Highlights from 2025 Georgetown Conference on Representing & Managing Tax-Exempt Organizations

Published on: by Gene Takagi Category:EVENTS
Key Bridge Potomac River Georgetown University

The following are just some of the many highlights from the 2025 Conference on Representing & Managing Tax-Exempt Organizations (the “Georgetown Conference”). Not surprisingly, the current hostile political climate towards the nonprofit sector was a pervasive theme. As with all of our posts capturing highlights of events, my interpretations, opinions, and suggestions of additional resources may be sprinkled in with the general information provided by the presenters.

Introduction – Celia Roady

General advice for nonprofits:

  • stay informed
  • plan ahead and prepare to be nimble
  • focus on accomplishing mission

Office of the IRS Director, Exempt Organizations: Practitioner’s Perspective – Timothy Berger

Current Developments at the Treasury and IRS: Practitioners’ Perspective – Alexander Reid, Michael Desmond

  • Office of Chief Counsel
  • Office of Tax Policy
  • Executive Orders (EOs) – Desmond’s past experience was that EOs do not originate from Treasury and the IRS even if they have tax policy impacts
    • EOs on race
      • provide that recipients of government contracts or grants cannot operate any program promoting DEI that violates applicable anti-discrimination laws
      • requires Executive agencies to investigate nonprofits with assets of 500 million dollars or more to see if their DEI programs constitute illegal discrimination or preferences
  • Department of Education memo (2/14/25)
    • “Federal law thus prohibits covered entities from using race in decisions pertaining to admissions, hiring, promotion, compensation, financial aid, scholarships, prizes, administrative support, discipline, housing, graduation ceremonies, and all other aspects of student, academic, and campus life”
    • “The law is clear: treating students differently on the basis of race to achieve nebulous goals such as diversity, racial balancing, social justice, or equity is illegal under controlling Supreme Court precedent”
    • But omits key guidance from the Supreme Court in Students for Fair Admissions v. Harvard that “Nothing prohibits universities from considering an applicant’s discussion of how race affected the applicant’s life, so long as that discussion is concretely tied to a quality of character or unique ability that the particular applicant can contribute to the university”
  • IRS is highly apolitical (e.g., only 2 political appointees) relative to other agencies and has very structured processes which the administration would need to carefully consider in issuing executive orders that can be implemented by the IRS
  • Priority Guidance Plans may change with administrations, legislative actions, and other factors (so this may impact DAF proposed regulations, especially with Trump’s 10-to-1 deregulation initiative)
  • Loper Bright elimination of Chevron deference standard – Desmond believes that it’s not likely Treasury will review its regulations under the new standard and amend old regulations as a result; similarly, Treasury will likely defend its regulations as the best interpretations of the statutory laws
  • DAF regulations are likely not a high priority for either promulgation or for withdrawal
  • Foreign grantmaking prohibition rumors – Can an EO be like a regulation and turn off foreign grantmaking? – In theory, good cause can result in pulling the regulation, but signals appear to show that the traditional proposal of a new regulation with notice and comment would be followed

Capitol Hill Update: What Are Members and Staffers Focusing on in 2025? – Andrew Lai, Ann Cammack, Jesse Mahan, Andrew Grossman, Alexander Reid

  • Background:
    • Congressional Budget Office estimates extending the Tax Cuts and Jobs Act expiring provisions to cost $4.6 trillion over 10 years
    • Federal debt is over $35 trillion and interest paid by Treasury is $2.4 billion per day
    • Tax-exempt organizations are in the crosshairs for raising money (e.g., increasing university endowment excise tax, eliminating tax-exemptions)
  • Budget Reconciliation (Senate) – provides a fast-track process for consideration of bills to implement the policy choices embodied in the annual congressional budget resolution
    • the budget cannot be stalled in the Senate by filibuster; it only requires a simple majority
    • Byrd rule is aimed at preventing the use of reconciliation to move a legislative agenda unrelated to spending or taxes, and to some extent it limits Congress’ ability to use reconciliation to increase deficits – at least over the long-term
    • See Budget Reconciliation Explainer, House Committee on the Budget
  • Budget Reconciliation (House) – House margins are so narrow with so many competing priorities (including regarding social programs) that the bill coming out of the House will be more narrowly tailored than might otherwise be expected (there will be strong differing opinions among Representatives within each party)
  • Nonitemizer Deduction (HR 3435 and S. 566)
  • Some House Budget Committee Proposals (while most of the panelists were understandably not inclined to offer opinions on their likelihood, at least one panelist offered some thoughts captured below)
    • Make $10k SALT Cap Permanent, but Double for Married Couples (costs $100-$200 billion)
    • Tax students on scholarships (raises $54 billion) – unlikely
    • Increase endowment tax by 900%, from 1.4% to 14% (raises $10 billion) or to 21% – possible
    • Tax nonprofit hospitals (raises $260 billion) – unlikely
    • Deny deduction for charitable gifts to hospitals (raises $83 billion) – unlikely
    • Tax interest on muni bonds (raises $250 billion)
  • HR 9495 – probably would be Byrded and pulled out of a Budget (revenue impact negligible)

Bruce Hopkins Memorial Update on Key Current Developments

  • Executive Orders and Actions – 200 since January 20, 2025 – impacts on nonprofits include:
    • reducing or canceling sources of funding
    • terminating government programs on which nonprofits or their beneficiaries depend
    • declaring certain activities to be “illegal”
    • directing investigations
    • slashing the workforces (i.e., layoffs) of agencies on which nonprofits depend
  • Examples:
  • Education
    • “Dear Colleague” letter (February 14, 2025) from the Department of Education to educational institutions receiving federal funds (including Harvard) [Ed. This letter does not accurately describe current law but reveals the administration’s positions on DEI.]
      • “Educational institutions have toxically indoctrinated students with the false premise that the United States is built upon “systemic and structural racism” and advanced discriminatory policies and practices. Proponents of these discriminatory practices have attempted to further justify them—particularly during the last four years—under the banner of “diversity, equity, and inclusion” (“DEI”), smuggling racial stereotypes and explicit race-consciousness into everyday training, programming, and discipline.”
      • “Although SFFA addressed admissions decisions, the Supreme Court’s holding applies more broadly. At its core, the test is simple: If an educational institution treats a person of one race differently than it treats another person because of that person’s race, the educational institution violates the law. Federal law thus prohibits covered entities from using race in decisions pertaining to admissions, hiring, promotion, compensation, financial aid, scholarships, prizes, administrative support, discipline, housing, graduation ceremonies, and all other aspects of student, academic, and campus life. Put simply, educational institutions may neither separate or segregate students based on race, nor distribute benefits or burdens based on race.”
      • “All educational institutions are advised to: (1) ensure that their policies and actions comply with existing civil rights law; (2) cease all efforts to circumvent prohibitions on the use of race by relying on proxies or other indirect means to accomplish such ends; and (3) cease all reliance on third-party contractors, clearinghouses, or aggregators that are being used by institutions in an effort to circumvent prohibited uses of race. Institutions that fail to comply with federal civil rights law may, consistent with applicable law, face potential loss of federal funding.”
    • Letter to Harvard from 3 Federal Agencies (April 11, 2025) that states “Harvard has in recent years failed to live up to both the intellectual and civil rights conditions that justify federal investment” and requires Harvard to agree to several areas of reform and the discontinuation of DEI
      • “The University must immediately shutter all diversity, equity, and inclusion (DEI) programs, offices, committees, positions, and initiatives, under whatever name, and stop all DEI-based policies, including DEI-based disciplinary or speech control policies, under whatever name; demonstrate that it has done so to the satisfaction of the federal government; and demonstrate to the satisfaction of the federal government that these reforms are durable and effective through structural and personnel changes. By August 2025, the University must submit to the government a report—certified for accuracy—that confirms these reforms.”
      • “he University shall make organizational changes to ensure full transparency and cooperation with all federal regulators. No later than June 30, 2025, and every quarter thereafter during the period in which reforms are being implemented, which shall be at least until the end of 2028, the University shall submit to the federal government a report—certified for accuracy—that documents its progress on the implementation of the reforms detailed in this letter. The University must also, to the satisfaction of the federal government, disclose the source and purpose of all foreign funds; cooperate with the federal government in a forensic audit of foreign funding sources and uses, including how that money was used by Harvard, its agents, and, to the extent available, third parties acting on Harvard’s campus; report all requested immigration and related information to the United States Department of Homeland Security; and comply with all requirements relating to the SEVIS system.”
    • Harvard’s rejection of the federal government’s letter (April 14, 2025)
      • “Harvard remains open to dialogue about what the university has done, and is planning to do, to improve the experience of every member of its community. But Harvard is not prepared to agree to demands that go beyond the lawful authority of this or any administration.”
    • April 23, 2025 – 7 Executive Orders on Education
      • EO 14281: Restoring Equality of Opportunity and Meritocracy
        • “It is the policy of the United States to eliminate the use of disparate-impact liability in all contexts to the maximum degree possible to avoid violating the Constitution, Federal civil rights laws, and basic American ideals.”
        • “Given the limited enforcement resources of executive departments and agencies (agencies), the unlawfulness of disparate-impact liability, and the policy of this order, all agencies shall deprioritize enforcement of all statutes and regulations to the extent they include disparate-impact liability ….”
        • “[T]he Attorney General shall initiate appropriate action to repeal or amend the implementing regulations for Title VI of the Civil Rights Act of 1964 for all agencies to the extent they contemplate disparate-impact liability.”
        • See What Trump’s order on ‘disparate impact’ means for civil rights (Washington Post)
      • See Trump signs executive orders targeting colleges, plus schools’ equity efforts (AP)
    • Executive Order 14188 (Additional Measures to Combat Anti-Semitism)
    • Improving Educational Outcomes by Empowering States, Parents and Communities (March 20, 2025) – This is the EO for closing the Department of Education
  • National Institutes of Health (NIH) cap on indirect cost rate on grants at 15% (February 27, 2025) – permanently enjoined by federal district court
  • Climate
  • International Activities
    • HR 9495 (could be re-introduced)
    • Rumors and speculation about restrictions on foreign grantmaking (including ending equivalency determinations) or receipt of foreign funds
  • Funders responses
  • Risk assessments and mitigation activities
    • Funders
      • Giving through DAFs (anonymity)
      • General support grants instead of project grants
      • Gift letters instead of grant agreements (Section 1981)
    • Other charities
      • Compliance checks
      • Emergency reserves
      • Identification of attorneys with appropriate expertise and legal resources
      • Crisis communication resources and plans
      • Creation of structures involving separate legal entities, exempt and non-exempt, domestic and foreign [Ed. For the vast majority of charities, these steps may be unnecessary or premature and may be far more complex with greater risks than anticipated.]
        • IRS Letter 5228 (safe harbor and expedited processing of applications for 501(c)(4) tax-exempt status) – note that an organization can also self-declare to be exempt under 501(c)(4) with proper notice to the IRS (Form 8976)

There were also an array of breakout sessions including on state updates, AI, IRS audits, racial justice, charitable diversions, investments, affiliated 501(c)(3) and 501(c)(4) organizations, UBIT, single member LLCs, church taxes, Treasury and the IRS, board committees, grants vs. contracts, executive compensation, enterprise risk management, legal ethics, DAFs, union organizing, international grantmaking, supporting organizations, Form 990, lobbying rules, fiscal sponsorship, general counsel updates, employee benefits, and Form 1023.

Many thanks to Celia Roady (partner, Morgan Lewis) for her many years of service as program chair for the Conference. Celia announced that this would be her final year in such role. She will be succeeded by her colleagues at Morgan Lewis – Tomer Inbar and Ann Batlle.