Reshaping Criminal Investigation Unit
Estimated reading time: 3 minutes
The Wall Street Journal’s October 15th report on heightened desire for IRS investigations, there is much you can do to be prepared. This preparation includes both internal and external communications and stakeholder engagement (e.g., the Board, funders, service recipients).
Preparatory work will benefit nonprofits and foundations, even if they do not currently face a threat. For example, reviewing tax filings for the slightest inconsistencies (e.g., differing language between the mission on the first page of the 990 and Part III), developing core messaging and communications materials, establishing clear decision-making protocols, coordinating closely with in-house and external legal counsel, planning stakeholder engagement, and simply actively monitoring for mentions of your organization and funders. Organizations that prepare in advance are best positioned to handle scrutiny.
Below is a summary of the October 15th Wall Street Journal article:
Trump administration targets progressive and left-of-center actors through IRS overhaul
The Trump administration is reshaping the IRS’s criminal investigation unit to go after liberal nonprofits and foundations, as well as major Democratic donors, bypassing legal safeguards.
Why it matters: This is meant to weaponize the IRS — an agency with more than 2,000 criminal investigators — for political purposes.
What’s happening:
- The architect: Gary Shapley, adviser to Treasury Secretary Scott Bessent, is installing Trump allies in the IRS criminal investigation division while sidelining career IRS lawyers, some of whom have raised concerns about what’s to come for foundations and nonprofits.
- The targets: “It is likely to include left-of-center organizations, such as Open Societies Foundation, and other organizations of varying sizes and scopes that the administration considers part of the violent left and antifa. A senior IRS official involved in the effort has drawn up a list of potential targets that includes major Democratic donors, some of the people said.”
- The justification: Trump claims these networks fund political violence in Democratic-led cities — allegations Democrats say lack evidence.
How they’re doing it:
- The administration tried to revoke tax-exempt status from organizations like Harvard, but was blocked by IRS lawyers who said it would require years-long investigations.
- The workaround: Change the Internal Revenue Manual (IRS’s internal rulebook), which can be modified by agency leadership without congressional approval — unlike actual tax laws — to make such actions lawful.
Sneak peek: Senior IRS criminal tax attorneys have privately warned that at least one proposed case appears vindictive and politically motivated rather than evidence-based.
What’s next: Shapley plans to replace Guy Ficco, the decades-long head of the criminal investigation unit. Bessent calls it “mission-critical,” comparing it to post-9/11 terrorist financing investigations.