US civil society and philanthropy organisations are working together to protect their tax-exempt status from any potential attempt to revoke it by the Donald Trump administration.
The Wall Street Journal reported that grantmakers across the political spectrum, including the Ford Foundation, the Gates Foundation and the Charles Koch Foundation, are discussing possible ways to respond should the administration make such an attempt.
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Many of the foundations have discussed whether to seek legal representation as a class or individually, should their tax status come under fire, the WSJ reported.
The Trump administration has not explicitly pledged to revoke foundations’ tax-exempt status, though it is exploring ways to challenge the tax-exempt status of nonprofits more broadly.
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Mr Trump has also threatened Harvard University with the revocation of its tax-exempt status and hinted at future actions against specific nonprofits.
The Ford Foundation, the Gates Foundation, and the MacArthur Foundation are some of the grantmakers funding democracy, human rights, and social justice initiatives in the US and other countries worldwide. These organisations have also spent millions of dollars funding initiatives in Nigeria.
Foundation executives said stripping off their tax-exempt status could shrink the amount of money they raise and give to causes of institutionalised philanthropy.
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WSJ reported that a loss of tax-exempt status could cripple many foundations, few of which boast multibillion-dollar endowments and many of which rely on funding from donors who view tax breaks as a spur to give.
“This is not a fight any of us is picking. This is very clearly a leave-us-alone-to-do-our-jobs approach,” said John Palfrey, president of the John D. and Catherine T. MacArthur Foundation, who is helping convene the foundations.
He also said that any effort by the administration to revoke foundations’ tax-exempt status on the basis of their giving activity “would be fully, fully pushed back upon, with a very clear legal argument, which we would expect to win and we’d be ready to bring.”
WSJ reported a spokesperson for the Gates Foundation, saying, “Preserving the sector’s charitable status is essential to ensuring that nonprofits can continue delivering critical services that millions of people—in the US and globally—rely on.”
Efforts to unify have also taken place throughout higher education, where trustees and school leaders have communicated in recent weeks over how to counter the Trump administration’s attacks on research funding and academic independence.
Philanthropies have also been alert to a 21 January executive order by Mr Trump that directs federal agencies to identify by 21 May up to nine potential investigations of organisations, such as big nonprofits or foundations with at least $500 million in
assets, as part of a plan to “deter DEI programmes or principles…that constitute illegal discrimination or preferences.”
WSJ said this is the first instance that philanthropy executives can recall of a president asking for possible investigations of large nonprofits and foundations.
“Tax-exempt organisations organised under section 501(c)(3) of the U.S. tax code must follow certain rules on how they operate. In exchange, they can receive tax-deductible donations and avoid paying taxes on net earnings.
“Executives and trustees say they also are concerned about other moves the administration could make,” it reported.
While exempt from regular income taxes in the US, foundations are required to pay an excise tax of 1.39 per cent annually on net investment income from their endowments, and are required to distribute about 5 per cent of their assets for charitable purposes a year.
Executives worry that Congress might raise the excise tax, as it is considering doing for university endowments, or change the payout requirement.
More fundamentally, Mr Palfrey said, targeting foundations’ tax-exempt status would mark an attack on people’s ability to give money freely.
“Nobody wants any administration to randomly pull our 501(c)(3)s if you don’t like the ways we give,” Mr Palfrey said. He added that libertarian and conservative foundations that are engaged are involved partly because they don’t want a future administration targeting their tax-exempt status.
Foundations in 2023 gave more than $100 billion to US charities, according to Giving USA’s most recent annual report, the second-biggest category of funding after individual donors.
The Trump administration’s focus on philanthropy has created worries inside large, progressive foundations that they could be targets.
Some foundations have decided to pursue individual legal representation, though they could ultimately choose to link up their efforts.
Some foundation leaders have been worried by other developments in addition to the 21 January executive order. “One is a bill that passed the House in late 2024 that calls for stripping the tax-exempt status of terrorist supporting organisations,” the WSJ reported.
The Politico reported over the weekend that House Republicans are aiming to put big new taxes on private foundations amid their push to raise revenue for their sweeping domestic policy legislation, according to two people directly familiar with a GOP tax package that has yet to be publicly released.
“Major philanthropies like the Gates and Rockefeller foundations would see the biggest tax increases under the draft proposal — private foundations with assets over 1 billion would get hit with a whopping 10 per cent tax on their investment income,” the report stated.
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“Foundations with assets of $250 million to $1 billion would see tax rates of 5 per cent, those with assets between $50 million and $250 million would pay 2.8 per cent, and those with assets under $50 million would pay the existing 1.4 per cent tax.”
This administration is very intent on sort of kneecapping civil society that does work they view as being contrary to their interests, WSJ quoted Nick Turner, president of the New York-based nonprofit Vera Institute of Justice, as saying.
Philanthropic organisations have become increasingly nervous that they’ll find themselves in Mr Trump’s crosshairs as well. Vice President J.D. Vance, in particular, has singled out large institutions like the Ford Foundation, telling Tucker Carlson in 2021 that they are “fundamentally cancers on American society, but they pretend to be charities.”
“They fund critical race theory, they fund ridiculous racism,” Mr Vance said at the time. “We are actively subsidising the people who are destroying this country, and they call it a charity.”
The House Ways and Means Committee is expected to release the draft text of the sweeping GOP tax bill as soon as 16 May. House Republican leaders are aiming for critical committees to vote on the major portions of Mr Trump’s “big, beautiful bill” this week, according to Politico.
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