A Portland, Oregon, nonprofit organization called the Avenue Foundation gives $1,000 grants, marketing consulting, and coaching sessions to small businesses. There’s one catch. Applicants must be at least 50% owned by someone who is black, indigenous, or a person of color. White business owners aren’t invited to apply. The foundation’s own grant application says so in plain English.
I’ve spent three decades advising fiduciaries on what they can and can’t do with money entrusted to a charitable purpose. Avenue Foundation is running race-based gatekeeping under a 501(c)(3) determination letter, and it’s exactly the kind of arrangement the IRS has the legal authority, and now the political mandate, to shut down.
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The American Alliance for Equal Rights filed a complaint against Avenue Foundation with the IRS this month, and the underlying facts aren’t in dispute. Avenue Foundation’s own website states its “Avenues of Impact” grant program is designed to support BIPOC-owned small businesses. The application form asks whether the business is majority BIPOC-owned and offers no path for a white-owned business to qualify, regardless of need, mission, or merit. Applicants must also show proof of Oregon business registration and a purpose-driven mission, but race is the only criterion in the entire application that excludes a class of owners outright. The foundation’s 2024 Form 990 shows it distributed $111,658 in grants under this criterion in its first year of operation.
Supreme Court precedent already settled this question in 1983. In Bob Jones University v. United States, the court held that an organization violating fundamental public policy against racial discrimination cannot claim tax-exempt status, regardless of what other good works it performs. The court didn’t limit that holding to schools. It cited the Civil Rights Act, the Voting Rights Act, and the Fair Housing Act as evidence that discrimination based on race offends public policy in every context, not just education. IRS practice bears this out, too. Four years after Bob Jones came down, the agency denied tax-exempt status to a white supremacist group on identical public policy grounds. Racial exclusion is racial exclusion, whatever direction it points.
The Supreme Court reinforced this in 2023 with Students for Fair Admissions v. Harvard, holding that race-based preferences are inherently zero-sum. A benefit given to one applicant on account of race is a benefit denied to another applicant on account of race. There’s no reframing a whites-need-not-apply grant program as anything other than what it is.
This matters now because President Donald Trump’s Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” directs federal agencies to identify and pursue the most egregious violators of civil rights law in the private and nonprofit sectors, including large nonprofit corporations and foundations. Avenue Foundation is small potatoes in dollar terms, but it’s a textbook case, and small-potatoes cases are often the easiest to win and the clearest to use as precedent.
Here’s what should trouble every donor and every board member who sits on a 501(c)(3): Tax-exempt status isn’t a private arrangement between a nonprofit group and its founder. It’s a public subsidy. Every dollar that flows through Avenue Foundation tax-free is a dollar the rest of us make up for through the tax code. The Supreme Court called this vicarious giving in Bob Jones, and it’s the reason public policy limits apply to charitable status at all. Taxpayers shouldn’t be forced to underwrite discrimination they’d never approve if asked directly.
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Plenty of DEI-branded programs across corporate and nonprofit America have quietly kept race-based criteria in place since the 2023 Harvard ruling, betting that enforcement would stay theoretical. Avenue Foundation is a useful test case precisely because the paper trail is so clean. There’s no ambiguity to litigate around, no disparate impact statistics to argue over. The application form says what it says.
The IRS doesn’t need new authority to act here. It needs to use the authority it has had since 1970, when it first adopted the common-law charitable trust doctrine as the standard for exemption. Organizations that discriminate on the basis of race don’t serve a public benefit. They serve a private ideology, and asking the rest of us to subsidize it through the tax code is a shakedown with a deduction attached.
Jay Rogers is a financial professional with more than 30 years of experience in private equity, private credit, hedge funds, and wealth management. He has a bachelor’s degree in criminal justice from Northeastern University and has completed postgraduate studies at the University of California, Los Angeles; the University of Pennsylvania; and Harvard University. He writes about issues in finance, constitutional law, national security, human nature, and public policy.
