Overview
Media reports about the Trump administration’s desire to revoke the tax-exempt status of prominent charitable organizations recently jolted the United States’s nonprofit community with anxiety over the impact potential changes to exemption standards could have on the financial stability and operational effectiveness of these organizations. While the Trump administration stated on April 22, 2025, that no executive orders concerning exemption standards are “being drafted or considered at this time,” many nonprofit hospitals, academic medical centers, and other charitable organizations are still analyzing the effect that existing executive orders have on the services and programs they provide.
Existing executive orders focusing on diversity, equity, and inclusion (DEI) programs; gender-affirming care humanitarian programs; and other activities each contain language that suggest organizations that fail to comply fully with the administration policies expressed by these executive orders risk heightened scrutiny from the Internal Revenue Service (IRS) or others regarding their exempt status.
This guide examines these existing executive orders and their relationship with IRS precedent governing charitable status through a series of frequently asked questions (FAQs). These FAQs accomplish the following:
- Identify existing executive orders that may affect the activities of charitable organizations
- Describe how charitable organizations might navigate the current environment
- Explore IRS precedent on how public policy influences the definition of “charitable” for tax purposes
- Consider how illegal activities may affect charitable status
- Summarize how a charitable organization can lose its tax-exempt status and the process that the IRS must follow
- Offer considerations for questions charitable organization leaders should ask as they prepare for potential scrutiny over compliance with executive orders.
FAQs Preview
Are all nonprofit organizations exempt from federal taxation?
No. Labeling an organization as “nonprofit” refers to its status under state corporate law, such as a nonprofit corporation. Not all nonprofit organizations qualify for tax-exempt status. Instead, a nonprofit organization must satisfy strict criteria set forth in the Internal Revenue Code (Code) to be exempt from federal taxation.
Plus, more frequently asked questions:
- What executive orders potentially affect the activities of charitable organizations?
- How concerned should hospitals, health systems, and other 501(c)(3) entities be about the current environment?
- How could a charitable organization lose its tax-exempt status?
- Could the Trump administration redefine the standards for charitable organizations?
For more information, or if you have additional questions, please contact Travis Jackson or Robert C. Louthian, III.
