What Congress is Getting Wrong About Nonprofits
What the House tax bill means for nonprofits, healthcare, and the future of democracy—and why it’s not a partisan issue.
*Portions of this post were originally published two weeks ago, this version has been updated to focus specifically on the implications of the House Republican tax bill for the nonprofit sector.*
There’s a lot that can break a nonprofit—funding cuts, burnout, dysfunctional boards, declining donations, and fragmented leadership. But this moment is different. It’s not just one challenge pushing nonprofits to the brink—it’s the steady drumbeat of partisan attacks. Civil society is being cast as the problem, and service, empathy, and compassion are being reframed—not as strengths, but as vulnerabilities.
Over the last five years, the nonprofit sector has endured a relentless series of shocks: the COVID-19 pandemic, inflationary pressures, shrinking unrestricted funding, and escalating political and legal threats. At its peak, the pandemic wiped out nearly a million nonprofit jobs—many of which have yet to return. Since then, organizations have faced increasing instability: from attempted censorship to intensified scrutiny of advocacy work to the growing use of audits, lawsuits, and public harassment to silence programs and activities. And in just the last four months, the federal landscape has shifted dramatically. The deep federal funding cuts across government agencies have forced thousands of nonprofits to scale back or, in some cases, shut down entirely. Across the country, organizations are losing staff, funding, and in many cases, the ability to plan beyond next quarter.
The newly released House Republican tax bill doesn’t just tweak deductions or shift financial burdens—it signals a broader effort to constrain, punish, and shrink the role of civil society. This isn’t about accounting; it’s about accountability. It’s about who gets to question authority, who has the resources to respond in times of crisis, and who is allowed to organize, advocate, and speak out. Tax policy may seem a bit boring, but it shapes power in real terms—by determining which voices are supported, which institutions are stable, and which communities are heard. When the rules are rewritten to punish nonprofits for doing their jobs—to serve, to speak, to push for justice—we’re not debating deductions. We’re debating democracy itself.
What the Bill Proposes—and Why It Matters
At first glance, this bill could appear to some as more technical than substantive: excise tax hikes, new thresholds for charitable deductions, changes to how nonprofit income is defined. But zoom out, and a pattern emerges.
This bill threatens to:
Drain resources from private foundations and public charities through tax hikes
Make it harder for nonprofits to qualify for tax-exempt status at all
Reduce giving by disincentivizing donations
Expand IRS scrutiny—especially on advocacy organizations
And most alarmingly, give the Executive Branch the power to revoke nonprofit status without due process
This is unprecedented. As the National Law Review notes, the authority to strip tax-exempt status has always required a formal review process. Giving that power directly to the Executive opens the door to politically motivated retaliation—targeting climate groups, civil rights organizations, reproductive health providers, and any nonprofit that challenges the administration’s agenda.
As the National Council of Nonprofits warns, Section 112209 of the bill allows the Treasury Secretary to unilaterally revoke nonprofit status from organizations deemed “terrorist-supporting”—without transparency, evidence sharing, or any meaningful due process. While every nonprofit I’ve ever worked with condemns violence and terrorism, enforcement must still be grounded in law, not political perception. Once that precedent is set, it can be used by any administration, against any cause.
And we’re already seeing signs of where it could go. There are credible reports and insider concerns that this authority could be used to target organizations working on racial justice, climate action, gender equity, and other so-called “woke” issues. By discrediting organizations, opposition forces will be able to defund infastructure, delegitimize messages, and dismantle movements. If this provision becomes law, it won’t just hamper dissent—it will put a legal framework behind silencing it.
This is happening just as nonprofits are being called to fill the widening gaps left by federal retrenchment. The abrupt closure of USAID alone has put at least 200,000 people out of work in the international development space, cutting off U.S. nonprofits and their global partners from critical funding and forcing programs to shut down overnight. The ripple effects are being felt everywhere—from Georgia peanut processors to refugee aid organizations, from global health hubs in D.C. to university research labs. And that’s just USAID. When you factor in the broader wave of federal grant cancellations across agencies, what we’re seeing is a significant risk to the entire nonprofit sector’s survival—a sector that was built to provide public goods where government and markets fall short. Nonprofits are not incidental. They are the fabric of our society and a critical safety net to those in need.
The message from the administration appears to be quite clear: if you serve the wrong people, speak too loudly, or advocate for justice—you’re on notice.
The Sector They’re Targeting
To understand the stakes of this moment, we have to be clear about what civil society actually is—and why it’s under attack. As I mentioned last week, in the U.S., the nonprofit sector includes nearly two million organizations: everything from food banks, hospitals, and advocacy groups to research institutions, mutual aid networks, and religious congregations. Together, these organizations employ more than 12 million people and generate over $3.7 trillion in annual revenue. It’s one of the largest sectors in the U.S. economy—touching nearly every community and every major social issue.
Public health and human services form the core of this ecosystem. Roughly two-thirds of nonprofit jobs in the U.S. are in healthcare and social assistance, including hospitals, nursing homes, home health agencies, community clinics, and direct-service organizations. While health-related nonprofits make up about 12–13% of total organizations, they represent the largest share of nonprofit revenue and employment—largely due to the scale of nonprofit hospitals, which account for nearly 60% of all U.S. hospitals. These institutions don’t just deliver care, they sustain local economies, especially in rural and underserved areas. For them, the cumulative effect of this bill—reduced giving, new taxes, legal uncertainty—translates directly into reduced capacity to serve. And, in addition, could lead to substantial job loss among communities that are already economically disadvantaged.
Specifically, the bill includes a provision that would allow the Executive Branch—not the IRS—to revoke an organization’s tax-exempt status without due process. This would be a profound shift. Historically, tax status decisions have required evidence, review, and legal scrutiny. Stripping those protections introduces the risk of politicized enforcement: favoring organizations aligned with the administration, while targeting those that challenge its agenda. Even the threat of revocation can have chilling effects—discouraging donations, stalling advocacy, and weakening the voices of smaller organizations that lack legal or financial buffers.
We’re already seeing how this could play out. Earlier this year, Lutheran-affiliated aid organizations were publicly attacked by Trump-aligned surrogates for their work with refugees and immigrants—groups that have long provided humanitarian assistance grounded in faith and service. If this rhetoric becomes policy, it won’t stop there. Muslim-led nonprofits are almost certain to face increased scrutiny, and even Catholic organizations—especially those aligned with the new Pope Leo’s outspoken positions on poverty, climate, and migrants—could find themselves in the crosshairs. What’s framed as national security quickly becomes a tool to silence dissent, discourage compassion, and unravel the ethical backbone of this country.
Alongside that, the bill proposes new restrictions on international giving, limitations on foreign contributions, and an expanded definition of taxable nonprofit income that could include government grants, program service fees, and membership dues. These technical changes carry enormous weight—especially for groups working in areas already facing political headwinds. If these provisions pass, entire categories of cross-border philanthropy and public-interest advocacy could be treated as suspect, or penalized outright.
A Sector Already Under Pressure
These threats don’t come in isolation. They land in a sector already stretched thin—both financially and emotionally. Many organizations are still reeling from pandemic-era disruptions, while also navigating rising demand for services, burnout, and declining unrestricted funding. The COVID-19 pandemic forced nonprofits to pivot rapidly, often at the expense of staff well-being and financial reserves. The loss of federal contracts and grants—now accelerated by the federal government restructuring—has created a funding cliff for thousands of organizations. Just yesterday, I joined a nonprofit fundraising call that would typically draw maybe 80 participants—but this time, over 5,000 people registered. That kind of surge doesn’t happen by accident. It’s a clear signal: the sector knows it’s in crisis.
In past essays, I’ve written about how nonprofit workers—especially those engaged in reproductive rights, racial justice, and immigrant advocacy—have faced heightened levels of harassment, both physical and digital. Offices have received threats of violence. Staff have been followed or photographed. The tax bill doesn’t create this dynamic—but it does potentially codify it. It gives permission for suspicion to become policy. By redefining advocacy as partisanship and international partnerships as interference, the bill effectively paints a target on organizations that challenge the current ultra-right wing narrative.
And while nonprofits working on issues that clash with the administration’s agenda may be the first targets, many of the organizations likely to be hardest hit are the small, rural, and faith-based groups that become collateral damage. These are the organizations helping veterans get mental health care, feeding families in agricultural communities, and keeping local schools afloat through aftercare and wraparound services. This bill would destabilize not just large institutions in D.C. or New York—but churches, clinics, and service providers in every congressional district.
The risk here isn’t just financial. It’s existential. If public confidence erodes due to misinformation and unfounded accusations, and if the regulatory protections that ensure nonprofit independence collapse, we could see a slow unraveling of one of the country’s most important democratic infrastructures.
Civil society—anchored by the nonprofit sector—is not just a safety net; it is a foundational engine of national strength, economic resilience, and democratic accountability. When government steps back, civil society steps up—filling critical gaps, safeguarding communities, and often driving the very innovations that move us forward as a country. Undermining this sector doesn’t just weaken services to the poor. It weakens our collective capacity to respond to crisis, to hold power accountable, and to imagine and build more just, resilient systems.
This Isn’t a Partisan Fight
What’s important to remember is that this isn’t a left-versus-right issue. Nonprofits—large and small, progressive and conservative—are united in opposing this bill. Organizations that rarely appear on the same policy pages have come together to warn that these proposals would cripple their ability to serve.
I’ve worked at two of the most ideologically different women’s health organizations in the country—one long aligned with conservative donors, the other a prominent progressive institution—and I think both would agree that this bill is deeply flawed. Conservative and liberal nonprofits alike have raised concerns that these changes could destabilize the sector, threaten mission delivery, and be used to silence free speech and dissent—regardless of political affiliation. That kind of cross-aisle alarm should give Congress serious pause.
Bipartisan leaders are already working toward better alternatives. Senators James Lankford (R-OK) and Chris Coons (D-DE), along with Representatives Blake Moore (R-UT) and Chris Pappas (D-NH), have introduced the Charitable Act—legislation that would expand tax incentives for giving and strengthen the ability of nonprofits to meet local needs. Their leadership reminds us that civil society isn’t partisan—it’s American.
In fact, Americans remain among the most generous people in the world. In 2023, charitable giving in the U.S. reached a record-breaking $557 billion, with individuals contributing more than two-thirds of that total. From everyday donors to high-net-worth philanthropists, this level of giving reflects a deep cultural commitment to community, care, and civic responsibility. America continues to lead globally in total charitable contributions and ranks among the top five countries in the world for helping strangers, volunteering, and donating to charity. As we navigate a time of heightened need and rapid change, this spirit of generosity offers a powerful foundation to build on—reminding us that the desire to show up for one another is alive and well in American life.
A Call to Action: Why This Moment Demands More
And yet—despite all of this—civil society isn’t retreating. It’s rising to meet the moment.
Legal coalitions are mobilizing to challenge executive overreach. Labor unions are expanding protections and organizing in sectors once considered unreachable. Faith communities are opening their doors to shelter immigrant families at risk of deportation. And grassroots organizers are building decentralized networks of care, mutual aid, and resistance—reminding us that solidarity doesn’t need permission to grow.
From neighborhood shelters to national advocacy networks, civil society is showing us what it means to adapt under pressure. But these efforts cannot survive if we allow bad tax policy to starve them out, silence their leaders, or strip away their legitimacy.
This is not just a battle over deductions and definitions—it’s a fight for the future of public life.
If you do one thing today, make it this:
Call your Member of Congress and tell them to:
OPPOSE granting unprecedented authority to the Executive Branch to revoke nonprofit status from organizations without due process.
OPPOSE new or expanded taxes on nonprofit organizations, including private foundations.
SUPPORT and EXPAND tax incentives for charitable giving, including the bipartisan Charitable Act (S.317, H.R.801).
Then forward this to three people who care about the future of this work.
Because the goal isn’t just to win a policy fight—it’s to remind each other what we’re fighting for: a future where care is not criminalized, where dissent is not punished, and where nonprofits can do what they were created to do—serve.
Reference List
National Council of Nonprofits – Nonprofits Under Threat: What’s in the House Tax Bill and How You Can Help
https://www.councilofnonprofits.org/articles/nonprofits-under-threat-whats-house-tax-bill-and-how-you-can-helpNational Council of Nonprofits – Statement Opposing Harmful Tax Provisions
https://www.councilofnonprofits.org/pressreleases/statement-diane-yentel-president-ceo-national-council-nonprofits-denouncing-house-gopIndependent Sector – Analysis of the American Families and Jobs Act
https://independentsector.org/resource/afja-analysis/Chronicle of Philanthropy – Nonprofits Face New Tax Threats in House GOP Bill
https://www.philanthropy.com/article/nonprofits-face-new-tax-threats-in-house-gop-bill/Tax Policy Center – How Does the Tax System Subsidize Charitable Giving?
https://www.taxpolicycenter.org/briefing-book/how-does-tax-system-subsidize-charitable-givingNational Law Review – Proposed Tax Changes for Nonprofits
https://www.natlawreview.com/article/house-tax-bill-would-make-major-changes-to-nonprofit-taxationUrban Institute – Nonprofits and the Tax Code
https://www.urban.org/policy-centers/center-nonprofits-and-philanthropy/projects/nonprofits-and-tax-codeCAF World Giving Index 2023 – Charities Aid Foundation
https://www.cafonline.org/about-us/publications/2023-publications/caf-world-giving-index-2023Giving USA 2023 Report Highlights – Charitable Giving Statistics
https://givingusa.org/giving-usa-2023-report-highlights/Bureau of Labor Statistics (BLS) – Nonprofit Employment and Wages
https://www.bls.gov/bdm/nonprofits/nonprofits.htmNational Council of Nonprofits – Protecting Nonprofits in Tax Reconciliation (May 2025)
[Available internally or via NCN member bulletins]Charitable Act (S.317 / H.R.801) – Bipartisan legislation sponsored by Sens. Lankford & Coons, Reps. Moore & Pappas
https://www.congress.gov/bill/118th-congress/senate-bill/317