The 2026 midterm elections have reshaped the political landscape, with voters handing Democrats majorities in both chambers of Congress. For foundations and nonprofits, this signals a significant shift in oversight scrutiny—the Democratic majority is expected to focus on affordability, perceived corruption, and oversight of the Trump Administration, likely including the executive branch’s enforcement actions against tax-exempt organizations. At the same time, scrutiny of the tax-exempt sector is likely to continue from the executive branch and Republican state attorneys general, albeit along different lines and from different perspectives. 

Congressional Oversight

With majorities in both chambers of Congress, Democrats will take the gavel on key committees with jurisdiction relevant to the nonprofit sector. In the House, this includes Ways and Means, Oversight and Government Reform, Judiciary, and the Appropriations Committees. In the Senate, key committees include Finance, Homeland Security and Governmental Affairs, Judiciary, and Health, Education, Labor, and Pensions. With a Democratic majority, key committees are anticipated to hold oversight hearings and seek documents and testimony from executive branch officials, including leadership in the Internal Revenue Service (IRS) and the Department of the Treasury. 

Likely chairs of these committees have already signaled a desire to initiate oversight of what they consider weaponization of the IRS and the Administration’s alleged targeting of the tax-exempt sector. For example, on September 2, 2026, Senator Ron Wyden (D-OR), anticipated Chair of the Senate Finance Committee, and Senator Raphael Warnock (D-GA) raised questions regarding reports that the Administration was developing plans to focus on “left-leaning tax-exempt organizations with IRS enforcement scrutiny.” In a letter to Treasury Secretary Scott Bessent and acting IRS head Frank Bisignano, Senators Wyden and Warnock alleged that media reports “raise serious questions about whether political officials are influencing IRS decisions concerning particular taxpayers in ways prohibited by federal law,” and requested documents and information. In the future, Democrats may also seek to use appropriations riders—provisions that are attached to “must-pass” government funding bills—to restrict funding for IRS and Department of Justice (DOJ) when they are accused of politically targeting nonprofits and foundations. 

In the next Congress, oversight priorities are expected to shift from left-of-center foundations to philanthropic organizations and nonprofits with ties to the Administration. For example, on September 13, 2026, Senators Elizabeth Warren (D-MA), Adam Schiff (D-CA), Alex Padilla (D-CA) and Richard Blumenthal (D-CT) wrote a letter to Freedom 250, the entity established by President Trump to plan and fund celebrations of America’s 250th anniversary, requesting disclosure of donations made to the organization. The letter raises questions as to whether Freedom 250 is “serving as a vehicle through which wealthy corporations and other private interests can make contributions while seeking preferential access to, and favorable treatment from, the Trump Administration.” Senators have made similar allegations against The Trust for the National Mall, the organization responsible for managing contributions to the White House ballroom. Organizations that have pledged money to other initiatives, including so-called "Trump accounts" and President Trump's anticipated presidential library, may also be subject to heightened congressional scrutiny.

In addition, progressive organizations should expect letters from Republicans on the same issues that were areas of focus in the Congress soon to conclude—the majority-turned-minority routinely continues oversight efforts even when it loses subpoena power, and imminent divided government increases the likelihood that Republican members will conduct oversight to inform referrals to DOJ, the IRS, and Republican state attorneys general. Additionally, areas of bipartisan concern remain ripe for scrutiny, including engagement in China, foreign funding of tax-exempt organizations, perceived political activities, and transparency around donor-advised funds (DAFs). 

Executive Branch Activity

Foundations and nonprofit organizations should expect sustained relevant developments from the executive branch, including executive orders, DOJ enforcement activity, agency rulemaking, and regulatory changes. 

With respect to investigations and enforcement, DOJ may continue to pursue criminal investigations against nonprofit organizations and foundations. In April 2026, a federal grand jury indicted the Southern Poverty Law Center on charges of wire fraud, false statements, and conspiracy to commit money laundering. Another possible area of enforcement includes potential violations of the Foreign Agents Registration Act (FARA), which the Administration initially announced would not be an enforcement priority, but more recently indicated might once again become one. 

The executive branch will also continue federal rulemaking, including moving forward a proposed rule that targets the tax-exempt status of private schools that have race-conscious policies. The Treasury Department has also announced a “Form 990 transparency initiative,” which would expand reporting obligations applicable to certain activities, including government contracts, government grants, and fiscal sponsorship arrangements. The initiative’s press release previews additional rulemaking addressing transparency and fiscal sponsorship arrangements.

The executive branch may also continue to focus on nonprofits and foundations through executive orders and their implementation. Last year, President Trump signed NSPM-7, which called for a coordinated federal approach to investigating political violence and related “institutional and individual funders.” The Administration may, according to news reports, build on this prior executive order by seeking to designate certain nonprofits as terrorist organizations or by seeking to revoke their tax-exempt status.

State Activity

With Democrats in control of both chambers of Congress, we expect Republican members of Congress to coordinate with Republican state officials, including state attorneys general, to advance consistent messaging and enforcement priorities. For example, in February 2026, a coalition of 19 Republican state attorneys general sent a letter recommending that DOJ initiate FARA investigations into 150 climate organizations.

States may also seek to apply their own terrorism designation laws to nonprofits and foundations. On April 6, 2026, Governor DeSantis signed HR 1471, which allows state officials to designate domestic terrorist organizations if they find them to be engaging in terrorist activity. Thereafter, the Florida chapter of the Council on American Islamic Relations announced that it would cease operations in the state following a federal judge’s order allowing the entity’s designation to take effect. 

What This Means for Nonprofit Organizations

Nonprofits should anticipate continuing, if evolving, scrutiny from the executive branch, Congress, and Republican state attorneys general. WilmerHale has extensive experience helping foundations and other nonprofits to navigate complex government oversight and enforcement challenges. Our team regularly advises on federal investigations and enforcement efforts, congressional investigations, state attorney general inquiries, and regulatory rulemaking and enforcement.