Trump administration weighs requiring nonprofits to disclose board members’ criminal convictions
Washington — The Trump administration is considering a proposal that would require nonprofit organizations to disclose in their annual tax filings whether their top officials have been convicted of certain financial crimes or terrorism-related offenses, according to sources with direct knowledge of the matter who spoke to CBS News.
The measure would add a new disclosure requirement to Form 990, the annual return that tax-exempt groups file with the Internal Revenue Service. The sources, who spoke on condition of anonymity because they were not authorized to discuss the matter publicly, said federal officials view the proposal as a way to pressure nonprofit groups to sever ties with individuals who have such criminal records and to give donors more information when deciding where to direct their money.
Under the proposal, nonprofits would need to report convictions for providing material support to terrorists, fraud, money laundering, securities fraud, tax evasion, theft, and civil judgments resulting from enforcement actions by the Securities and Exchange Commission or state securities regulators. The requirement would apply to convictions occurring within the last 10 years, according to the sources. It would not, however, force organizations to identify which officer, director, or trustee had been convicted. Federal law does not bar people with felony convictions from serving on nonprofit boards.
The proposal is still in the formative stage and has not been finalized. It is one of at least two proposed changes to the Form 990 moving through the Treasury Department and the IRS. In April, the Treasury Department announced a separate proposal that would impose new disclosure requirements on nonprofits that receive government funding.
Supporters of the disclosure measure argue that transparency is long overdue. Tom Jones, an ally of President Trump who leads the conservative American Accountability Foundation, said the public has a right to know if nonprofit leaders have criminal histories.
“No one has a right to privacy of their criminal record,” Jones said. “If your board members are convicted criminals, I am hard pressed to understand why you have a problem with that being publicized. You should have to explain why those people are on your board.”
A Treasury Department spokesperson said the agency is considering “a range of measures to strengthen accountability for nonprofit organizations” and “will continue to follow the money to ensure tax-exempt status is not exploited to facilitate illicit activity.”
But the proposal has generated concern inside the IRS. Multiple sources familiar with internal conversations said some IRS officials have privately questioned what the agency could lawfully do with the information and how it relates to enforcement of tax laws. These officials reportedly view the effort as a form of potential political targeting that could draw legal challenges, including on First Amendment grounds.
“This disclosure rule goes directly to guilt by association,” said Roger Colinvaux, a law professor at the Catholic University of America and former counsel to the nonpartisan Joint Committee on Taxation in Congress. “There’s no federal law that says a nonprofit cannot have a convicted felon on their board. It could just create a stigma and chill association. This would reach deeply into American civil society.”
One source with direct knowledge of the proposal suggested that the requirement would be similar to material disclosures that publicly traded companies must make to help investors make informed decisions. The source also said the proposal could help the IRS act more quickly to suspend or revoke the tax-exempt status of nonprofits that fail to disclose convictions of their leaders. Because nonprofit officials who submit Form 990 must attest to its accuracy under penalty of perjury, fact-checking whether board members have undisclosed criminal convictions would be a relatively simple task for the IRS, the source added.
The disclosure effort comes amid a broader push by the Trump administration to scrutinize left-leaning nonprofits. Last year, Trump signed a national security memorandum directing the IRS to refer groups believed to be financing “domestic terrorism” to the Justice Department. In March, CBS News was first to report that the FBI and IRS Criminal Investigation had teamed up to create a “command post” tasked with investigating possible links between nonprofits and terrorism.
That initiative followed a directive from then-Attorney General Pam Bondi late last year instructing law enforcement agencies and federal prosecutors to investigate the anti-fascist antifa movement and other “extremist groups.” The memo asked agents to consider investigating such groups for potential fraud and tax crimes. Antifa, a decentralized coalition of far-left activists, is not a formal organization and has no board members or officers.
Several federal criminal investigations and prosecutions targeting nonprofits are now underway. The highest-profile case involves the Southern Poverty Law Center, which has been accused of misleading donors and banks by funneling money to informants for white supremacist groups. The SPLC has pleaded not guilty.
In another matter, Neville Roy Singham, the wealthy husband of the founder of the progressive nonprofit Code Pink and a benefactor of far-left political causes, is under criminal investigation in Manhattan. The investigation began by looking into possible violations of the Foreign Agents Registration Act and has since expanded into a criminal tax probe over whether money was unlawfully funneled through nonprofits he controls and whether he lied on tax forms for those organizations.
Earlier this year, eight people affiliated with a North Texas antifa group were sentenced to prison terms ranging from 30 to 100 years after being convicted of providing material support to terrorists and other offenses, including the attempted murder of an Alvarado police officer at the Prairieland Detention Center.
The proposal also comes as the Trump administration has focused on fraud, particularly in the nonprofit sector. Officials have repeatedly spotlighted the pandemic-era Feeding Our Future scandal in Minnesota as an example of abuse. The scheme, which is estimated to have involved $250 million, has resulted in 68 convictions or guilty pleas.
Some states already require nonprofits to answer a version of the question the IRS is now considering. California, for example, requires charities soliciting donations in the state to disclose whether their officers or directors have been convicted of certain offenses, as part of an effort to prevent charitable fraud. Under state law, a court can remove a director for fraud, dishonest acts, or breach of duty in a case brought by the attorney general.
But federal law has no equivalent remedy, said Ellen Aprill, a senior scholar in residence at UCLA Law School’s center for philanthropy and nonprofits. That means the IRS would be collecting information it has no stated authority to act on. “I think there is the potential for a fishing expedition,” Aprill said.
Alexander Reid, a partner at the law firm BakerHostetler who specializes in tax-exempt organizations, said the proposal would collide with the Supreme Court’s 2021 decision in Americans for Prosperity Foundation v. Bonta. That ruling struck down a California requirement that charities turn over lists of their major donors.
“The bulk collection and disclosure of sensitive information from tens of thousands of charities, much of which would never be relevant to tax administration or charitable-law enforcement, would fail exacting scrutiny by chilling freedom of association without furthering a narrowly defined governmental interest,” Reid said.
The IRS has also faced questions about political interference in recent months. Ken Kies, who was the top tax official at the Treasury Department, was ousted in July after warning that the White House was at risk of illegally involving itself in IRS audits, according to The Wall Street Journal.
Steven Toscher, a tax attorney in California, said that from a good governance perspective, he does not see a problem with requiring nonprofits to disclose terrorism-related convictions of their board members. At the same time, he said, it is fair to ask why the Trump administration wants this information, what it might use it for, and how it defines terrorism.
“It’s hard to view this in isolation of just good corporate nonprofit governance because of the executive who is proposing it,” Toscher said. “They have an agenda, so it’s hard to filter this.”
Diane Yentel, president and CEO of the National Council of Nonprofits, which represents roughly 37,000 organizations, sees the proposal as part of a pattern of Republicans seeking to target groups in the sector that are not aligned with Trump.
“Nonprofits welcome reasonable regulation as a way to maintain public trust,” Yentel said, but the proposal is “a step too far when viewed in the context of all of the administration’s actions and rhetoric of the last 18 months, including equating some nonprofits to ‘domestic terrorists’ or ‘enemies’ of the American people.”
She said complying with the disclosure “would take precious time and resources away from nonprofits’ core work of serving communities.”
The proposal remains under review, and no final decision has been made. But the debate over it reflects a broader fight over the role of nonprofits in American society, the limits of government oversight, and the extent to which political considerations are shaping tax policy.
