A 2023 U.S. Supreme Court ruling that affirmative action in college admissions is unconstitutional put the nonprofit world on notice.
While limited to admissions based on race, the decisions in a pair of cases brought by Students for Fair Admissions against Harvard University and the University of North Carolina opened the floodgates to lawsuits that test whether the use of race in other determinations, such as who gets a philanthropic grant, is discriminatory.
As companies and universities retreat from DEI policies, grant makers that focus on racial equity are bracing for litigation.
The most publicized of those cases was American Alliance for Equal Rights v. Fearless Fund; the defendant was a venture firm with an associated foundation that made small grants to Black women entrepreneurs. That case was settled in September, with Fearless Fund ending its race-based grant program, but the settlement left the legal outlook on the topic murky. Now, as foundations and nonprofits that focus on racial equity brace for more litigation, the broader concept of diversity, equity, and inclusion has come under attack — throughout all sectors.
For example, in late November, Walmart said it would not renew a five-year $100 million commitment to its Center for Racial Equity, which researched the root causes of racial disparities in education, health, and criminal justice, and brought nonprofits together to encourage equity approaches. Deere & Co., Lowe’s, and J.P. Morgan have also backed away from policies meant to address racial disparities.
Meanwhile, public universities, including those in Michigan, Missouri, Ohio, and Wisconsin, have backpedaled on DEI, no longer requiring applicants for faculty positions to write statements that explain how they would advance diversity and equity in their teaching and research.
Foundations and nonprofits are watching these developments closely, along with the return to the White House of Donald Trump, an avowed critic of efforts to support diversity, equity, and inclusion. Trump has pledged to scrap DEI requirements in the federal government on the first day he is in office.
Nonprofits will be under enormous pressure to change policies that specify race, according to legal experts. Some have already retreated. For instance, in February, the Smithsonian’s National Museum of the American Latino was sued by the American Alliance for Equal Rights, led by Edward Blum, the legal strategist behind the Supreme Court affirmative action and Fearless Fund cases. Blum’s nonprofit argued that limiting a 12-week internship program to Latino students was unconstitutional, and after reaching a settlement in March, the museum announced that students of all races qualified.
Other DEI skeptics who have litigated against diversity efforts are set to be at the center of the Trump administration’s decision-making apparatus. Chief among them is Stephen Miller, whose legal advocacy nonprofit America First Legal filed a dozen cases against educational and corporate diversity programs over the past two years. Miller is slated to be Trump’s deputy chief of staff for policy.
Nearly 100 other DEI-related lawsuits have been filed in the past three years by conservative legal nonprofits, according to a tally compiled by the New York University School of Law’s Meltzer Center.
“This is going to be a big shift,” says Isabelle Leighton, executive director of the Donors of Color Network, a group of about 200 philanthropists who seek to advance racial justice. “A lot of the private actors now have the keys to policymaking, and they’re going to feel very emboldened to enshrine a lot of what they were doing” into law.
Leighton predicted that the notion of philanthropic freedom — the idea, long cherished by conservatives, that donors should be able to give to whatever causes they choose — will be severely tested by lawsuits aiming to curtail grants made to people of a specific race. Foundations focused on racial equity, she said, face a decision about whether to accommodate the new legal and political environment by taking mention of race off the table or to hold fast to their mission to increase the visibility of and find a solution to disparities based on race.
In some ways, the battle over race-based nonprofit programs is a fight between protecting philanthropic freedom — and the idea that private grant making is a form of constitutionally protected free expression — and a civil-rights statute dating from the 1860s that forbids discrimination based on race in private contracts. The Reconstruction-era law, meant to protect formerly enslaved people, is now being used by litigants like Blum, Miller, and others to try to dismantle race-based grant making.
The civil-rights law, the litigants argue, is “color-blind” and should be interpreted to curtail discrimination against anyone by virtue of their background.
An emphasis on DEI is by nature discriminatory because it pushes favoritism based on race, argues Jonathan Butcher, a research fellow at the Heritage Foundation, a conservative think tank. Following the corporate reversals, nonprofits that promote diversity are next in line to receive public condemnation from the right, he says.
“When they’re called out on their DEI programs and statements, they back away from them,” Butcher says of companies criticized for their DEI work. “The same thing should be happening in the charitable sector.”
‘Every Nook and Cranny’
On the first day of his presidency in January 2021, Joe Biden issued an executive order titled “Advancing Racial Equity and Support for Underserved Communities Through the Federal Government,” which aimed to ensure people of color and lower-income Americans could achieve their full potential with regard to federal benefits and grants.
Since then, the push for equity has seeped into “every nook and cranny” of federal operations, according to Ian Kingsbury, director of research at the conservative nonprofit Do No Harm, which tallied more than 500 examples of DEI policies throughout federal agencies.
Nonprofits focused on equity had anticipated a windfall in federal support because of Biden’s executive orders and legislative language in major spending bills that required an equity component. Federal support for transportation and climate-change projects, distributed through local governments and networks of nonprofits, especially targeted communities of color over the last four years.
For instance, under the “Just40" Biden program, 40 percent of all clean-energy, climate, and sustainable-housing investments have been earmarked for groups “marginalized by under-investment.” One Chicago nonprofit, Blacks in Green, plans to use a $10 million U.S. Environmental Protection Agency grant to build a solar and geothermal grid on the city’s south side.
But DEI’s moment has come and gone, says Kingsbury.
“Politically, it is a real liability because it peddles in grievance and political extremism,” he says. “The Justice Department is probably going to take on an active role in enforcement.”
Meanwhile, progressive grant makers believe the Justice Department and other federal agencies will go after nonprofits by sending cease-and-desist letters to nonprofits engaging in race-based programming or by revoking tax-exempt status from nonprofits engaging in activities deemed counter to the Trump administration’s policy agenda.
In November last year, legislation that would allow the U.S. Treasury Department to cancel the nonprofit status of organizations alleged to assist terrorist groups passed the House. Nonprofit advocates warned that if passed into law, the bill would give the agency leeway to target nonprofits without justification or due process.
By casting DEI and race-based grant-making efforts as un-American or unfair rather than attempts to right historical wrongs, the Trump administration is poised to transform public programs and change the way people understand the history of racism in America, while instilling fear, says Fred Blackwell, CEO of the San Francisco Foundation.
“They’re pursuing a dampening effect,” Blackwell says. In the face of that pressure, he says, it’s understandable that some foundations might want to avoid mention of race in their work. But foundations involved in racial-justice work have a responsibility to try to influence public discourse, he says, and it is necessary to bring race to the forefront when trying to improve poor social outcomes.
‘Erasure of Race-Conscious Efforts’
To get that message across, philanthropy leaders are attempting to more forcefully communicate the benefits they see from an equity focus. The Bridgespan Group, for instance, released a multimedia collection in December celebrating DEI. And the Kresge Foundation announced a three-year fellowship program to support a pipeline of leaders committed to “diversity, equity, inclusion, and justice.” The goal is to train a cadre of social-change professionals to be well prepared for fights against DEI.
The idea that donors should be able to give to whatever causes they choose may be tested by lawsuits that aim to curtail grants made to people of a specific race.
Supporters of DEI programs are scrambling to prepare for anticipated lawsuits. Foundations should make sure their work is legally defensible, “recognizing that an attack could come,” says E. Bomani Johnson, senior director of special initiatives at ABFE, formerly known as the Association of Black Foundation Executives.
ABFE and the California Black Freedom Fund each have pooled funds to train lawyers on civil-rights law and provide pro bono legal assistance to nonprofits fearful of DEI-related lawsuits. Another effort, MN Legal, Education, Advocacy and Defense, was modeled after the California fund and created by the Minnesota Black Collective Foundation, a Black community foundation founded after the murder of George Floyd in 2020.
Lulete Mola, who leads the Minnesota effort, fears that concerns over the incoming administration’s approach will lead to a watered-down approach to racial justice.
She points to one of the recommendations of Project 2025, a Heritage Foundation policy blueprint for the Trump administration, that calls for doing away with the collection of data on race and ethnicity, including employment figures collected by the Equal Employment Opportunities Commission, an effort to be “color blind” in its approach to social problems.
Mola fears foundations that make grants to Black-led organizations or to improve educational or other outcomes for Black people, are scrubbing race from their grant guidelines, requests for proposals, and grant agreements to try to avoid public scrutiny and lawsuits.
“There will be an erasure of race-conscious efforts,” she warns, if references to race are replaced by proxies, such as the ZIP code of a grant recipient. Without that race-specific language, policymakers and philanthropy leaders will not be able to collect data on whether government or grant-making interventions are having the desired effect, she says.
Rather than arguing that grants are constitutionally protected gifts, another approach is to argue that race-based grant making conforms to civil-rights law, which allows using race as a criterion to remedy past racial disparities in areas like public health and education.
Specifying the race of an intended grant recipient can help ensure foundation money has the greatest impact, argues Eric Ward, executive vice president at Race Forward, a racial-equity advocacy nonprofit.
Ward suggests that nonprofit leaders prepare to defend their race-related work by ensuring the language of their grant agreements “acknowledges the legal and political landscape” that has put race-based grant making under the microscope. He suggests grant makers thoroughly document how their grants conform to their organization’s tax-exempt mission and aim to address disparities based on race.
“Clarity in intention is likely the strongest shield against legal challenges,” Ward says, “especially when it comes to upholding goals that serve the public.”
