the church submit an IRS Form 1023, and the IRS gave them an official ruling letter, and presto-facto, they became “official”. I am not a fan of any organized religion, but I have faith, and do believe strongly in freedom of religion and strict separation of church and state–which is diminishing every day. However, I strongly disagree with the laissez faire way we treat religion. It should be held to the same accountability as the rest of the nonprofits sector, which will likely never be achieved. But this helps us in the UpsideDown.

If we embrace the remarkably permissive way in which we view religion from a charitable standpoint, it also means it can be a nexus of legal activism. Not every nonprofit mission would be a shoe-in for the IRS’s church test, but many would, in particular the nonprofits most under fire, such as movement organizations, advocacy groups, intentional community-based nonprofits. How different morphologically are these activities from any given religion, really? They might be short the frocks, smells, bells, and spells, but in most other regards, they could be a religion. If you should need support from a foundation that excludes religion, use a Model “C” fiscal sponsor. For years, I’ve encouraged arts organizations to look to faith communities for inspiration in how to build a following and financial support. Cultural practices are, in my view, closer to faith-based intentional communities than any other business model. The artist or artistic director(s) are the faith leaders, their subscribers and patrons follow the vision-catechism of the leader. Audiences aren’t receiving “services”, but rather derive many of the same spiritual and belonging values from attending performances as congregants do from worship.

Why is this a dodge? Well, you can start tomorrow, chuck the legal formation (if you want), directly solicit charitable donations, and never have to report your existence to the government. In short, you can fly under the radar–there is no tax letter to pull or DODGE factotum looking at your 990–until someone dimes you out. And then, the legal recourse is to seek an exempt ruling from the IRS (unless we go full KGB). What is more, attacking religious organizations, like attacking the private sector, opens a possible pandora’s box for the religious right-wing community. In fact, I’m interested to see how things play out with mainstream, high-profile religious organizations, like the Episcopal Church. It is pushing back on the administration and does many of the humanitarian things the government now has declared inhumane and “illegal”.

To close, below is the IRS’s church test with my interpretations in italics, where a preponderance of compliance is the goal.

• Distinct legal existence - nonprofit corp or bank account “doing business as”

• Recognized creed and form of worship - your mission’s beliefs and theory of change

• Definite and distinct ecclesiastical government - your community’s governance

• Formal code of doctrine and discipline - bylaws, policies, processes, practices

• Distinct religious history - your connection to similar work and movements

• Membership not associated with any other church or denomination - check

• Organization of ordained ministers - everyone receives the same organizing training

• Ordained ministers selected after completing prescribed courses of study - hiring staff

• Literature of its own - check

• Established places of worship - your convening space and office

• Regular congregations - meetings of your staff and stakeholders

• Regular religious services - meetings of your staff and stakeholders

• Sunday schools for the religious instruction of the young - educational programming

• Schools for the preparation of its members - volunteer training programs

Who said this couldn’t be a little fun?

***

The nonprofit sector is often called the independent sector, as it is indeed independent from government, except for the small matter of tax exemption. And I have a lot of faith in the people of the independent sector.

Granted, a certain portion of them stand behind missions I consider amoral, inhumane, or downright diabolical. The Heritage Foundation is a 501(c)(3), and most of the organizations on the SPLC’s hate watch list are nonprofits.

But I would like to think that behind an even greater portion of the 1.9 million nonprofits out there, there are many more millions of people with strong hearts, solid morals, and the strength to fight for justice, peace, and the safety of our neighbors and fellow citizens.

I may no longer trust in God, but I do trust in them.