Nonprofit leaders defend tax-exempt sector as GOP lawmakers threaten revocations and cuts
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Summary
At a House Oversight subcommittee hearing, nonprofit advocates warned that threats to revoke tax-exempt status and broad funding cuts would harm local services, while Republican members argued for transparency and tighter controls on federal grants to politically active nonprofits.
Diane Yentel, president and CEO of the National Council of Nonprofits, used her opening statement to lay out the sector's role in communities and to push back on committee members’ allegations that most nonprofits are partisan or corrupt. "Nonprofits are local, accountable, transparent, and are nonpartisan by law and in practice," Yentel told the subcommittee.
Why it matters: Members on both sides framed the hearings around oversight of federal dollars — Republicans argued for transparency and restraint of perceived cronyism, and Democrats warned that illegal or retaliatory targeting of charities would reduce services for vulnerable communities and could itself be unlawful.
What nonprofit leaders said
- Yentel said most charities are small: "92% have budgets of less than $1,000,000," and described nonprofits’ work across disaster response, food banks, health clinics and other local needs. She cautioned that withdrawing congressionally appropriated funds or using executive actions to punish organizations would "do real harm".
- During questioning, Yentel also stressed, "It is illegal for the president, or any member of the executive office to direct the IRS to make any changes to the tax status of an individual or an organization," and described legal risks for officials who overreach.
What Republican members and witnesses said
- Republican members said some organizations are excessively dependent on federal funding and cited public-reporting examples they described as cronyism. Committee members repeatedly referenced Project 2025, ties between agency officials and nonprofits, and the need to prevent awards that appear to reward political allies.
- Several Republicans pushed for stronger disclosure rules and for legislation to require organizations that receive federal dollars to disclose large donors and funding sources.
Democratic responses and numbers cited
- Democrats on the panel argued that the committee’s messaging and some witness testimony risked chilling legitimate nonprofit activity. Representative Jamie Raskin and others pointed to the specific harms of freezing or rescinding congressionally appropriated funds and cited reporting that the Trump administration had frozen or terminated certain program funds.
- During questioning Representative Lynch cited news reporting that an investigation found limited evidence of criminality in EPA grants. Other Democrats listed program cuts they said were already harming communities, including cited figures of frozen or terminated funds for justice programs, NIH research and substance-abuse treatment (figures presented in members’ questioning and attributed to administration actions and media reporting).
Ending: The hearing showcased a deep partisan split over whether the committee’s oversight would center on eliminating waste or would instead become a tool for partisan pressure. Committee members said staff will continue document requests and legislative drafting; nonprofit leaders urged legally grounded oversight that preserves service delivery to communities.