Navigating New Developments in Nonprofit Tax Policy

By Dayna Sear, Founder & CEO, Smart Grant Solutions

Nonprofit leaders are no strangers to change but recent developments in federal tax policy signal that a fresh wave of regulatory scrutiny may be on the horizon.

According to a recent Wall Street Journal article (subscription required), internal discussions at the Internal Revenue Service (IRS) have explored new criteria and enforcement mechanisms that could significantly impact how tax-exempt status is granted, monitored, and revoked under Section 501(c)(3) of the Internal Revenue Code. While still in early stages, these discussions suggest a broader reexamination of the guardrails that define what it means to operate as a public benefit organization.


Why This Matters Now

The nonprofit sector has long relied on its tax-exempt status not just as a legal framework, but as a cornerstone of public trust, donor engagement, and mission sustainability. As federal regulators consider streamlining enforcement and increasing scrutiny, organizations across the spectrum, from education to public health, arts, and media, must be prepared to demonstrate compliance, transparency, and alignment with their charitable purpose.

These signals of change arrive alongside real-world examples. On April 15, 2025, President Trump publicly called for the revocation of Harvard University’s §501(c)(3) status, citing alleged governance failures and political bias. While the IRS has not issued a formal ruling, the case has become symbolic of the growing pressure to reevaluate what qualifies as a public benefit organization.

The May 1, 2025 Executive Order eliminating federal funding for public broadcasting has already begun reshaping the nonprofit landscape. The Corporation for Public Broadcasting has announced it will cease operations by September 30, 2025—putting over 1,500 NPR and PBS stations at risk. The resulting lawsuits and closures serve as a stark reminder that even long-standing nonprofit institutions are vulnerable to political and regulatory shifts.


What Nonprofits Can Do Right Now

In times of uncertainty, preparation is power. Nonprofits can take the following steps to stay proactive and resilient:

• Reevaluate compliance alignment: Review governance structures, Form 990 reporting, executive compensation, and board oversight protocols to ensure they align with evolving IRS expectations.
• Strengthen impact documentation: Use both qualitative and quantitative data to demonstrate how your work meets public benefit standards. This clarity supports both funder confidence and audit defense.
• Centralize audit readiness: Create or update internal systems to track restricted vs. unrestricted funds, program allocations, and donor-restricted uses in real time.
• Monitor regulatory intelligence: Follow updates from trusted sources like the National Council of Nonprofits, the Alliance for Justice, and the Urban Institute’s Center on Nonprofits and Philanthropy.

How MissionGranted by Smart Grant Solutions Can Help

As the regulatory landscape evolves, financial transparency and grant compliance will be under sharper focus. That’s where MissionGranted by Smart Grant Solutions comes in. Our platform was purpose-built to help nonprofits and local governments simplify the complexity of grant management, integrating seamlessly with accounting systems to ensure that financial reporting, program alignment, and compliance tracking are accurate, auditable, and stress-free.

MissionGranted empowers organizations to stay ahead of regulatory requirements, confidently manage multiple funding sources, and maintain the documentation needed to demonstrate their value and legitimacy, all in one affordable, easy-to-use system. In a moment when operational clarity and accountability are more important than ever, we’re here to help you not just stay compliant, but thrive.