The Law is On Our Side
As I’ve said before, the triumph of those of us who value democracy, equity, and justice is inevitable. When some try to give us a legal hassle, we will continue to triumph because the law is on our side.
I’m not a lawyer and don’t give legal advice. However, I’m sharing with you the insights I have received from lawyers and informed entities.
First of all, the federal government – the executive branch or legislators – do not have the ability to revoke the federal tax-exempt status of any entity through Executive Order or on a whim. There is a formal process that is far more complex and considered than anyone threatening civil society would like us to understand.
The United States’ federal government has long recognized organizations remediating the impacts of systemic racism and economic inequality as appropriate uses of tax-exempt funds. As you can see in the 2024 IRS Approval Letter 202407006, the IRS issued this letter to a private foundation for a scholarship using diversity and inclusion criteria to diversify the pipeline of law students to serve students from underrepresented groups. In Revenue Ruling 70-585, Situation 2, the IRS rules appropriate the use of tax-exempt funds support for an organization form to reduce racial and ethnic imbalances in a community by targeting “minority groups” for sale of low-income housing. In Revenue Ruling 77-272 the IRS deemed an appropriate use of tax-exempt funds support for job training specific to Native Americans.
In these past rulings, the US federal government has recognized that these tax-exempt funds were working for the public good by addressing generational imbalances in support. Evidence of these imbalances is not hard to find. As Grantmakers in the Arts shares in our Capitalization & Nonprofit Financial Health workshops, SMU Data Arts’ recent analyses found that the average nonprofit cultural organization founded by and for racialized people had a 30% smaller operating budget than their white counterparts. According to ABFE, majority white-led nonprofits receive about 30 times as much sector-wide revenue as majority Black-led nonprofits. According to Philanthropic Initiative for Racial Equity, annual foundation funding focused on people of color has never exceeded 8.4% of overall grantmaking. According to Native Americans in Philanthropy, Native American communities receive less than 0.5% of philanthropic dollars directed towards them despite being 2.9% of this country’s population.
As Grantmakers in the Arts has long said, we are race-explicit but not race-exclusive.
In our Racial Equity in Arts Funding workshops, we share how race is intersectional with disability, gender identity, and inclusion in LGBTQIA2S+ communities. For instance, white women earn $0.84 on the dollar compared to men. Black women earn $0.62 on the dollar. Latine women $0.55 on the dollar. About 12% of the general US population lives in poverty. 22% of members of the LGBTQ+ community live in poverty. 29% of white Trans people live in poverty. 39% of Black Trans people live in poverty. 48% of Latine Trans people live in poverty. 24% of white people with a disability live in poverty. 29% of Latine people with a disability live in poverty. 40% of Black people with a disability live in poverty. (See Figure 1).
Figure 1.
According to a 2023 report by the Disability & Philanthropy Forum, foundation funding for disability only represents approximately two cents of every foundation dollar awarded, even though one in four adult Americans experience disability. According to Funders for LGBTQ Issues, in 2022, only 25 cents for every $100 awarded by U.S. foundations specifically supported LGBTQ communities and issues. Further, for every $100 awarded by U.S. foundations, only 4.6 cents specifically supported transgender, gender nonconforming, and nonbinary (TGNCNBi) communities and issues.
If this federal administration or the private citizens who threaten investigations or lawsuits against foundations cared about fairness or equal opportunity, the issues above would be their first priorities - but they're not. And we are not fooled.
Across the nation, the next generation of lawyers are lining up to join the law firms that explicitly stand up to this federal administration. The national foundation field has expressed their unity in advance of any attacks against our stakeholders. Foundations are committing to increasing their support, using trust-based philanthropy principles and doing so in concert with the field they serve.
What makes the nonprofit and cultural communities unique is we are NOT the corporations that toady to this federal administration. We don’t need to ape the corporate sector. The only reason the suit against the Fearless Fund was initially considered to have standing was that it was deemed a contract – an exchange of goods – not a gift to support the recipient’s mission. And when those missions include addressing the issues above, our federal government has agreed for decades that doing so has been an appropriate use of tax-exempt funds.
The law is on our side. We will continue to act with courage. Our triumph is inevitable.
Grantmakers in the Arts thanks United Philanthropy Forum for creating access to the information from BakerHostetler and Tenenbaum Law Group that informed this blog post.
ABOUT THE AUTHOR
Eddie Torres is president & CEO of Grantmakers in the Arts
