Why It’s Time To Audit The IRS Status Of Harmful Nonprofits (2025)

Under Section 501(c)(3) of the Internal Revenue Code, tax-exempt organizations hold a privileged space in the American civic landscape. They can collect tax-deductible donations, operate with financial and reputational insulation and define their work around extensively framed public interest missions. In return, they are expected to adhere to specific fiduciary responsibilities, including transparency, ethical governance and a commitment to their stated charitable purpose.

Regardless, existing oversight agencies are insufficient to prevent situations where a nonprofit deviates from its mission in ways that materially harm the target audiences they claim to serve. Nowhere is this more urgent than in the domestic violence support sector, where confidentiality and ethical integrity are not just procedural best practices but necessary safeguards for the lives and legal rights of survivors.

Recently, reported cases have occurred involving staff at domestic violence organizations sharing confidential information with abusers, retaliating against survivors who raise concerns, or leveraging their institutional roles to sway custody proceedings and other legal matters. In some instances, survivors signed confidentiality agreements during intake, only to discover later that their disclosures had been relayed to third parties. The result is often catastrophic and includes a loss of legal credibility, housing instability, emotional trauma and further exposure to unsafe conditions.

The Role of Oversight Agencies

While the IRS provides Form 13909 for reporting abuse of 501(c)(3) status, the survivor must recognize the misconduct, gather the evidence, and file a complaint. The process is not trauma-informed, nor is it widely publicized. And even if it were, IRS investigations into nonprofits are generally limited to financial misbehavior, not relational or ethical violations, even when those result in tangible harm.

State attorneys general, too, have limited bandwidth to investigate charitable breaches unless donor funds are directly implicated. Violations of survivor confidentiality, retaliatory conduct by staff, or ethical breakdowns within mission delivery often fall into a regulatory gray area. The result is a pattern of harm that is widely underreported, legally under-enforced and institutionally ignored.

To address this gap, a multi-pronged oversight framework is required:

1. Mandated Ethical Audits:

Organizations serving vulnerable populations should be subject to periodic third-party audits of confidentiality practices, reporting mechanisms and survivor-facing protocols.

2. Linking Ethics to Tax Status:

Repeated violations of confidentiality or substantiated retaliatory behavior should be grounds for suspension or revocation of tax-exempt status, even in the absence of financial fraud.

3. Reform:

State and federal oversight bodies should develop clearer statutory language that contains fiduciary abuse and mission drift as enforceable breaches.

4. Transparency:

Organizations should be required to publish anonymized summaries of complaints and resolutions related to confidentiality and ethical misconduct.

5. Education and Access:

Survivors must be informed of their rights under nonprofit codes of conduct and be given access to independent legal or advocacy resources if harmed by a tax-exempt organization.

These are not radical propositions but instead form baseline expectations for any organization that is entrusted with the lives, safety and stories of vulnerable people. The nonprofit sector plays a valuable role in American society, but with privilege must come accountability. A failure to protect confidentiality is not a paperwork error but borders on a breach of public trust, one that should have measurable and enforceable consequences. If a nonprofit cannot adhere to its most basic ethical obligations, it should not continue to enjoy the benefits of tax exemption. The stakes are life-altering for the people it was created to serve.