The ‘Nonprofit Killer Bill’ Could Rise Again

Is the “nonprofit killer bill” dead?

According to Lara Friedman, president of the Foundation for Middle East Peace, the measure, which lawmakers in the House punted on last week, could soon resurface. If so, all nonprofits should take notice, not just those that support Palestinians in the Israel-Hamas war, the original focus of the bill.

The legislation would have allowed the U.S. Treasury Department to strip the nonprofit status from any group it believes supports terrorists. It was included as a late addition into the massive tax bill on May 14, right before it cleared the House Ways and Means Committee; and it was then excised from the bill on the House floor, just hours before passage eight days later.

The anti-terror measure raised alarms among nonprofits because it would have let the Trump White House — and future administrations — characterize a nonprofit’s actions as supporting terrorist groups, while giving the accused nonprofit a very limited ability to challenge that determination.

Two earlier versions of the legislation passed the House in 2024, with bipartisan support, but did not receive a Senate vote. Following the election of President Trump in November, a broad swath of nonprofits sounded alarms about the proposal, arguing that it was an effort by the incoming administration to chill political speech.

The Foundation for Middle East Peace has received support from the Rockefeller Brothers Fund and Open Society Foundations; it makes grants largely to grassroots organizations that promote a peaceful resolution to the conflict between Israel and Palestine.

Friedman spoke with the Chronicle about what she sees as the dangers such legislation presents to broad civil society efforts and the prospects that debate on the issue is not over.

Her remarks have been edited for brevity and clarity.

The language allowing the Treasury Department to terminate an organization’s nonprofit status for supporting terrorism was stripped from the tax bill. Does this represent a victory for the nonprofit lobby?

It was pulled because Republican leadership was convinced it was going to be taken out by the Senate parliamentarian anyway. They figured, Why spend a lot of political capital in the House when the expectation is that the Senate parliamentarian will just take it out on technical grounds? So it being pulled was not based on substance or lobbying.

Is the issue resolved for good now that it is out of the current bill?

The nonprofit killer legislation is clearly still in play. Some people expected it to just disappear after it failed in the last Congress. They may have thought this administration or Congress has other priorities. But there are clearly some members of Congress who still want to push this.

Go Deeper

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3. Communications

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4. Special Report

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Having made an effort to attach it to a bill like the reconciliation bill is a signal that this is going to come up again. There are likely going to be efforts to attach it to other pieces of “must-pass” legislation, which is a tried-and-true method in Congress of pushing through things that are more controversial or harder to pass on their own.

The legislation was originally crafted in response to the October 7, 2023, attacks by Hamas and the ongoing war in Gaza. Why should nonprofits that support other causes be concerned?

When this was first introduced, it was explicitly about going after people, organizations that support Palestinian lives and rights. It was explicitly about shutting down organizations engaged in work in support of Palestinian lives and Palestinian rights and critical of Israel and what it’s doing in Gaza. That was explicit.

Then people began to say, “This is great. We can use this to go after Soros and the Open Society Foundations.” It was recognized as a weapon of mass destruction against groups with disfavored political viewpoints. This piece of legislation is sort of ripping the mask off. There’s no pretense. Initially, it was clearly focused on Palestinians. The intent behind this law is to make it easier to simply strip away the 501(c)(3) status of organizations for disfavored political views and speech.

To what extent do nonprofits that work on unrelated issues agree with this?

As someone who works on Palestine issues, I had warned people the tools that have been used against us can be used against you, so pay attention. And generally in the civil society sector, everyone is very self-interested. Everybody navel-gazes and they don’t want to stick their head out unnecessarily for somebody else’s controversial cause.

When I said anti-BDS laws — the Boycott, Divestment, and Sanctions movement calls for economic pressure on Israel to end its occupation of Palestinian territories and recognize the rights of Palestinian citizens — can be repurposed to go after any disfavored viewpoint, people kind of shrugged. Then suddenly we have anti-BDS laws repurposed to go after DEI, critical race theory, and ESG (environmental, social and governance investment policies).

Is some version of this bill needed to block nonprofits, which receive tax advantages, from supporting terrorists?

We already have a body of law that prohibits any American, including nonprofits, from in any way aiding terrorism. And the IRS already has far-reaching powers to go after nonprofits, whether they’re acting in ways that are not consistent with their nonprofit status or they’re violating U.S. law. Does a highly motivated administration need new tools to go after this? Arguably they have tools that could already be used. But they’re trying to facilitate it by creating new shortcuts, new authority.

But shouldn’t the administration have the authority to thwart terror?

Material support for terrorists has always been redefined by the courts. It gets broader and broader. But at this point, there is an effort to say it doesn’t merely mean that you are sending money to terrorists, sending help to them, or working directly at their behest. It seems to be saying that if Hamas says Israel is committing genocide, and you say Israel is committing genocide, then therefore you are aligned with the terror organization, and therefore that’s support for terror. That’s the argument they’re using against student demonstrators. This is straight viewpoint discrimination. There’s a reason why people call this the NGO killer. It’s also the free-speech killer bill.