The nonprofit sector has always operated in the messy intersection of public policy, community needs, and societal values. But in 2025, that intersection feels more like a collision. Political polarization is spilling into the regulatory space, and nonprofits of all types, regardless of mission, are feeling the pressure.
Whether your organization receives federal funding, advocates for social change, or simply accepts charitable contributions, today’s environment demands heightened legal awareness and rock solid compliance practices. Below, we break down four major areas where nonprofits are seeing increased politicization and scrutiny, and offer practical steps to stay protected.
1. Political Activity, The IRS Is Watching, and So Is Everyone Else
Nonprofits exempt under 501(c)(3) must remain strictly nonpartisan. This has always been true, but enforcement expectations and public scrutiny are rising.
What is changing?
- Organizations perceived to be supporting or opposing political candidates are facing calls for investigation, often driven by political opponents or watchdog groups.
- Social media posts, staff statements, and coalitions you join may all be scrutinized for signs of political intervention.
- The line between permissible issue advocacy and prohibited campaign activity is narrowing in the public eye, even if the law itself has not changed.
In this environment, compliance is not only a tax requirement, it is reputational risk management.
What to do now:
- Revisit your political activity and communications policies.
- Train staff and board members, especially those involved in advocacy, communications, or public events.
- Review public facing materials before release.
- Keep issue based messaging grounded in your mission, not in candidates or campaigns.
2. Government Funding Volatility, Politics Are Driving the Math
If your nonprofit receives federal or state grants or contracts, you have likely already felt the impact of policy swings. Government funding used to change gradually, but today it can evaporate with a press release.
Key risks:
- Funding can be terminated or frozen when programs are reinterpreted as misaligned with current political priorities.
- Some nonprofits face new eligibility restrictions tied to immigration status verification, DEI certifications, or other compliance requirements.
- Entire federal programs have been dissolved or suspended, creating gaps that philanthropy often cannot fill.
Unpredictability is the new normal. For nonprofits that rely on government dollars, particularly those in health, housing, education, or social services, this volatility can threaten core programs.
What to do now:
- Diversify revenue streams where possible.
- Understand whether you are a prime recipient or subrecipient, because your rights differ.
- Review termination clauses in all awards.
- Preserve detailed documentation of performance, allowable costs, and communications with your funder.
3. Donor Disclosure Rules, A Potential Shake Up Ahead
Depending on federal and state policy shifts, nonprofits may soon face new rules requiring the disclosure of certain donor information that is currently confidential.
Why this matters:
- Disclosure changes could deter major donors who value anonymity.
- Nonprofits working on controversial issues may fear targeted harassment of supporters.
- The administrative burden of additional reporting could be substantial.
- Legal challenges are almost guaranteed, creating further uncertainty.
Donor privacy rules have swung back and forth over the past decade, and more changes appear likely under the current administration.
What to do now:
- Review your donor privacy policy and fundraising practices.
- Understand what information you currently collect, and what you might be required to disclose under updated rules.
- Communicate openly with major donors about any evolving compliance requirements.
4. Political Targeting of Specific Missions, Advocacy Comes With New Exposure
Nonprofits working in civil rights, immigrant justice, environmental protection, reproductive health, LGBTQ+ issues, or other politically sensitive missions are facing heightened scrutiny from politicians, regulators, and private groups.
Increasingly common challenges include:
- Politically motivated allegations of misconduct.
- Public records requests or legislative inquiries.
- Investigations into grants, contracts, or program practices.
- Social media campaigns questioning an organization’s legitimacy.
While these inquiries often lack legal merit, poor record keeping or weak governance can turn a political headache into a legal problem.
What to do now:
- Maintain meticulous records of program activities and expenditures.
- Ensure your board is engaged and understands potential risks.
- Document mission alignment for all advocacy activities.
- Adopt a response plan for regulatory inquiries or negative public attention.
The Path Forward, Compliance as a Strategic Asset
In today’s polarized climate, nonprofits can no longer treat compliance as a back office function. It is a strategic shield that protects your mission, your funding, and your reputation.
The most resilient organizations are those that:
- Invest in strong governance.
- Keep detailed records.
- Train their teams regularly.
- Seek legal guidance before problems arise.
- Communicate proactively with funders, donors, and the public.
You cannot control the political environment, but you can control how prepared your organization is to navigate it. Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. licensed to practice in Washington and Arizona. Ellis advises nonprofit and socially responsible businesses on federal tax and fundraising regulations nationwide. Ellis also advises donors concerning major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form.