Where were you when they taxed private foundations?

Four Acts from "It Won’t Happen" to "It Already Did"

Act I: The Thoughtful Postdoc
It starts, as these things often do, with a well-meaning postdoc and a half-read journal article.

She’s new to reading about Canadian philanthropic tax policy, but the title grabs her: “Treasury efficiency of the Canadian tax regime for private foundations and their founders.” The data is okay. Fragmented. But the argument is tidy, and it sticks. Foundations, the piece claims, are poor vehicles for public benefit. Tax loopholes dressed in charitable clothing.

She thinks back to her research. Foundations have had their turn in the spotlight before. In 1915, the Walsh Commission tipped its hat to higher ed and private giving, but also flagged the awkward part: what happens when private money starts competing with public priorities?

The State or Government should neither subsidize them nor be subsidized by them, nor cooperate with them. Such cooperation has often led to public scandal. Instead of subsidizing private charity the State should use its money to displace it by better and more universal charity. Instead of calling upon private foundations for help the Government should treat them as competitors. (p. 388)

Fast forward to the Tax Reform Act of 1969, and Congress decided to put some guardrails on the sector: payout rules, no self-dealing, and a little transparency, please.

Still, more than 50 years later, critics are still raising eyebrows at private foundations as “zombie organizations,” tax-exempt entities that shuffle along with no real pulse, still soaking up public subsidies. Some days, it feels like the 1915 memo just got lost in the telegraph machine.

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Act II: Signs and Decoys
Two years on, our postdoc has matured into a lead researcher, now knee-deep in U.S. policy sense-making. She’s been tracking the flurry of Executive Orders from the new administration. Most are noise. Some are smoke screens. But every now and then, she spots something like a signal in the chaos: national debt as a key issue, those big pots of discretionary money (impact investors want it, government wants it back), the core values of Project 2025.

She hears someone say the phrase “where the wings meet” in a webinar. It’s a metaphor. It's the moment when every progressive critique, every conservative comment, every deferred conversation, all come to roost.

She jots down a few lines about foundations needing to be clear on how they support civil society, and maybe saying that out loud to policymakers. Practical stuff. Sensible, even. Then, crickets.

She feels something shifting. She wonders if foundations even know how to talk about why they exist, beyond outputs, beyond grants. What happens when they’re asked to defend their own exemption? (She thinks about Canada once more and the growing rumble of that tax efficiency article.)

She files it away as a thought experiment.

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Act III: Harvard in the Crosshairs
When Harvard’s tax-exempt status is threatened, it feels absurd. Until it doesn’t.

Headlines bloom. LinkedIn talking points fly. Think pieces multiply. Suddenly, it’s not just about Harvard. The nonprofit sector begins to murmur: wait, this could actually happen?

Our researcher, now fully alert, reaches for her phone. She opens 5Calls. No prompt. No campaign. She writes to them: “Hi, would you consider adding Harvard’s tax exemption to your list?”

Quick reply. No listing.

It is, after all, hard to rally the public to protect an institution with a $50 billion endowment. But she knows, it’s not about Harvard. It’s the symbolic tip of the wing. The perfect target. And it has landed.

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Act IV: The Train Arrives
Then it happens.

The new Republican tax bill lands. It directly taxes private foundations. Higher education. High earners. It includes a sweeping clause allowing review and revocation of charitable status for “terrorist supporting organizations”. No public evidence needed. No due process.

She once again looks at 5calls, but the scripts are not about the nonprofit sector and certainly aren’t about philanthropic foundations.

The sector advocacy begins. Most statements focus on the impact on frontline charities, food banks, shelters, and local nonprofits. All vital. But the foundation argument feels off. It centers on funding lost, not on defending the role of private foundations themselves, even though they’re the ones directly in the crosshairs.

How would an increase in the excise tax hurt your grantmaking? Amid drastic cuts in federal funding, the last thing Congress should do is take more dollars away from nonprofits and communities.

She thinks back to a conversation with a foundation CEO talking about being fine with a disbursement quota, but not tax on endowments:

“They can mandate our front doors,” the CEO had said, “but they leave the back of the shop alone.”

She lies awake at 4:00 a.m. now, wondering if the back of the shop just got boarded up.

It’s preventable, she thinks. It was preventable. But it was never fashionable to defend tax exemption. It was always easier to talk about grant strategy, theory of change, or impact investing.

Now? The train is here. And the only thing left to do is research the impact.

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Epilogue: Research in a Burned Field
If this feels tragic, that’s because it is. But it’s also darkly funny.

A sector designed to ask hard questions ducked out on the hardest one: Why should we be tax-exempt? And now, answered by someone else: We’re not sure you should.

The researcher sharpens her pencils. She knows the studies will come: assessments, reviews, models.

Hard to defend something when you never said why it mattered.

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Support the National Council of Nonprofits. Over the past six months, I have been impressed by their persistent and tactical advocacy.