Government Scrutiny of Nonprofits Intensifies

Nonprofits continue to be closely scrutinized by the executive and legislative branches, as well as state attorneys general and legislatures, expressing interest in examining the ways in which foreign donors use nonprofits to promote foreign interests in the United States. The February 10, 2026 House Ways and Means Committee Hearing titled “Foreign Influence in American Non-profits: Unmasking Threats from Beijing and Beyond” investigated the influx of money from foreign sources through nonprofit entities to influence domestic policy, elections and public discourse. These developments have serious implications for organizations in the nonprofit sector that receive funds from foreign donors, have foreign individuals on their boards, coordinate their activities with foreign individuals or entities or promote foreign interests by seeking to influence the U.S. government or the American public.

Resurgent Federal Focus on FARA and Foreign Influence

Following many years of aggressive enforcement of the Foreign Agents Registration Act (FARA), Attorney General Pam Bondi announced on February 5, 2025 that the Department of Justice (DOJ) would shift the enforcement of FARA to focus on conduct “similar to more traditional espionage by foreign government actors” and would reprioritize the DOJ FARA Unit’s efforts to civil enforcement and regulatory initiatives. This signaled to many that FARA would no longer be enforced. Seven months later, however, President Trump resurrected FARA as an enforcement tool in his national security presidential memorandum entitled “Countering Domestic Terrorism and Organized Political Violence.” In the memorandum, President Trump directed the National Joint Terrorism Task Force and other federal agencies to investigate three main groups for possible violations of FARA or money laundering laws related to domestic terrorism: (1) individuals involved in political violence, domestic terrorism or deprivation of rights; (2) their institutional and individual funders, including officers and employees of organizations that support these actions; and (3) any non-governmental organizations or U.S. citizens residing abroad with close foreign connections which are engaged in violations of FARA or supporting entities that support or encourage domestic terrorism. This shift highlights the considerable risks for entities within the nonprofit sector that maintain any association with foreign interests.

In addition, on September 3, 2025, President Trump issued a presidential memorandum entitled “Use of Appropriated Funds for Illegal Lobbying and Partisan Political Activity by Federal Grantees” that directs the Attorney General and other federal agency heads to investigate whether recipients of federal grants are using taxpayer funds for political and legislative advocacy. Such use would violate the Byrd Amendment, which prohibits the use of federally appropriated funds for lobbying.¹  The issuance of the two memoranda in close proximity to one another highlights the scrutiny that nonprofit organizations are facing under the current administration and the legal risk for organizations that conduct activities that could be considered activity meant to influence governmental processes or the broader U.S. public.

Congress has also been very active in investigating and eliminating foreign influence in the nonprofit sector. The February 10 House Ways and Means Committee hearing delved into the use of nonprofits, including fiscal sponsorships and donor advised funds to obscure sources of foreign money. During the hearing, lawmakers expressed serious concern over foreign entities using American nonprofit laws to fund influencing campaigns within the U.S. without revealing the source of the funds or registering under FARA. The hearing focused on national security risks, election interference and political destabilization linked to foreign entities, particularly those connected to hostile governments such as the Chinese Communist Party (CCP).

The hearing is the latest attempt to draw attention to foreign money flowing through U.S. nonprofits:

• On November 7, 2025, Senator Tom Cotton (R-AR) sent a letter to Attorney General Bondi requesting an investigation into Code Pink, an anti-war nonprofit organization. Specifically, Sen. Cotton alleged the organization violates FARA and provides material support to foreign terrorist organizations, in part due to its receiving funds from an individual who allegedly works closely with Chinese government media, as well as the organization’s support for Palestine-aligned individuals and organizations.
• On November 19, 2025, the House Oversight and Government Reform Committee launched an investigation into the Sixteen Thirty Fund following allegations that the organization attempted to bypass campaign finance disclosure laws.
• On January 13, 2026, House Ways and Means Chairman Jason Smith (R-MO) requested the IRS investigate and potentially revoke the Council on American-Islamic Relations–California’s tax-exempt status, alleging the nonprofit misuses millions in federal funds. Chairman Smith specifically pointed out that the nonprofit participated in political activity and protests, violating restrictions on tax-exempt organizations.
• On January 14, 2026, the House Judiciary Committee launched an investigation to determine whether the Environmental Law Institute, a climate law nonprofit, is improperly influencing federal judges presiding over environmental-related cases, including through distributing materials to the courts, judicial seminars and preparing training materials.

Multifront Acceleration of State Level Enforcement

Mirroring scrutiny at the federal level, on December 16, 2025, 26 attorneys general wrote a letter to the DOJ requesting a criminal investigation into Energy Foundation China and Center for Climate Integrity for potential violations of FARA. The letter alleges that the organizations receive millions of dollars in grants from the Children’s Investment Fund Foundation, a U.K.-based charity allegedly aligned with the CCP, making them foreign agents for the purposes of FARA. The letter specifically alleges that these nonprofit organizations acted as unregistered agents of foreign principals by engaging in substantial political activities in the United States to undermine the American energy sector.

Along with state attorney general enforcement, many states have enacted statutes that limit foreign investment. Multiple states, including Kansas, Kentucky and Wyoming, enacted laws in 2025 restricting foreign contributions to ballot measure campaigns. In addition, many states, including Arkansas, Texas, Nebraska, Oklahoma and Louisiana, enacted statutes in 2025 designed to address state-level lobbying efforts on behalf of foreign companies and organizations. While these statutes are similar to FARA, they often cover a broader range of activities and differ in their definitions and applicability. As a result, nonprofits should also ensure they carefully review all applicable state laws to confirm compliance.

Key Takeaways for Nonprofits

With these trends in mind, nonprofits can expect to see heightened federal and state scrutiny into their activities, particularly when the organization’s conduct crosses into political or public policy subjects or involves foreign interests. Nonprofit organizations should also update their internal policies regarding the use of federal funds to ensure they are used in line with all applicable regulations and should develop due diligence procedures to address sources of foreign funding and ensure complete and accurate tax reporting.

FARA’s application to nonprofits is a highly fact-specific analysis, with serious criminal penalties at stake. As a result, nonprofit organizations should seek legal counsel when determining whether FARA applies to their organization, as well as in developing compliance programs to ensure compatibility with all applicable federal and state regulations.

1 31 U.S.C. 1352 (prohibits recipients of federal grants, loans, contracts or cooperative agreements from using funds to lobby or influence federal officials in connection with a federal action, such as the awarding of a federal grant).