A series of actions by the Trump Administration and certain state law enforcement officials have indicated that the nonprofit sector may face special scrutiny. These actions include the following:
- On September 25, 2025, President Trump issued National Security Presidential Memorandum/NSPM-7, Countering Domestic Terrorism and Organized Political Violence. The memorandum directed the National Joint Terrorism Task Force and other federal agencies to investigate (1) those who commit political violence, domestic terrorism, and deprivation of rights; (2) the “institutional and individual funders, and officers and employees of organizations” that fund those actions; and (3) any nongovernmental organizations and U.S. citizens living overseas or with close foreign ties for potential violations of the Foreign Agents Registration Act (“FARA”) or money laundering laws relating to the same.
- On September 3, 2025, President Trump issued a memorandum directing the Attorney General to investigate whether federal grant funds are being used illegally for lobbying.
- On October 15, 2025, the Wall Street Journal reported that the Trump Administration is considering changes at the IRS that would make criminal enforcement of certain tax laws easier.
- State Attorneys General have pursued nonprofits for alleged failures to follow charitable registration requirements.
These actions increase scrutiny of, and attention on, nonprofit organizations, as well as those who fund and run them. In light of these actions, there are practical steps that nonprofit organizations, their staff, and funders can take to protect their interests. Below we list a number of proactive steps that organizations may consider taking in this period of heightened scrutiny and enforcement.
- Adopt, maintain, and enforce a compliance program and policies. Policies on anti-corruption, sanctions compliance, political activity and lobbying, gifts, entertainment, and other risk areas specific to the particular nonprofit are important to demonstrating compliance with the law. To help ensure compliance, organizations can provide regular training on policies and adopt corrective actions as needed.
- Adopt, maintain, and enforce a FARA compliance policy and assess FARA risk. Because NSPM-7 specifically calls out FARA for increased enforcement, organizations with activities that may touch on the statute should have a policy on compliance with FARA, as well as an associated training program. A brief overview of FARA can be found here.
- Know your funders and grantees. Organizations can conduct a thorough vet of sources and recipients of funds, whether individual or organizational, to understand who they are, their own funding situation, and other information, including checking lists of sanctioned persons.
- Practice good grant hygiene. When awarding grants, organizations should have a written, signed grant agreement that provides details on permissible use of the grant funds and any restrictions. Organizations should consider requiring grantees to submit a report describing the use of those funds.
- Adopt and adhere to a document retention policy. Understanding the scope of documents in the possession or control of the organization is crucial for preparing for and responding to an investigation.
- Consider preparing for legal challenges. Organizations concerned about potential adverse decisions by the IRS or other agencies can consider options for legal challenges, including the preparation of draft legal filings or action plans.
- Understand government funding. Recipients of government funding may be subject to additional scrutiny or compliance burdens. Organizations should seek to understand whether any funding sources originated from the government, such as government grants or subgrants, or government contracts or subcontracts. Organizations should understand obligations that flow from such funding, like restrictions on use of funds for lobbying or Form SF-LLL lobbying-related filing obligations.
- Assess exemption compliance. Organizations should assess whether their activities comply with their tax-exempt status, and they can consider reducing or ending activities that push against the boundaries of permissible activities.
- Assess corporate compliance. Organizations may consider whether necessary corporate registrations, charitable fundraising registrations, employment taxes, etc., are filed in all required jurisdictions.
- Provide employees with guidance for government interactions. Organizations can consider educating employees on their rights and obligations in interacting with law enforcement and other government officials, and what to do if agents and officers come to their homes or offices.
Covington’s cross-practice team of white collar defense, tax-exempt organization, election and political law, congressional investigations, government contracting, and trade sanctions attorneys has experience advising nonprofit organizations and funders as they look to protect themselves or defend against specific investigations. For more information, please contact one of the attorneys below.
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