Nonprofits in the Crosshairs: When Tax Status Becomes a Political Tool

How We Got Here

The Trump administration’s attack on the nonprofit sector, which includes many institutions of higher education, reached a dramatic high in early May 2025 when Trump reiterated his threat to strip Harvard University of its 501(c)(3) tax-exempt status. While this may have felt unprecedented, Trump is far from the first president who has tried or threatened to weaponize tax-exempt status as a means for political leverage.

What Does the Johnson Amendment Have to Do with Tax-Exempt Status?

Nonprofit tax-exempt status has long been a contentious issue in American politics. The federal exemption started with the Tariff Act of 1894, also known as the Wilson-Gorman Tariff. The Act exempted nonprofits from paying federal income taxes. That law, opposed by many Republicans at the time, reflected the view that groups serving the public deserved tax benefits. But even from its inception, the tax exemption was politically fraught—seen by some as shielding elites or institutions from paying their fair share of taxes.

Sixty years later, the Johnson Amendment was enacted to explicitly prohibit churches and other 501(c)(3) tax-exempt organizations from directly or indirectly participating or intervening in any political campaign on behalf of, or in opposition to, any candidate for elected public office. It arose from concern from Senator Lyndon B. Johnson that charitable organizations were donating money to the campaign of his political opponent. For decades after its passage, the prohibition survived First Amendment challenges and remained good law until recently when Trump made mobilizing religious conservatives a centerpiece of his campaign and promised to “totally destroy” the Johnson Amendment under the guise of furthering religious freedom and free speech.

Historic Attempts to Politicize the IRS Led to Greater Safeguards 

Historically, few presidents have attempted to use the tax-exempt status of nonprofit organizations as political leverage. Most notably, President Nixon pressured the IRS to investigate hundreds of nonprofit organizations that he believed to be “political enemies.” When the IRS refused, Nixon launched a broader campaign to restructure the agency’s leadership. Nixon felt that the IRS had become too politically insulated and wanted to have several officials appointed by his administration put in place. Congress pushed back, adding to Section 7217 of the IRC, which prohibits the President, Vice President, and other executive officials from directing the IRS to investigate specific taxpayers. That law is still in effect today, offering some—if limited—protection to institutions like Harvard University.

Politically Charged Independent IRS Enforcement

The IRS itself can still use its investigative powers in politically charged ways, so long as the agency is acting independently. In 1978, the IRS announced it would investigate tax-exempt, private Christian schools popping up across the South in attempts to evade federal desegregation orders. The agency made it clear it was willing to effectively close these schools if it found any evidence of protecting white separatism. If a president ordered the IRS to conduct such investigations or made threats to advance desegregation, the order would be illegal. However, because the IRS initiated these independent investigations to advance its own political agenda, action was allowed.

What Does Recent Enforcement Look Like?

Enforcement of the Johnson Amendment has been relatively restrained. Since 2008, only one of the more than 2,000 churches that have openly defied the amendment has been audited—and none have faced penalties. Additionally, the law is very narrow in scope—limiting only campaign intervention. 501(c)(3) public charities may still legally engage in issue advocacy and a limited amount of lobbying. For more information, see Being a Player and The Rules of the Game.

What Does This Mean for Nonprofits in 2025?

So, what does all this mean for nonprofits and institutions like Harvard? One, despite Trump’s threats, he cannot unilaterally revoke a nonprofit’s tax-exempt status, nor can he order the IRS to do so. Past presidential overreach caused Congress to put safeguards in place to minimize the overt politicization of the IRS. Revocation is a multistep process, including: (1) an IRS examination (also called an audit), (2) an internal IRS appeal process, and (3) federal court litigation. Second, the Johnson Amendment remains in effect, and while enforcement is rare, the law still bars 501(c)(3)s from influencing candidate campaigns. Recent developments in National Religious Broadcasters v. Werfel may change this, but nothing is certain as of the time of this blog post.

History reminds us that threats to a nonprofit’s tax-exempt status aren’t new—and (thankfully) rarely succeed. What is more dangerous is the chilling effect these threats can have. The Johnson Amendment protects against the politicization of charitable 501(c)(3)s, which is essential to the integrity and effectiveness of the organization’s mission. When presidents treat nonprofits as enemies and wield tax law as a blunt instrument against 501(c)(3)s, it undermines public trust in both our civic institutions and the rule of law.

Cecelia Kincaid is a rising 2L at Northwestern Pritzker Law and a Bolder Advocacy intern during the 2025 summer.