Knock-Knock: The IRS Is Calling For Exempt Organizations — Are You Ready?

According to multiple published reports, the Trump administration has directed the IRS’s Criminal Investigation Division (IRS-CI) to zero in on left-leaning exempt organizations.

One of those sources, The Wall Street Journal, describes how the IRS is being reorganized to enable easier pursuit of investigations of organizations it deems politically adversarial (The Wall Street Journal, https://on.wsj.com/3N0b15J).

In the past, and as reflected in the IRS’s Internal Revenue Manual at 9.1.1.4(3) (https://bit.ly/49iNoNc), IRS-CI cannot open an investigation on any individual or entity based on political affiliation but rather initiates investigations based on leads from other operating divisions within the IRS or through other agencies, informants or whistleblowers.

Organizations must treat their compliance, records, governance and operations as though they could be subject to criminal exposure, reputational harm and loss of exempt status.

So, this directive would be a full-scale shift in how the Internal Revenue Service (IRS) handles tax-exempt organizations. As the newly retired IRS’s first-ever National Fraud Counsel, I oversaw investigations and see the need for organizations to take protective actions and get ready for a potential knock on the door from investigators.

On Dec. 4, 2025, U.S. Attorney General Pam Bondi issued a sweeping internal directive (the “AG’s Memorandum”) that substantially expands the federal government’s approach to identifying, investigating, and prosecuting alleged domestic terrorism.

Issued to implement National Security Presidential Memorandum-7, the AG’s Memorandum mandates new investigative procedures, broadens key definitions, and

introduces enhanced enforcement mechanisms. Together, these changes significantly elevate the risk landscape for nonprofits, donors, advocacy organizations, and other taxpayers.

Ensure your governing documents, mission statement, bylaws, board minutes and public filings clearly align with a valid exempt purpose.

That means exempt organizations — whether charities, advocacy groups, or other tax-exempt entities — need to act and prepare now.

A change-in-tone matters

As reported in the Wall Street Journal article, “Trump Team Plans IRS Overhaul to Enable Pursuit of Left-Leaning Groups,” Oct. 15, 2025, the IRS aims to install staff in IRS-CI to review “left-leaning groups” to investigate. The translation — organizations must treat their compliance, records, governance and operations as though they could be subject to criminal exposure, reputational harm and loss of exempt status.

What an exempt organization should do: a six-step readiness plan

1. Ensure your governing documents, mission statement, bylaws, board minutes and public filings clearly align with a valid exempt purpose. Review whether the organization is engaging in any activity that might jeopardize its exempt status — e.g., substantial political campaigning (for a 501(c)(3)), impermissible private benefit, or impermissible unrelated business income.

Make sure your annual tax-exempt filings (e.g., Form 990 series) have been timely, complete and accurate, and if they are not, consider whether to engage in corrective activity now.

2. Have a master log of all records: financial statements, bank statements, board minutes, governance policies, grant agreements, program evaluations, employee files, contractor arrangements, related-party transactions.

Follow — and abide by — a document retention policy: what you keep, where you keep it (physical/electronic), how it is protected (lock, backup, encryption), and which employees are the points of contact.

If you receive notice of a government investigation, the key is to quickly locate responsive records. In this environment, IRS-CI could be investigating but so could IRS civil with a parallel or joint administrative investigation. (See e.g., IRS Internal Revenue Manual 9.5.1.5, https://bit.ly/3MXB2m9).

Notably, identifying the entity’s books and records that demonstrate expenditures and donations are explicitly tied to their purposes, will help defend the organization and its employees against such an accusation.

3. Engage outside counsel or a tax-specialist advisor with exempt-organization experience to do a risk assessment, looking for hazards (e.g., any prior governance lapses, questionable transactions, or insufficient board oversight). Create a plan to fix any weak
4. You should have a “what-if” plan addressing immediate and long-term concerns in place before any contact from IRS-CI.

Key features:

Designate internal and external points of contact, such as your Executive Director or General Counsel, and outside counsel.

Have a clear strategy for handling both home and business office visits and the execution of a search warrant, depending on your organization’s structure.

• Staff protocol: Create a detailed step-by-step response plan for both “front desk” and “back office” employees and ensure they’re trained on how to handle in-person visits from law enforcement or IRS agents.
• Communication plan: Identify who in your organization (including stakeholders) needs to be informed during such interactions, and outline how sensitive information should be protected and
• Media and public relations strategy: A public investigation can have reputational Provide training and be prepared with a plan for managing media and public relations. Have an executive and support crisis team in place with prepared statements that can be modified.
• Board and leadership training: Ensure that your board and leadership team understand what to do if IRS agents arrive. This includes knowing what agents can and cannot request (e.g., questioning, document demands) and understanding the role of legal counsel in these situations.

5. Conduct an internal review of financial transactions, ensuring full documentation for grants, sponsorships, and expenses. Confirm that funds are clearly linked to your Ensure board minutes reflect decisions on significant expenditures, especially those involving political activities, lobbying, or related-party transactions. Consider a “pre-audit” of key tax years (prior 3-5 years), reviewing your records as if you were the investigating agency.

6. Train staff and board members, update key policies regularly, conduct an annual board meeting to ensure the entity is aligned with its mission, and update a response

Why now, and why urgent

When a case enters criminal investigation, it can escalate quickly ranging from search warrants and subpoenas to complaints and indictments. The initial step is often a grand jury, conducted in secrecy, leaving the target organization with little insight into the direction the case may take.

For exempt organizations, you must — Know your mission. Know your books. Know your documents. Know your risks. Know your plan.

This article is designed to give general information on the developments covered, not to serve as legal advice related to specific situations or as a legal opinion. Counsel should be consulted for legal advice.