Million-dollar attorneys explain why their clients don’t make money

WASHINGTON, D.C. — America’s nonprofit industry has responded to the possibility of losing federal tax exemptions in the traditional Washington manner: by preparing to spend an extraordinary amount of money explaining that it does not exist to make money.

The Trump administration is weighing a proposed executive order that could suspend the tax-exempt status of organizations designated as having terrorist connections.

The proposal has not been signed, and the identities of any potential targets remain unclear. Legal specialists have raised questions about the process, particularly the difficulty of challenging designations that may depend on classified information.

Nonprofit executives are understandably concerned.

Their accountants are even more concerned.

And America’s constitutional lawyers have begun making restaurant reservations.

The Lawyers Discover a Charitable Opportunity

At a nonprofit headquarters near Dupont Circle, executives reportedly gathered to discuss the financial threat.

The organization’s president opened the meeting by declaring that protecting charitable resources was the highest priority.

He then authorized an emergency legal budget large enough to operate a respectable neighborhood soup kitchen for several years.

The legal team recommended hiring a second legal team to review the first team’s recommendations.

A communications consultant suggested appointing a crisis-management director.

An organizational development adviser proposed a leadership retreat.

By lunchtime, the nonprofit had spent enough money defending its charitable mission to temporarily forget what the mission was.

“Our organization is not motivated by profit,” explained the president. “This is why our attorneys charge by the hour instead of accepting stock options.”

Tax Exemption Is Not a Constitutional Force Field

Federal tax law provides exemptions to qualifying organizations because Congress has determined that certain activities serve legitimate public purposes.

A nonprofit is not automatically exempt from the law.

Nor does the absence of shareholders establish moral superiority.

An organization can operate without distributing profits and still waste money, mislead donors or violate legal requirements.

Conversely, genuine charities that disagree with the government should not lose their protections merely because their political positions are unpopular.

That distinction is where the argument becomes complicated.

Politicians enjoy simple categories.

Constitutional law, regrettably, insists on details.

Under the reported proposal, the administration could invoke provisions addressing organizations designated as supporting terrorism.

But legal authority does not eliminate the need for sound evidence or protection against arbitrary enforcement.

Washington Discovers the Price of Principle

A nonprofit industry consultant developed a three-part strategy for responding to the threat.

First, organizations should ensure their activities comply with applicable law.

Second, they should maintain clear financial records demonstrating how donations are spent.

Third, they should hire the consultant.

The third recommendation received the most enthusiastic support.

One donor wondered why an organization dedicated to helping disadvantaged families needed a headquarters with marble floors and a conference room named after a venture capitalist.

The executive director explained that disadvantaged families deserved professional representation.

The donor suggested giving them the marble.

The meeting ended.

Ultimately, the controversy presents an awkward challenge for both government and charitable organizations.

The administration must demonstrate that serious accusations are supported by evidence and lawful procedures.

Nonprofits must demonstrate that their activities justify the favorable treatment they receive.

Both sides claim to represent the public interest.

Meanwhile, the public continues donating money, paying taxes and wondering why saving the world requires so many billable hours.