We wrote recently about the historical pattern of governments using tax audits, funding cuts, and stigmatizing labels against nonprofits they disfavor. That post was framed as a general pattern worth watching. This one is about a specific, current allegation that the IRS is targeting specific nonprofits for examination that fits squarely inside it.
What Was Reported
The New York Post reported on August 27, 2026, that Treasury officials are reviewing the tax-exempt status of several organizations, including the Open Society Foundations, the Southern Poverty Law Center, and the Council on American-Islamic Relations, along with other labor-aligned and “anti-corporate” groups. According to that reporting, members of Treasury Secretary Scott Bessent’s inner circle are developing a “blueprint” for possible revocations, and officials reportedly hope to complete a substantial part of the effort before the November 2026 midterm elections.
The Congressional Response
On September 2, 2026, Senate Finance Committee Ranking Member Ron Wyden and Senator Raphael Warnock sent a letter to Secretary Bessent and IRS Cheif Executive Officer Frank Bisignano demanding documents and answers by September 15, 2026. The letter connects the reported blueprint to two other actions: National Security Presidential Memorandum 7, which directed federal agencies to target the financial networks of “Antifa” and domestic terrorists, and a December 2025 memorandum from then-Attorney General Bondi ordering law enforcement to map the financial sponsors of “Antifa-aligned extremists.” The senators argue that both documents blur the line between actual violence and disfavored political viewpoints on capitalism, religion, race, and immigration.
The letter also raises a specific legal concern under IRC Section 7217, which makes it unlawful for covered executive branch officials, including the President, the Vice President, their staff, and Cabinet-level officials, to request, directly or indirectly, that the IRS conduct or terminate an examination of a particular taxpayer. A willful violation carries criminal penalties of up to five years in prison. IRS employees who receive such a request must report it to the Treasury Inspector General for Tax Administration.
What the Law Actually Says
None of this changes the underlying legal standard. Whether an organization qualifies for exemption under Section 501(c)(3) turns on objective criteria applied through the IRS’s own examination procedures, not on whether Treasury or White House officials approve of the organization’s advocacy. Mr. Bisignano testified before the Senate Finance Committee in April that the IRS has never acted on the President’s public statements about political opponents and that those statements have no influence on IRS decisions.
The case law points the same way. In Regan v. Taxation With Representation of Washington, the Supreme Court said that Congress may not discriminate invidiously in its tax subsidies in a way that aims at suppressing dangerous ideas. Bob Jones University v. United States, which is sometimes cited for the proposition that the IRS can revoke exemption on public policy grounds, involved racially discriminatory admissions and discipline policies. It was a case about conduct, not about the views an organization expressed.
We covered the revocation process in an earlier post. It bears repeating, with one important qualification. In most cases, revoking an organization’s exemption requires an individual examination, with notice and multiple opportunities to respond and appeal, and ultimately the right to seek a declaratory judgment in court under Section 7428. There are two exceptions. The first is automatic revocation for failing to file an annual return for three consecutive years. The second is Section 501(p), which suspends the exemption of an organization designated as a terrorist organization, for example under Executive Order 13224 or as a Foreign Terrorist Organization. Suspension under Section 501(p) takes effect on the date the designation is first published, requires no IRS examination, and cannot be challenged in any proceeding relating to federal tax liability, including under Section 7428. Contributions made during the suspension are not deductible.
That exception is worth understanding in the current environment. It is triggered by a designation made outside the IRS, and it applies only to an organization that has itself been designated. The State Department designated four antifa groups in Germany, Italy, and Greece as terrorist organizations in November 2025, and NSPM-7 directs agencies to use their existing authorities against domestic networks. Section 501(p) is the route by which a designation decision, rather than a tax examination, could end an organization’s exemption.
A press report about a blueprint is not a revocation, and it is not evidence that the ordinary process is being bypassed. It is, however, a reason for organizations in politically exposed categories, and frankly for organizations of every political stripe, to make sure their own compliance is airtight before anyone comes looking.
What This Means for Your Organization
If your organization’s mission or advocacy work makes it plausible you could appear on a list like the one reported, this is a good time to have counsel review your Form 990 filings, your lobbying and political activity documentation, and your governance records for anything that would not hold up well under an unfriendly examination. This is sound practice regardless of whether the reported blueprint is real, accurate, or ever acted on. The organizations best positioned to weather a politically charged environment are the ones whose compliance file was already in order before anyone was looking for a reason to open it.
This post describes matters currently under congressional inquiry and public reporting. Facts here may change as more information becomes available, and nothing in this post should be read as confirming the accuracy of any report referenced.
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. This post is for general informational purposes and does not constitute legal advice.