Dangerous Days For Directors Doing Good: How Do We Protect Our Nonprofitand Ourselves? (Podcast)

Welcome to Corporate Conversations, our podcast breaking down the legal issues that matter most in today’s corporate landscape and delivering practical insights for business owners, executives and legal professionals. Be sure to subscribe wherever you listen to podcasts so you don't miss an episode!

What do recent Trump administration actions mean for nonprofits and their leaders?

In the latest episode of Corporate Conversations, Doug Schwartz, Kimberly Kamkar and Kendall Sirica discuss growing concerns among nonprofit organizations regarding audits, tax-exempt status and federal oversight. They break down what has changed, what has not and what nonprofit boards and executives should be doing now to protect their organizations.

Listeners will gain practical insights into the evolving legal landscape, strategies for maintaining compliance and guidance for navigating heightened political and regulatory attention. Most importantly, the conversation helps separate headlines from reality, equipping nonprofit leaders with the information they need to make informed decisions.

Transcript: Dangerous Days for Directors Doing Good: How Do We Protect Our Nonprofit and Ourselves

0:00:00.2 Kendall Sirica: Nonprofits and their directors say they are under assault by the Trump administration. They worry about getting audited and keeping their tax exemptions. But nonprofits have always been a target and always need to be proactive and vigilant. Today, we'll try to separate hype from reality and give practical advice about what nonprofits and their boards can do to protect themselves, no matter who is in office.

0:00:22.3 Speaker 2: Welcome to Nossaman's Corporate Conversations podcast, where our corporate attorneys bring practical insights into the deals, disputes, and legal decisions shaping today's corporate world.

0:00:22.3 Speaker 2: Welcome to Nossaman's Corporate Conversations podcast, where our corporate attorneys bring practical insights into the deals, disputes, and legal decisions shaping today's corporate world.

0:00:35.9 KS: I'm Kendall Sirica and I'm a retirement plan and benefits lawyer at Nossaman LLP. Before this, I was a student lawyer with Northwestern Law School's Seigle Clinic for Immigrant Youth and Families, where I helped unaccompanied minors and young adults apply for asylum in the U.S. So I have a particular interest in today's topic, which is what nonprofits and their directors can do to keep their tax-exempt status and protect their missions with the current political mood in Washington. My two colleagues with me today are Kimberly Kamkar, a corporate and business lawyer who has advised nonprofits on these issues for years, and Douglas Schwartz, who brings years of tax experience to these matters. Kimberly and Doug, great to have you both here today.

0:01:14.4 Kim Kamkar: Happy to be here. Thanks, Kendall.

0:01:16.3 Doug Schwartz: Thanks for having us. The topic is near and dear, as they say.

0:01:21.1 KS: So the title of our podcast is "Dangerous Days for Directors Doing Good?" With a question mark. In other words, you're asking a question and not making a statement. Why is that?

0:01:31.4 DS: So if our listeners take anything from this podcast, we'd like it to be five words, "Don't panic, but don't ignore." I got out of law school when Ronald Reagan was president and I can tell you that nonprofits have been a target-rich environment throughout my career. In fact, that's been the case even before I was born. So we say don't panic because this has been going on for decades and nonprofits still have survived and even thrived. But we also say don't ignore because this is always serious. Running a nonprofit is fraught and political and you need to be vigilant and proactive regardless of who's in power.

0:02:09.4 KS: And I understand that both of you not only advise nonprofits, but also serve on nonprofit boards yourselves.

0:02:15.5 KK: That's true. I've been on the board of the Women Lawyers Association of Los Angeles, we call it WLALA, for four or five years now, and this is my second year as an officer. This year I am the secretary for WLALA as well as the foundation.

0:02:32.9 DS: And I've served on committees for my alma mater and as a director and president of its local alumni club. I've been an officer for the tax sections of the California State and Los Angeles County bars. And recently I joined the board of the Arthritis National Research Foundation.

0:02:50.0 KS: So you see these issues both as advisors and from the trenches, so to speak.

0:02:54.3 KK: Yeah, absolutely. And honestly, with WLALA, it feels like every day there's something new.

0:02:59.9 KS: So, Kimberly, putting on your lawyer's cap, what kinds of nonprofits do you and Doug advise?

0:03:05.1 KK: The full gamut, honestly, we advise on everything from typical nonprofits like C3s to C13s, which are, funnily enough, nonprofit cemetery companies. But this might actually be a good time to walk through the three most common types of nonprofits that are out and about in the real world. First, we've got C3s, and that's Internal Revenue Code 501(c)(3). And these are your charities, museums, hospitals, colleges, religious institutions. They're the sort of typical nonprofit that you see and that you think about. And they serve a really essential function, which is to bridge the gap between government policies and community services and community needs like healthcare and education. And after C3s, we're going to go in order, you've got C4s, they're commonly known as social welfare organizations, and they do quite a bit of lobbying and advocacy. And they even have the ability to do some political campaigning. Which, by the way, that is sort of a key distinction between C3s and C4s, because C3s cannot. And third, there are C6s. And yes, we did skip C5. So C6s are called trade organizations, and they promote the interests of their members in a particular trade or industry. And like C4s, C6s can lobby and they can do some political campaigning. And you might be thinking, why would you ever go with a C3 then if a C4 and C6 can do lobbying and political advocacy? Well, C3s can solicit charitable contributions from people who want to claim a charitable deduction on their taxes, and C4s and C6s cannot do that. And that ends up being a really big difference.

0:05:05.4 KS: Thanks, Kimberly. That was really helpful. So now let's dive into our title, "Dangerous Days for Directors Doing Good." What has nonprofits and their directors running scared?

0:05:15.3 KK: To answer that, we kind of have to go back to Inauguration Day, January 20, 2025. On that day, President Trump signed Executive Order 14151. And I'm gonna call them EOs for short from here on out. The EO directed federal agencies to terminate DEI, that's diversity, equity, and inclusion, related offices and programs and grants and contracts throughout the federal government. And a bunch more EOs followed after that, including an EO ordering government agencies to terminate "illegal preferences" in federal policies, grants, and contracts. And that was code for DEI. There was another one that targeted federally funded programs that permit "ineligible non-citizens" to obtain social services. And again, that was code for DEI. And there was another EO that redefined qualified employment under loan forgiveness programs with the intent to exclude employers with a "substantial illegal purpose," again, like DEI or discrimination. And there was a fourth main one that directed the Department of Government Efficiency, or DOGE, to get rid of "outdated or unlawful regulations." Again, code for DEI. And what DOGE ended up actually doing was they cut key staff at a lot of federal agencies, including the IRS. And this has had a really deleterious effect because the remaining staff at the IRS are just completely underwater, which is really unfortunate because nonprofits really benefit from an experienced and functioning IRS. Because the IRS approves exemption applications and it answers all nonprofit questions. And importantly, it audits bad actors, which helps the public maintain trust in nonprofits as a whole, which is really important when you are soliciting money from the general public.

0:07:40.0 DS: And we should mention a couple of other developments. First, the Treasury Department announced in April that it will revise the nonprofit Form 990 annual return to better show government contracts, grants, and fiscal sponsorship arrangements. Now, "fiscal sponsorship," means arrangements where a tax-exempt entity funds another charitable project and initiative. Treasury Secretary Bessent said that the changes were needed to curb abuse, fraud, and extremism. But Democrats and left-leaning nonprofits worry that initiatives like these, plus the EOs, target groups with different ideologies. Second, the House Ways and Means Committee in July approved bills requiring nonprofits to provide more information on their annual returns about contributions they receive from abroad and impose penalties if they give to political entities within two years of receiving money from foreign donors. As Kimberly noted, a 501(c)(3) charity can do only a little bit of lobbying and it can't campaign at all, but a 501(c)(4) can do both those things. So Republicans were trying to curb the ability of foreign interests to contribute to 501(c)(3)s, which then transfer the funds to a 501(c)(4). Again, Democrats and left-leaning nonprofits think that these proposals are ripe for abuse.

0:09:04.4 KS: This all sounds serious and honestly a little scary, but as you suggested earlier, it's not unprecedented.

0:09:11.6 DS: Correct. Nonprofits are, unfortunately, a punching bag for whomever is in power in Washington. Now, there are two reasons for that. First, nonprofits are usually tax-exempt, so the sense is that with your tax exemption comes more scrutiny and accountability to the public. Second, many nonprofits do what the current Washington party in power may not like, for example, being pro or anti-gun rights or pro or anti-reproductive rights. The Clinton, Obama, and Biden administrations were also accused of gunning for nonprofits, just from the other side. Also, a lot of the initiatives against terrorism funding and overseas accounts and activities came from the George Bush administration after 9/11. I mentioned the bills to increase disclosure of overseas funding. Well, we've had battles over donor disclosure for years. During the Obama years, it was the Democrats saying there's too much dark money behind these 501(c)(4) political organizations, we need more disclosure about who's funding them. And it was Republicans saying, "No, you just want to dox and harass the donors." We have a cold peace now where 501(c)(4)s do not disclose their donors to the IRS, but 501(c)(3)s do, but the list is available to the public only if the 501(c)(3) is a private foundation, which we'll discuss later. And by the way, a PAC, which is another species of tax-exempt entity, always discloses its donors to the IRS, and that list is always available to the public. Now, to be fair to both political sides, there are indeed nonprofits that work in the shadows and are aggressive and secretive where the laws are unclear or have loopholes. That's unfortunate because, as Kimberly alluded to earlier, when Congress and the IRS try to plug the holes and enhance transparency, it's all the nonprofits that suffer.

0:11:10.3 KS: You've mentioned words like accountability, disclosure, and transparency. It sounds like nonprofits have long been subject to a lot of scrutiny regardless of who's in the White House or the Capitol.

0:11:21.6 KK: Yeah, absolutely. And I really want to build on what Doug just said because what's going on right now is serious, but it really is not unprecedented. And I'll hit a couple highlights. First, we've talked about Form 990s. That's the Form 990 return, which is the required nonprofit annual filing. The 990s are incredibly detailed. If you thought your personal income taxes were bad, just wait. And all the information filed on a 990, like Doug said, is public information, and copies are available on the IRS's website. It's a couple clicks and you can just download it. And this really trends towards transparency. Anyone can see what the nonprofit is doing and how it's spending its money and what its goals and priorities are. And transparency has been determined to be so important that if the nonprofit doesn't file their Form 990 for three years, three straight years, I guess I should say, then they lose their tax exemption automatically. It's a bright line rule, there's no way around it. Second, C3s and C4s pay penalties on what are called "excess benefit transactions," which really is just a fun way of saying sweetheart deals for insiders. And there's sort of an extra layer of those kinds of penalties and fees that are on top of a special kind of C3 that's called a private foundation, because a private foundation is basically a charity that's funded by one person or a very small handful of people. And Congress put these additional guardrails and disclosure requirements in place for these private foundations because... Well, it's under the theory that they're less accountable to the general public. Third is, if a nonprofit does any kind of lobbying, then they have to file a bunch of reports at the federal and the state and typically the local levels. And again, this goes towards what Doug was talking about, each level of government is trying to ensure transparency around the general public's contributed dollars. And I guess, last but certainly not least, C3s are also required to file reports with the state agency that's in charge of protecting the public interest. And here in California, that is the Attorney General's office. And the policy behind this is that C3s solicit charitable contributions and they hold those funds in trust for the public. So C3s essentially have a higher burden to prove that the contributions that they receive actually do go towards the public good instead of, say, inflated overhead or employee salaries.

0:14:28.3 DS: And that's just the official government oversight. There's also charity monitoring websites where you get a charity's 990s, you can see graphics on how much it spends on overhead versus charitable activities, and even look at a rating of the charity that goes from, say, gold to lead. Think Charity Navigator, Charity Watch, BBB Wise Giving Alliance, or GuideStar. Fair or unfair, many donors go to these websites and spend 30 seconds on them before donating to a charity they don't know.

0:14:59.2 KS: So what you're both saying is that what this current administration is doing, and maybe what prior administrations have also done, is to add unwelcome and biased layers to what's already a robust and maybe even intrusive reporting and oversight system.

0:15:13.9 KK: Yeah, you hit the nail on the head.

0:15:16.7 KS: But even so, I do note that not only has the current administration tried to add all of these burdens, but it's also threatened nonprofits with revocation of their tax exemptions if they don't comply. Harvard University comes to mind. But can the administration really do that?

0:15:31.6 DS: Not really, Kendall. A chief executive can't revoke a nonprofit's exemption unilaterally by an EO. There are statutory procedures in place for that. First, as Kimberly mentioned, if a nonprofit doesn't file its 990 for three straight years, its exemption gets yanked automatically. All it can do is try to get the exemption reinstated going forward. Second, the IRS can audit a nonprofit for compliance with tax laws, including adherence to purpose, excessive lobbying, and private inurement or benefit. There are levels of due process here, including multiple chances for defense and appeal through the IRS levels and then at court. Losing exemption status has historically been a high bar and typically involves some pretty egregious abuse. Now, I should mention that educational institutions, you mentioned Harvard, are different from your typical 501(c)(3)s. In 1971, the IRS adopted official guidance that a private school does not qualify for exemption if it does not have a racially nondiscriminatory policy as to students. The Supreme Court upheld this rule in 1983 in Bob Jones University, which involved a South Carolina nonprofit which lost its exemption because it had a disciplinary rule banning interracial dating and marriage, and it also denied admission to people in an interracial marriage or just supporting the same. The Trump administration, ironically, invoked this rule in threatening Harvard's exempt status on the accusation that it discriminated in its admission policies and its operations.

0:17:12.8 KK: I should jump in here really quickly to say there's another piece to this. Internal Revenue Code Section 501(p), which, funnily enough, was buried in the post-9/11 USA PATRIOT Act back in 2001, says that if a federal authority designates a nonprofit as supporting terrorism, then the IRS has to suspend that nonprofit's tax-exempt status, and there's no due process about this at all. And I guess thinking back, you can probably see why this was slipped into the PATRIOT Act. But on top of that, in September 2025, the Trump administration issued... And this is a mouthful, bear with me, the National Security Presidential Memorandum Number 7, which directs the DOJ, the FBI, the Treasury, and the IRS all to investigate nonprofits and donors that might "sponsor or otherwise aid and abet unlawful activity." And so this language, this memo stops short of actually invoking Code Section 501(p), but it still does threaten revocation through the DOJ referrals. And the scary part of that is that we've seen the kind of damage that inquiries like this do to a nonprofit's reputation and donor confidence and their banking relationships and their daily operations, even if that inquiry is baseless and goes nowhere.

0:18:49.8 KS: You bring up a really important point that even if the administration can't yank a nonprofit's exemption by an EO, just the very fear and uncertainty from these orders does damage anyways.

0:19:00.5 KK: Yeah, it's that lovely expression, the process is the punishment. And I think that's what we're seeing in play here. These initiatives have created a lot of fear around nonprofits losing their exempt status, losing control over their internal functions and their management, and actual management shakeups. I mean, especially for universities, everyone was scrambling to prepare for audits or brace for the next change in the law that everyone assumed was coming for a while. But Doug is right, the government can't revoke your tax-exempt status just by executive order. That's not how our checks and balances system works. What it can do, though, might be just as serious. It can terminate your contracts, it can refuse to make or honor grants, and it can pretty quickly erode the public's trust in the nonprofit. And I think we can take a look at quite a few universities as examples of this, like Columbia or Cornell or Brown or Northwestern.

0:20:12.2 KS: Doug, you mentioned earlier that the IRS can audit a nonprofit as a start to possibly revoking its exempt status. How do these audits typically start?

0:20:21.4 DS: Well, the IRS has a staff to review 990s and uses algorithms to pick up any unusual items. But as Kimberly said, IRS enforcement has kind of withered with the DOGE cutbacks. More often, audits start with some disgruntled ex-employee or a director blowing the whistle, or a blogger who doesn't like the nonprofit's mission writes the IRS saying, "You need to look at these guys." And it doesn't matter if you're doing something non-political like a soup kitchen or community theater. No matter what you do, you're gonna tick someone off sometime. And again, I don't care about the party, but there's always a senator or representative saying the same type of thing. So, basically, your worst enemy is the person out there with an axe to grind. That is why we tell nonprofit clients to follow the New York Times rule: don't do anything you wouldn't want to see on the front page of the New York Times the next day.

0:21:13.4 KS: So what I'm hearing is that nonprofits have always had and will always have targets on their backs, and that being vigilant, careful, and proactive is always a good idea no matter who's in power.

0:21:23.7 KK: It's always a concern, and it's always really important to be careful and proactive. There's nothing wrong with either of those things.

0:21:33.2 KS: What specifically would you suggest to nonprofits?

0:21:36.8 KK: That's a great question. I think I would start from the very beginning, which is the formation of the nonprofit itself. First, in order to form the nonprofit, you file a nonprofit charter with your local state agency, and that charter is typically fairly boilerplate. But after that, you need to prepare bylaws. And the bylaws are an incredibly important document for the nonprofit itself because it governs everything about the nonprofit's governance, including how directors and members meet, and how decisions get vetted and approved, and what to do when there's a conflict of interest, and all sorts of other things. So it's important that that document be well-prepared because that will set the tone and the groundwork for how your nonprofit exists in real-life. And then after the bylaws, I think the next best and most proactive decision a nonprofit can make is to put together and adopt three specific policies, a conflict of interest policy, which, like its name suggests, prevents self-dealing by people within management; a whistleblower policy, which protects people who report wrongdoing from retaliation; and a document retention policy, which tells you what documents to keep and for how long. I say these three policies in particular because nonprofits have to disclose whether these exist on their Form 990 report that's filed annually. And those... If you remember those watchdog websites that Doug mentioned earlier, these watchdog websites expect to see them, and your nonprofit rating will be knocked down if you don't have them. And again, that goes towards the public's confidence in your nonprofit. And so it's important to make sure that you've ticked all of these boxes ahead of time before you ever start to bring money in the door. Doug, any more thoughts? Did I miss anything?

0:23:51.1 DS: No, I think you covered it, but I'd like to make one suggestion about the bylaws, namely, be practical and consider how the nonprofit and its management and members actually operate in real-life. If you can't operate according to your bylaws, then that's a problem. For example, if you have members, consider virtual meetings and how to notice and conduct them, and consider web-based voting platforms like SurveyMonkey to cast ballots. And don't set the quorum at, say, 90% of the members, because you'll never get that in a million years. We've seen bylaw quorum provisions of more than 50% and even 30%, although, to be frank, if you gotta go lower than 30%, you should really consider having voting members if no one's gonna show up for meetings. Another example is director meetings. Meetings are tough to schedule and time consuming, and written consents take time to draft and may involve attorney fees. So build something in your bylaws whereby directors can make decisions by email. As long as there's a complete email chain and some means of storing the email for posterity, remember, we talked about a document retention policy, then it should be easy to figure out who voted for what and what was voted on. Oh, and by the way, I don't like text or social media to conduct decision making. There's no permanent record, and it's much more difficult to figure out who said what or what was decided.

0:25:15.7 KS: Is there anything else to think about or consider at the formation stage?

0:25:22.3 KK: I mean, I guess I would also call the tax exemption application a formation document. So I guess we can talk about that even if it's on a technicality. The exemption application is filed with the IRS, and it's either a Form 1023 for a C3, a 1024-A for a C4, or a 1024 for a C6. And like the 990, the exemption application is public information, so everything that's written in it will be downloadable to the general public, so anyone can see a copy. And this is probably the nonprofit's first chance to tell its story both to the IRS and to the public. Because this is... In the exemption application, you have to set out what the mission is and how it plans to operate and spend its time and its financial plan. Where is it gonna get money? How is it gonna spend it? And who's running the show? What are their qualifications? So it becomes a really big piece of the history and the operations of the nonprofit. And making sure to give this whole suite of information to the public proactively will set you up for success in the future. Now, technically, only C3s are required to file one to get their exempt status. C4s and C6s are sort of assumed to have one even without the exemption application. But we always recommend that C4s and C6s file one too, both in order to provide this really vital information to the public, but also because the exemption letter itself is a really important piece of the nonprofit's exempt status and operations as it moves through the world.

0:27:19.3 KS: So at this stage, I just have to ask because I, and I know our listeners are thinking the same thing, what role can AI play in all of this?

0:27:28.0 KK: That is a great question, Kendall. And Doug, if you don't mind, I'm gonna take this, mostly because I'm on my firm's technology committee and our AI committee, so I am constantly using and testing AI during my day to understand the extent of what it can do and also its limitations. And AI is really great at doing certain things, like taking minutes or preparing talking points or getting you kickstarted on a draft of anything from an initial draft of a document or that first initial search you do for research where you're just sort of taking the lay of the land. It's really great at getting you started on these things. So it is a wonderful tool. But I do always feel the need to make this one caution, which is that AI doesn't replace careful work or experience. And so absolutely use AI within your nonprofit to take your minutes and summarize the action steps for your... That everyone is gonna have to take out of this meeting. But make sure to always double-check what AI has prepared and put together, both in terms of the content and in terms of its sources, because it can hallucinate and it doesn't really think like a human, so it's good to double-check it.

0:28:55.4 KS: That's about the answer that I expected, that AI can be a valuable and even essential tool for the whole life cycle of a nonprofit, but as long as you're careful. And this segues into my next question, which is once you've launched the nonprofit, how should management operate it?

0:29:11.2 DS: Well, to start, directors should remember the three duties of care, loyalty, and obedience. First, the duty of care requires directors to actively participate, stay informed, and exercise reasonable common sense and prudent judgment when making decisions for the organization. Basically, if you sign up to be a director, then show up to meetings and pay attention and answer your emails, please. Second, the duty of loyalty requires directors to put the nonprofit's interest above personal professional gain. And that includes avoiding and properly disclosing any conflicts of interest. Remember we said before the nonprofit should adopt and follow a conflict of interest policy. And third, the duty of obedience requires directors to stay faithful to the organization's core mission and comply with its governing documents and applicable local, state, and federal laws. Now, let me expand on that third duty, which is obedience. First, I said comply with its governing documents, and this is a reason we advise that bylaws be carefully drafted and reflect the way in which the board is likely to operate. If a board can't operate according to the bylaws, then the board can't comply with the governing documents. Second, I said comply with applicable local, state, and federal laws. I didn't say blindly follow every law that purportedly applies to you. So here we are at the podcast talking about the Trump administration's EOs and how they apply. Paying attention to these developments and getting sound professional advice satisfies the duty of obedience, even if the ultimate decision is that these orders are improper or otherwise don't apply to you. In fact, blindly complying with an EO may well conflict with a director's ability to stay faithful to the organization's core mission, setting up an internal conflict with the duty of obedience.

0:31:07.9 KS: Can you give some practical examples of how to meet these duties?

0:31:13.2 KK: Absolutely. I'm gonna reference something Doug said just a minute ago, which is to pay attention. Follow the news, join nonprofit blogs and chat groups, and get professional advice. I know it might be expensive, but it's important. The IRS also has really great resources. You can look up Stay Exempt, and there's also an EO Update newsletter. Second is to document and disclose everything. Remember that major decisions need board approval, and those decisions include things like the budget, leases, programs, personnel contracts, big grants, all sorts of things in that category. And when making these decisions, nonprofits have to make sure that their minutes show that the board was fully informed, had a reasonable discussion about the strengths and weaknesses, goods and bads, pros and cons, and also how everyone voted. I know life moves fast. If you missed getting your approval before the transaction actually happened, a lot of times what you can do afterwards is you still need to make sure to disclose all of the information, but the board, the company, can do what's called a ratification. They can take a look at the transaction, the approval that was missed, and say, "You know what? We agree that was a good decision. We're gonna adopt it as our own action after the fact." And you can do that at your next meeting. Third is, and we're seeing this a lot right now, be extra careful with executive compensation. Document that person's qualifications and their performance and benchmark it against similar organizations and similar employees. And remember that if you're having a really hard time figuring out the right benchmarks, nonprofit 990s are public. You can go take a look at any other nonprofits' 990s and see what they're paying their own employees of a similar title. Sometimes we also see that our bigger clients, bigger organizations, they might commission with a formal market study on compensation, but those can run pretty expensive, around $25,000. So it's not really an option for all clients. And if it's not an option for your nonprofit, there is plenty of information and research that you can do through the web as well as through the IRS's own resources to help set you up there. Doug, do you want to address any other points on this one, of practical examples?

0:33:53.6 DS: Sure, I got three of my own. Number one, self-interested transactions need special attention. Follow your conflict of interest policy and your state's rules. Full disclosure plus approval by disinterested directors, preferably unanimous, will usually protect you. Second, have counsel review any joint venture or affiliation with another organization, whether it be for-profit or nonprofit. Affiliations or ventures can be valuable, but watch out. If a partner does too much lobbying or any political campaigning, that could jeopardize your 501(c)(3) status. And third, know your political activity limits. Keep nonpartisan education separate from campaign activity and document your neutrality in any voter education or candidate forums.

0:34:42.1 KS: Now, you mentioned the 990 returns and how those are all public information. So I'll bet all of this information also shows up on the 990, right?

0:34:50.4 KK: Absolutely. I know I've said it a lot, but it bears repeating. The 990 covers everything, governance, management, disclosure, compensation, board composition, independence, policies, current initiatives, new initiatives, lobbying, finances. I genuinely could go on and on with this list. And as we mentioned earlier, Treasury and Ways and Means wants to expand that even further to cover foreign donors and sponsorships, as if that list wasn't long enough. But I'm gonna say this again as well. I wouldn't look at the 990 as a burden because it really is a chance to tell your nonprofit's story. It's one of the places potential donors are gonna look to learn about your goals and your efforts. So describe your initiatives, explain how they benefit the public, give specific examples. If there's a big bonus, don't be embarrassed, don't try to hide it. Explain why it was justified. Like we said above, if this all sounds really daunting, if it does still sound like a burden, AI can help draft a lot of these different statements. You just have to make sure to check and edit them. But all of this information helps the public to understand and stand behind your story and your nonprofit. So always be upfront, because if you try to hide something, somebody is gonna find it. Everything is on the internet now. Someone will find it, and then you have to be on the defensive.

0:36:23.6 KS: So given everything that we've discussed, should a nonprofit do anything more now if it's concerned about being targeted or facing enhanced scrutiny?

0:36:32.6 DS: Yes, for sure. I can think of six things. First, for federally funded nonprofits, review grant term certifications, DEI program language, and beneficiary eligibility rules in light of the new executive orders. As we mentioned before, the government can't yank your tax-exempt status by executive order, but sure can yank your funding. Second, conduct an internal compliance audit. Review organizing documents, board minutes, compensation practices, and political activity safeguards. Third, engage outside counsel to assess risk exposure, especially for organizations receiving federal funding, engage in advocacy, or operating in areas administration has identified as problematic, which might include DEI, immigration services, environmental work, et cetera. Fourth, develop a rapid response plan in the event of an IRS or other government investigation, including preserving documents and designating a point of contact. Fifth, familiarize yourself and the board with the anti-terrorism provisions of Code Section 501(p) and National Security Presidential Memorandum 7 and do contingency planning. And sixth, as we said before, pay attention to current developments and monitor the outcomes of ongoing legal challenges. I note in this respect that there have been numerous court rulings pausing or even invalidating some of the administration's initiatives.

0:38:00.9 KS: Do you both have any final thoughts for our listeners? What's the one thing that you would want every nonprofit leader to take away from this conversation?

0:38:08.6 DS: Well, as we said before, don't panic, but don't ignore it. The current administration initiatives might seem scary and oppressive, but we've seen this before, and a nonprofit can and should conduct its affairs knowing that there is always and will always be a target on its back. The situation's unfortunate, but it's not desperate and it's not unfixable.

0:38:29.8 KK: And I do so love to echo Doug, so I'm gonna do that again here. He and I deal with these issues every day, both as lawyers and as directors of nonprofits ourselves. We have seen how the scrutiny from the current administration has just sent shockwaves through the community, which makes this a moment where your formation decisions, your governance practices, your compliance posture, it's gonna matter more than ever. And I guess we really just hope that we've been helpful today and given you a bit of grounding and some practical advice that you can take into your everyday life.

0:39:07.6 KS: Thank you so much, Kimberly and Doug, for your insights today. And to our listeners, whether you're in-house counsel, sitting on a board, or running a nonprofit, I hope this conversation gave you some concrete ideas for managing the risks we discussed and maybe making you feel a bit relieved. The landscape is shifting fast, but with the right governance practices, the right attitude, and the right advisors, you can navigate it successfully. For additional information on this topic or other corporate transactional, litigation, or insurance matters, please visit our website at nossaman.com. And don't forget to subscribe to Corporate Conversations wherever you listen to podcasts so that you don't miss an episode. Until next time.

0:39:46.5 S2: Corporate Conversations is presented by Nossaman LLP and may not be copied or rebroadcast without consent. Content reflects the personal views and opinions of the participants. Statements provided in this podcast are for informational purposes only, are not intended as legal advice, and do not create an attorney-client relationship. Listeners should not act solely upon this information without seeking professional legal counsel.