🚨 NSPM-7: How Every Nonprofit Leader Can Defend Their Organization

Something surprised me recently. I was speaking with a colleague who had not heard of NSPM-7, probably the greatest threat to the nonprofit and philanthropic sectors yet posed by the Trump Administration.

Perhaps this has missed your radar, as well. President Trump issued National Security Presidential Memorandum 7 (NSPM-7), "Countering Domestic Terrorism and Organized Political Violence," on September 25th. NSPM-7 orders the Department of Justice (DOJ), Department of the Treasury, and the Internal Revenue Service (IRS) to investigate and act against organizations they deem linked - directly or indirectly - to “political violence or domestic terrorism.”

This is a brand-new framework, which includes elements of tax enforcement and criminal prosecution. NSPM-7 does not create new laws or authorities, but it does focus the resources of the federal government on the nonprofit and philanthropic sectors in a strange new way.

The memo calls out as “common threads” that drive violence views including “anti-Americanism, anti-capitalism, and anti-Christianity; support for the overthrow of the United States Government; extremism on migration, race, and gender; and hostility towards those who hold traditional American views on family, religion, and morality.”

It’s easy to see why this directive has prompted alarm. Even if your organization does not explicitly espouse any of these viewpoints, these are vague and capacious terms.

Not only can nonprofits face drastic consequences for Constitutionally protected speech - so can their funders and supporters.

The stakes for your organization could be existential: Even if your organization has done nothing wrong, IRS audits, the freezing of bank accounts, and criminal investigations can bankrupt even well-capitalized nonprofits.

The best thing any nonprofit leader can do now is to make your organization a "hard target," one that will make it not worth the time of federal investigators. Here are three categories of actions that can get you started…

1. Conduct a "Hostile Audit"

Do not wait for the government to find your weaknesses; find them yourself. If you don’t have it already, hire legal counsel that specializes in nonprofit and tax law to help. The engagement could be in the form of an evergreen retainer, a dedicated amount of money that ensures counsel is immediately available. Some evergreen retainers can be as small as $1,500. Then, have counsel help you conduct a deep-dive, adversarial review of your regulatory hygiene.

• Financial Records: Ensure clear documentation of all expenses, especially any related to advocacy, protest support, or politically sensitive issues. Remove any ambiguity that could lead to funds being misinterpreted as "indirectly financing" prohibited activities.

• Lobbying Limits: Meticulously track and document all lobbying expenditures, ensuring you remain well within IRS limits for 501(c)(3) organizations. Consider taking the 501(h) election.

• International Ties: Rigorously screen any foreign funding and collaborations. If your work has any international component, proactively assess your risk under the Foreign Agents Registration Act (FARA). FARA compliance requires specialized counsel.

2. Establish a Response Process

Create a simple protocol that’s ready to execute in the event that you, or your organization, is subpoenaed or contacted by a federal law-enforcement officer.

• Don’t Talk to Cops: Create a written policy instructing all staff to never speak to law enforcement or regulators without an attorney present, and to immediately direct all inquiries to legal counsel.

• Document Retention Policy: Implement and enforce a clear policy. Don’t destroy documents during an investigation, but do ensure you destroy irrelevant or outdated records. Rules of thumb.

3. Diversify and Stress-Test Your Financial Infrastructure

Financial institutions may close your accounts - or “de-risk” - if you are under federal investigation or if they sense that your work is politically sensitive. Reduce this risk with these steps…

• Multi-Bank Strategy: Don’t put all your financial eggs in one basket. Maintain operational accounts with at least two different financial institutions. Consider community banks or credit unions, which may be less susceptible to external pressure than large national banks.

• Prepare for Scrutiny: Be ready for increased scrutiny from your banks regarding transaction types. Ensure your financial recordkeeping - from ledger entries to invoices - is clear and detailed.

• Legal Defense Fund: Proactively raise a dedicated legal defense fund sufficient to cover at least six months of estimated legal fees. Promote this fund to donors and funders, and frame it as a sign that you are thinking ahead and taking this moment seriously.

4. Control Your Narrative, Act in Coalition

Deploy a public messaging strategy that frames your work as essential to the public good and American democratic values before scrutiny begins.

• Your Work is Pro-Democracy Work: Proactively insert pro-democracy messaging into issue briefs, blog posts, and statements. No matter the issue, your work is a fundamental expression of First Amendment freedoms and part of America’s vibrant civil society.

• Coordinate with Peers: Join or form a resource-sharing coalition with peer organizations. A coordinated legal and public response by a coalition of organizations makes any attack politically costly and legally challenging for the Administration to sustain.

By taking these steps, you can transform compliance into a defensive weapon, ensuring that your organization is prepared for scrutiny and stay focused on your mission.