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The OBBB and Nonprofits: Silencing Dissent through Tax Policy [1]

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Date: 2025-06-19

The One Big, Beautiful Bill (OBBB) Act (oh how I hate that name) is being touted by the administration as a comprehensive effort to streamline the federal budget and close tax loopholes. Make no mistake, however, this is not just a budget bill. It includes sweeping provisions that have little to do with fiscal responsibility and everything to do with reshaping the government’s relationship with the people, as this page has previously shown in its coverage of changes to the federal judiciary and the regulation of artificial intelligence. In another of these society reshaping provisions, the OBBB gives the executive branch significantly greater, if not basically unchecked, authority over nonprofit organizations. These provisions could neuter and potentially dismantle the nonprofit sector and civil society with it, and particularly those organizations that may oppose the administration's policies or expose governmental overreach.

Initially, the OBBB went as far as proposing to give the President unilateral power to revoke the tax-exempt status of any nonprofit organization deemed to be against “national interests.” While that specific language was later stripped from the final bill following widespread public outcry, the revised version is little better. Now, the Treasury Secretary holds the power to make such designations, and although the President no longer directly signs the order, the executive branch retains a streamlined path to silence dissent.

This is not unlike what the administration has tried to do in its ongoing campaign against institutions like Harvard, where pressure tactics, legal threats, and political messaging have been deployed to isolate and punish entities it sees as ideologically opposed. That effort—couched in language about “equity” or “accountability”—is in essence an attempt to intimidate and change how Harvard operates. The nonprofit provisions of the OBBB formalize those tactics into law.

Nonprofit regulation in the United States has traditionally walked a fine line between ensuring transparency and preserving freedom of speech. The IRS has long maintained oversight of 501(c)(3) and 501(c)(4) organizations, requiring they avoid direct partisan campaigning to maintain their tax-exempt status. But even in moments of national security concern—such as the post-9/11 implementation of the USA PATRIOT Act—Congress resisted giving the President or Treasury Secretary blanket authority to revoke nonprofit status without judicial oversight.

The OBBB changes that.

Section 112209 of the Act would allow the Treasury Secretary to designate any nonprofit as “terrorist-supporting” based on internal assessments, classified evidence, or vague associations with foreign organizations, immediately stripping the organization of its nonprofit status. The nonprofit would then have 90 days to prove its innocence—a reversal of due process norms. No judicial finding, no transparent review. The standard, providing 'material support' to foreign terrorist organizations— is a term so loosely defined that even public advocacy or independent research could qualify. With tax-exempt status lost, donors can no longer claim deductions. Grants tied to IRS status vanish. State-level exemptions, dealing with property and sales taxes, for example, dissolve. Additionally, the OBBB imposes new taxes on nonprofit executive compensation, expanded unrelated business income taxes (UBIT), and restrictive reporting burdens—all under the guise of fiscal tightening.

In practice, these changes will hurt smaller advocacy groups the most: local immigrant resource centers, watchdog journalists, and legal aid organizations, among others. In effect, an organization that has built itself around these realities would suddently face a financial shock that could effectively shut them down. These change are not fiscal targets—they are political ones, meant to intimidate organizations, like Harvard, that dare to stand up to the horrible people now running this country.

The administration’s defenders argue that the power to revoke status now lies with a Cabinet official, not the President, and that appropriate appeal mechanisms exist. These safeguards, however, are paper-thin.

Imagine a small nonprofit in Texas that provides legal aid to asylum seekers. It partners with international NGOs that assist migrants across the border. Under the OBBB, if one of those NGOs is later found to have tenuous links to a foreign entity designated as hostile, Treasury could determine that the U.S.-based nonprofit “materially supported” them. Within days, their status is stripped. The group has 90 days to challenge the decision, with little access to the classified evidence against them. Donations dry up. Legal contracts are frozen. Offices shutter and the nonprofit dies. With a process with too many secrets, malleable definitions, and minimal checks or oversight, it’s clearly being built, and with an open invitation, for abuse.

Once again, we are faced with a provision that goes well beyond reconciling a budget. The OBBB’s nonprofit section doesn’t balance a ledger—it tilts political scales in favor of an administration eager to consolidate power and quiet opposition. This is not budget reform. It is policy transformation. And it marks a dangerous new precedent for American civil society.

At its core, the nonprofit sector is one of the last relatively independent counterweights to federal power. Through education, litigation, protest, and aid, nonprofits give voice to those otherwise ignored. They expose wrongdoing, document abuses, and propose alternatives. Weakening them weakens democracy. Nonprofits would face a choice: don’t say what needs to be said in order to continue to exist, or scream loudly once and be shuttered. Sure, there may be freedom of speech issues to argue about, but do you trust this Supreme Court?

Please call your senators and representatives.

[originally published here].

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