Rules of the Road for Nonprofits: Using the Law to Achieve Your Mission went to press just as the second Trump administration took office. Needless to say, a lot has happened in that year and a half, and that is why I am updating this book. I will do so periodically over the next few years. You will know how recent each chapter’s update is because it will be dated. This first chapter will update any information that was originally in Chapter 1 and summarize what has happened in nonprofit law since January 2025.
Here goes: After decades of growth and a symbiotic relationship with the government, the sector now faces a slew of challenges that stretch the limits of the current legal framework. Those pressures include a hostile federal (and in some cases state) government, increased wealth disparity, climate change, and artificial intelligence. Some fear that the democratic function of civil society is itself disappearing, and nonprofit law could lose its democratic function completely.
Despite these challenges and despite all appearances, nonprofit law has not changed very much. We can look to three areas for legal changes: legislation, administrative rules, and court orders. To date, there has been very little action in these areas.
WHAT HAS CHANGED
Legislation: Only one piece of federal legislation has passed that relates to nonprofit law, the One Big Beautiful Bill Act (OBBBA). That law tweaked the charitable deduction rules and the rules surrounding wealthy nonprofit organizations. The update to Chapter 4 explains those changes in detail. A few state laws of significance have also become law. The book’s updates will cover them, as well.
Administrative Rules: As for administrative rules, the Trump administration has finalized one rule that affects nonprofits and proposed two others. The finalized rule, which was invalidated, attempted to narrow the definition of public service for student loan forgiveness to disqualify certain §501(c)(3)s. The administration was trying to stretch the "illegal purpose" doctrine discussed in Chapter 2. The administration may appeal, but as for now, the status quo prevails.
The administration has also proposed a rule that overhauls the way federal grants are decided. The rule would allow political appointees to make ideological decisions, both when deciding whether to award a grant and when deciding on termination. The comment period closed on July 13, 2026. More than 340,000 comments were received. Needless to say, this rule will be challenged in court if it is finalized.
Finally, the General Services Administration announced proposed amendments to the system for making federal grants, loans, and certifications, which would require grantees to certify they are complying with President Trump’s executive order and the US Department of Justice’s guidance on “illegal” DEI. The comment period has ended, but the final amendments have not yet been published.
We can expect litigation challenging both proposed rules if they become final, as the definitions remain vague and they probably invoke First Amendment concerns.
Court Decisions: Several other issues, notably those dealing with federal grants for nonprofits and DEI programs, are winding their way through the courts. One Supreme Court case that was pending as the book went to press has been decided, and a second indirectly shows that the Court values donor privacy. Neither makes a major change, but they will be discussed in the updates to the relevant chapters. Additionally, the Fifth Circuit sidestepped issues dealing with the Johnson Amendment. That case will be discussed in the update to Chapter 7.
WHY DOES IT SEEM LIKE THERE IS SO MUCH LEGAL CHANGE, EVEN THOUGH THERE ISN’T?
Changes in rhetoric and policy can be confusing. The rhetoric and policies emanating from the federal government have changed dramatically. Fortunately, neither rhetoric nor policy constitutes an actual change in the law. When President Trump posted on his social media account that Harvard should lose its tax-exempt status, for example, he expressed a wish, not a legal change. Those types of statements often succeed in frightening those who disagree with the administration, but nonprofits that can distinguish between a change in rhetoric or attitude and a change in the law can proceed with less fear.
Executive orders are authoritative, but they don’t change the law. President Trump has issued hundreds of executive orders, memoranda, and proclamations during this second term. Those orders explain to the administrative agencies run by the Executive Branch how the Trump administration wants the rules to be interpreted. They do not, however, change the law, and many have been or are being challenged in court. As of June 10, 2026, the Just Security Litigation Tracker was following 831 cases that had been filed against Trump’s executive actions. The plaintiffs were winning at the rate of two to one, although many, if not most, of those cases were on appeal.
Changes in federal grants, however disruptive to a nonprofit’s bottom line, don’t change the law. One of the most disruptive changes in the past 18 months has been the cancellation of thousands of federal grants and the placing of conditions on receiving new funds.[1] Again, most of these actions have been challenged, and many grants have been reinstated, but the anxiety and mistrust remain.
WHAT HASN’T CHANGED
DEI remains legal. The Trump administration is stretching several legal theories that would make illegal any efforts to remedy past discrimination. These theories are so controversial, they cannot become law until or unless legislation changes the current law or the Supreme Court weighs in. Congress has not made any effort to change laws to date, and it will take years for the Supreme Court to issue an opinion. In the meantime, you can track DEI lawsuits on this site. Although the site is not limited to nonprofits, it shows how extensive the legal fight over DEI has become.
The right to protest remains legal. The right to protest is protected by the right of association in the First Amendment.[2] The vast majority of non-501(c)(3) nonprofits are associations, and many 501(c)(3)s engage in advocacy, which is sometimes interpreted as protest. The Trump administration and several states have taken steps to make protests more difficult and possibly illegal, so this is an area that we will continue to follow.
Nonprofits can still receive federal grants. As mentioned above, the federal government is still making grants to nonprofit organizations.
Nonprofits don’t lose exemption overnight. The procedures for revoking exemption remain intact. The IRS will investigate before revoking an exemption, and nonprofits can challenge the revocation, both administratively and in court. Nonprofits can, of course, lose exemption automatically if they fail to file their tax information form (Form 990) for three consecutive years. They can also have their assets frozen and their exemption suspended if they are designated as a terrorist organization.
There are no domestic terrorist groups. In late 2025, President Trump signed a presidential memorandum designating Antifa (a non-existent organization) as a terrorist organization, which has led to fears that the administration would designate organizations with views opposed to it as terrorist organizations. That has not happened to date, but in June 2026, the Department of Justice indicted 15 protestors in Minnesota for their actions during the ICE surge earlier that year and said they were members of Direct Action Minnesota, calling them an “antifa group.” The nonprofit itself was not charged.[3] The Chapter 2 update to this book discusses this issue in more detail.
The nonprofit sector remains a vital part of the American economy, its democracy, and the safety and well-being of its citizens.
The importance of the nonprofit sector cannot be overstated. In the 18 months since Rules of the Road for Nonprofit Leaders went to press, nonprofit leaders have increasingly realized that they need to educate the public about their importance. As the book says, “[A] world without cultural institutions, houses of worship, food banks, shelters, and nonprofit health and educational institutions would be a mighty bleak world indeed.”[4] Fortunately, trust in the sector remains at 57%, which is higher than trust in other institutions. As long as nonprofit leaders continue to use the law to achieve their missions, this trust should remain and possibly grow higher.
The nonprofit sector survived economic downturns and the Covid pandemic in better shape than the other sectors,[5] and it will survive the current threats as well. The 8 sentences that form the basis of Rules of the Road for Nonprofits remain crucially important, because they help us use the law to achieve our missions. After all, the worst thing that can happen is not the loss of exemption, dissolution, or even a criminal investigation. The worst thing that can happen is to abandon our missions.[6] As the first precept says, “Keep your mission front and center.”
[1] In some cases, the restrictions were also a condition of retaining existing grants.
[2] The First Amendment does not protect violent actions. In June 2026, several anti-ICE protestors were sentenced to between 50 and 100 years in jail after a protest became violent. The protestors had planned to set off fireworks; some of them vandalized cars; and one shot a policeman in the shoulder. The policeman recovered completely. These unusually harsh penalties may be designed to deter peaceful protest. Sam Levine, Texas Anti-ICE Protestors Convicted of Terrorism Charges Sentenced to at least 50 Years in Prison, The Guardian (June 23, 2026).
[3] The Trump administration also sued the Southern Poverty Law Center for fraud, an action that many believe is politically motivated. As I write this update, a motion to dismiss for vindictive prosecutionhas been entered in the case.
[4] Rules of the Road for Nonprofits, p. 4.
[5] “Between 2005 and 2023, nonprofit employment in the United States grew 33 percent. During this same time, employment in the private, for- profit sector only grew 9 percent. Nonprofit employment growth also exceeded growth in government employment at any level— federal, state, or local.” Rules of the Road for Nonprofits, p. 4.
[6] Karl Mill, Resisting Administration Threats and the Focus on Philanthropic Freedom, Mill Law Center (Oct. 16, 2025).