University foundations are facing a legal and regulatory environment that is shifting in ways that may affect compliance, reporting, institutional relationships, and risk management. For many foundations, the challenge is not only identifying what has changed, but also determining which developments require immediate action versus a wait-and-see approach. In this environment, a measured and disciplined approach is critical—identify the areas of greatest exposure, confirm where current requirements are clear, and document how decisions are being made as guidance continues to develop.

More importantly, a legal or regulatory change that appears to affect only the foundation may also have implications for university leadership and university boards, shared services, financial aid, athletics, the foundation’s board’s oversight of the foundation, or donor communications. That makes legal review not just a compliance exercise, but a function that requires coordination among multiple stakeholders. See our forthcoming legal update When Risks Converge: Strategic Preparedness and Cross-Campus Coordination for University Foundations for the importance of strong cross-campus coordination and collaboration.

Areas Foundations May Wish to Reassess

No single checklist will apply to every institution. Public and private foundations, large and small organizations, and foundations with different levels of operational integration will face different risks. Still, several areas are likely to merit review due to recent legal and regulatory changes, as well as demographic and institutional pressures:

• Tax-exempt compliance and reporting
• DEI-related programming and scholarship administration
• Athletics support and NIL-related activity
• Foreign gifts, foreign donors, and foreign influence risk
• Gift acceptance policies and donor restrictions
• Public records law

These issues should be assessed in light of the foundation’s own structure, staffing, operations, and relationship to the university it supports.

Tax-Exempt Compliance and Reporting

Tax-exempt status remains foundational (no pun intended), and legal developments that affect exempt organizations should be monitored carefully. Foundations should evaluate whether any changes in law, enforcement posture, or reporting expectations may affect current operations. This can include reviewing annual filing processes, substantiation practices, charitable receipts, restricted-fund administration, and any activities that could create questions about private benefit, political activity, or unrelated business income.

DEI-Related Programming and Scholarship Administration

DEI programming and scholarships and donor-restricted funds deserve focused attention given the current political environment. Foundations should review whether donor-restricted scholarships, fellowships, awards, or program funds include eligibility criteria based on race, color, national origin, sex, gender, or similar classifications, and, if so, how those restrictions are being administered.

In the current environment, criteria that were once treated as longstanding expressions of donor intent may create new legal and operational questions, especially where the foundation funds university-administered student aid, academic initiatives, pipeline programs, or affinity-based activities. Older gift instruments may warrant particular attention if they use rigid eligibility language that no longer aligns with current legal guidance or best practices.

This does not mean every race- or sex-based fund presents the same risk, nor does it mean foundations should make immediate changes without analysis. But foundations should understand where such restrictions exist, whether the terms are mandatory or aspirational, how selection decisions are made, whether legal review has occurred, and what options may be available if a restriction becomes difficult to administer lawfully or consistently with institutional policy.

Coordination among advancement, financial aid, university counsel, and foundation leadership can be especially important in this area. Informal workarounds or undocumented practices may create additional risk.

Athletics Support and NIL-Related Activity 

Athletics continues to be an area where legal, financial, and reputational issues can converge quickly. Foundations should understand whether athletics-related fundraising, benefits, event structures, sponsorship arrangements, booster involvement, and support connected to student-athlete opportunities could raise questions about donor restrictions, private benefit, use of foundation resources, or institutional oversight.

Based on available guidance, foundation funds likely can be used to provide student-athletes with a private benefit in the form of institutional name, image, and likeness (NIL) payments without compromising or threatening a foundation’s tax-exempt status, as long as it is quantitatively and qualitatively incidental to the foundation’s charitable purposes. A foundation should not earmark funds specifically for student-athlete NIL or for payments to specific student-athletes, but a foundation can continue to provide unrestricted funds to the university and/or the university’s athletics department such that their use for NIL is within the university’s or athletic department’s discretion.

Even where the foundation is not directly involved in NIL activity, its relationship to affiliated athletics programs, fundraising initiatives, or supporting organizations may still warrant review. Team-specific gifts, facilities support, naming opportunities, and initiatives that provide benefits to student-athletes—through payments or otherwise—may create more complicated gift structures and heightened expectations from donors or campus stakeholders.

Foundations should confirm that athletics-related gifts and NIL-adjacent issues are reviewed with the same discipline applied elsewhere. That includes written documentation, clear approval processes, and alignment among advancement, athletics, finance, and legal functions. Side understandings or informal donor expectations can create particular risk in this area.

Foreign Gifts, Foreign Donors, and Foreign Influence Risk

Foreign influence is another area that has continued to draw federal attention. University foundations should consider whether they have adequate visibility into foreign gifts, donor relationships, affiliated entities, and funding arrangements that could create reporting, diligence, sanctions, export control, national security, or reputational issues.

The relevant risks will vary by institution. Some foundations may have limited foreign donor activity. Others may support international programs, receive gifts from donors based abroad, or participate in initiatives involving research, academic partnerships, or naming opportunities with cross-border dimensions. In those settings, coordination with university counsel and compliance personnel may be important to determine whether any federal disclosure, diligence, or risk-assessment obligations apply. Institutions should also determine whether state laws impose reporting requirements for international gifts or contracts.

Foundations may benefit from reviewing how foreign-source gifts are identified, what diligence is performed, how source-of-funds or sanctions concerns are escalated, and whether staff know when a proposed gift or partnership requires additional review. The legal question may not be limited to whether a gift can be accepted, but also whether the surrounding relationship creates broader institutional risk.

Gift Acceptance Policies and Donor Restrictions

Gift administration remains another area where legal compliance and institutional stewardship meet. Foundations should consider whether gift agreements are clear, whether restrictions are capable of being monitored in practice, and whether there are processes for identifying funds with obsolete, impracticable, ambiguous, or legally sensitive purposes.

This review can be especially important for scholarships, DEI-related funds, athletics support, and gifts connected to foreign donors or international programs. Foundations should confirm that these gifts are documented with precision, reviewed with appropriate legal input where needed, and administered consistently with current law and institutional policy. Any restrictions, side understandings, or informal donor expectations should be reflected in writing and evaluated before funds are used.

As scrutiny increases, institutions may benefit from reviewing not only the substance of their gift acceptance and administration policies, but also how those policies are carried out. Inconsistent recordkeeping or insufficient coordination between advancement, financial aid, athletics, finance, compliance, and legal functions can create avoidable risk.

Public Records Law

Foundations organized as nonprofit organizations under their state law and federal tax law are generally not subject to state public records laws unless they function as a government body or hold records on behalf of a public agency. Foundations, however, are subject to certain disclosure obligations under federal tax law and state charity regulations, including IRS forms and certain state tax forms. As a result, foundations may benefit from reviewing their ongoing compliance with federal tax law and state charity regulations.

Avoiding Overreaction and Underreaction 

One of the more difficult challenges in a changing legal and regulatory environment is deciding how quickly to act. Some developments may require prompt policy review or process changes. Others may be better addressed through a wait-and=see approach consisting of monitoring, internal discussion, and focused guidance to the relevant stakeholders.

A useful approach is often to separate developments into three categories:

• Changes that clearly require immediate action
• Areas where targeted review is prudent while guidance continues to develop
• Issues that should be monitored but do not yet justify operational change

This type of framework can help foundations remain responsive without making unnecessary or poorly calibrated adjustments.

Practical Steps Foundations May Consider

As university foundations review current legal and regulatory developments, several practical steps may be worth considering.

• Confirm reporting, substantiation, and recordkeeping protocols
• Review gift acceptance and restricted-fund administration controls
• Inventory scholarships, awards, and program funds with eligibility criteria tied to race, color, national origin, sex, or gender
• Assess whether athletics-related support and NIL-adjacent activity are addressed clearly in current policies and practices
• Review diligence and escalation procedures for foreign gifts and foreign donor relationships
• Strengthen internal controls for sensitive or high-visibility funding arrangements
• Establish a process for monitoring and triaging legal changes as guidance evolves

How Hunton’s Higher Education Team Can Help

For university foundations, the impact of legal and regulatory changes is likely to be less about any single change and more about how multiple developments affect compliance, documentation, and institutional coordination over time. Foundations that take a structured approach to review may be better positioned to identify where risk is concentrated, make proportionate updates, and demonstrate sound stewardship in a period of continued scrutiny. 

Hunton Higher Education represents educational foundations, as well as public and private institutions of higher education. If you have questions about this legal update and the implications for your institution or foundation, please do not hesitate to reach out to your Hunton Higher Education attorney for assistance.