One line in a recent Bloomberg article about potential Trump administration executive orders has sent parts of the Jewish philanthropic world into a frenzy with the prospect of a major, possibly disastrous, change in the mechanism for making tax-deductible donations to Israeli nonprofits. 

Last week, the financial news outlet reported on a slew of moves that it said are under consideration by the White House targeting the tax-exempt status of environmental nonprofits. It mentioned that the Trump administration was also considering the elimination of the so-called equivalency determination, a process that grants foreign charities a similar status to domestic ones for tax purposes. This process also permits U.S. foundations to issue direct grants to charities abroad without special approval from the IRS.

Such a change would have a profound impact on the ability of donors — individuals and organizations — to make charitable gifts directly to Israeli nonprofits. 

White House officials have since denied to Politico that there are any plans to target nonprofits’ tax-exempt status or to issue executive orders targeting nonprofits, but they did not specifically mention potential changes to the equivalency determination process. 

Beyond equivalency determination, steps taken by the administration to target nonprofits whose agendas compete with the executive branch’s aims — including recent moves against nonprofit universities — has also created nervousness among funders, according to Andrés Spokoiny, the Jewish Funders Network’s president and CEO. 

Speaking at an event on Thursday, President Donald Trump singled out Citizens for Responsibility and Ethics in Washington, a watchdog organization that has been involved in several ethics probes of Trump, as well as a number of environmental groups, according to The Washington Post. “Tax-exempt status — I mean, it’s a privilege. It’s really a privilege, and it’s been abused by a lot more than Harvard,” said Trump. “We’ll be making some statements. It’s a big deal.”

For now, Spokoiny and other leaders in the Jewish philanthropic sector are encouraging that donors remain calm, double down on compliance measures and communicate with overseas grantees about possible next steps. 

“Make sure that your house is in order,” said Spokoiny in a statement issued to JFN members on Monday. “In general, it’s never a good idea to play fast and loose with compliance, so now’s the time to look for screws that need tightening.”

Currently, these policy measures remain hypothetical, and dealing in hypotheticals can be risky, Spokoiny told eJewishPhilanthropy. And even if implemented, he added, any such challenges are likely to be met with legal pushback. “The president can sign an executive order. But that doesn’t mean that things automatically happen,” he said. 

But for the last week, he’s been fielding questions from leadership of a number of nonprofits, both within the network, and from Israel — which prompted him to put out the statement. Nonprofits in Israel are concerned about losing funding or the process becoming more complicated if the tax codes change, said Spokoiny, a regular and public critic of the Trump administration. 

“There’s rumors and there’s media reports and there’s questions, so people get nervous,” said Spokoiny. “My response to them is that we still don’t know. What we can do is to be compliant, which is a good thing to do in any case. And then let’s see how things play out,” he said.

“The Jewish community is adaptable, right? Even if equivalency determination goes away, we’d find a way. But it’ll be a shock to the system,” he said. 

Though approaches to nonprofits have varied from administration to administration, the Trump White House seems to be more willing to “throw the book” at nonprofits and foundations that contribute to causes the government doesn’t align with, Spokoiny said. For instance, he said prior administrations have been more hesitant to threaten the tax-exempt status of nonprofits for fear of it backfiring if the political pendulum swings back. “Every administration, to an extent, chooses where to enforce what. But here it seems much more aggressive than we’ve ever seen,” he said. 

Funders have been expressing concerns about the administration’s willingness to single out or strip a nonprofit of its tax-exempt status based on its ideological mission, as well as proposals to tax endowments and donor-advised funds, Spokoiny said. 

“If there is an attack on philanthropic freedom — which, frankly, is a conservative value rather than a progressive one — it could have a chilling effect on the philanthropic space. And [philanthropy] is one of the things that makes America great, that makes America unique,” he said.

Historically, U.S. philanthropy has been the main source of international giving to Israeli nonprofits — representing 75% of all international charitable giving in 2021 — with donations increasing every year. In 2010, U.S. donors sent approximately $1 billion to Israeli nonprofits; 11 years later it reached $2.65 billion, according to research from New York University and Tel Aviv University. In the wake of the Oct. 7 terror attacks, that number spiked — though a reputable tally has not yet been completed — with the Jewish Federations of North America alone raising nearly $900 million for Israeli relief efforts. 

Limiting or eliminating equivalency determination would complicate the process of giving to international charities, and eliminate tax incentives for donors who decide to give to overseas causes, which would likely reduce giving, according to Geoffrey Stern, president of PEF Israel Endowment Funds. 

“There is certainly a percentage of donors who would give whether or not they get a tax deduction, but there’s also clearly a very high percentage of donors who give with the best of intentions, but are cognizant of the fact that they get a tax deduction when they give that money,” Stern told eJP.

Taking away equivalency determination would mean that US taxpayers can no longer give tax-deductible contributions to foreign entities, said Stern. So while larger nonprofits with domestic “American Friends of” counterparts might be more resilient, a tax code change could deal a heavy blow to smaller Israeli nonprofits. 

“But it’s kind of like the Wild West,” said Stern. “It’s hard to make any sort of long-term plans when the guardrails are being changed so quickly. How does an Israeli organization know that if they set up their own American friends that that won’t be in question at a certain point in time?”

According to Stern, smaller teams operating on a tighter budget that don’t have the interest or bandwidth to have ‘American friends’ organization, would be the hardest hit. The problem is, said Stern, that those organizations tend to take the lead in helping people at a local level. 

“It’s all of our jobs, no matter what side of the spectrum that we’re on, to let our elected officials and those in power realize that you can’t cherry-pick which philanthropic donations you like and which you don’t like,” said Stern. “Either you support philanthropy — in this case, it’s philanthropy for the citizens of the State of Israel — and you let donors who are law-abiding and follow the regulations and the rules make their own choices as to what organizations they support, or you don’t. Saying you don’t would be very hurtful, both to the generosity of donors, and definitely hurtful to people who are in desperate need right now of charitable funds.”