Despite vocal opposition from a wide range of nonprofits, lawmakers in the U.S. House passed a bill Thursday designed to give the Treasury Department unilateral authority to strip nonprofits of their tax-exempt status should they be suspected of financing terrorist organizations. While passage in the Senate is a long shot during the final days of the current Congress, the legislation stands a better chance of passing next year when Republicans control both the upper and lower chambers.
Called the Stop Terror-Financing and Tax Penalties on American Hostages Act, the legislation was given a different moniker by charities that oppose it: the Nonprofit Killer bill.
“Congress must act to stop this abuse of our tax code that is funding terrorism around the world,” Chairman of the House Ways and Means Committee Jason Smith, a Missouri Republican, said Thursday during debate in the House.
The measure passed 219-184, with the majority of the support coming from Republicans and even though more than 40 Democrats who voted in favor of the bill earlier in the month switched their votes. Smith noted that the legislation had bipartisan support in his committee and suggested that the only reason it faced greater opposition was that Democrats wanted to punish President-elect Trump.
The Democrats who changed their votes did so following aggressive push-back from nonprofit organizations, including the American Civil Liberties Union, the Council on Foundations, Independent Sector, the National Council of Nonprofits, and scores of individual charities that lobbied members and campaigned against the bill on social media.
Opponents of the bill argued that laws already on the books forbid supporting terrorists. The House-passed measure would give the administration the ability to label a nonprofit as a terrorist-supporting organization and yank its status without providing evidence.
The bill was used to “hotbox” Democrats into taking what could be construed as a pro-Palestinian position in the Israel-Hamas war and could be used to target nonprofits that provide humanitarian support in areas where it is difficult to determine who is or isn’t a terrorist, said David L. Thompson, acting CEO of the National Council of Nonprofits.
Said Thompson: “They don’t usually wear that as a badge.”
‘We Have to Be Vigilant’
With improved chances of passage under a GOP-controlled Congress, the legislation puts nonprofits on the defensive as they push for a number of priorities on a broad package of tax policies that expire at the end of next year, Thompson said.
Ways and Means Chairman Smith “has it out” for nonprofits, Thompson said, and he worries that Republicans will use the tax bill to settle scores against tax-exempt organizations, which may push for policy choices counter to the incoming Trump administration.
“We have to be vigilant,” he said. “Which disfavored nonprofits are going to cause the drafters of the tax bill to skew and contort the law to slight one or two organizations?”
Opponents of the bill, including Shannon Farley, co-founder of Fast Forward, a nonprofit that supports tech nonprofits, says the legislation would trample due process, giving the Treasury Department absolute say over whether an organization has supported terrorists.
Her opposition, she said, was not based on next year’s change of power.
“I don’t know that I would trust any Treasury Department,” she said. “One of the problems with this bill is there’s no standard of evidence. It doesn’t matter who’s in the White House because we all may define what is terrorism differently.”
Farley said she was especially concerned about several nonprofits supported by Fast Forward that could get swept up in the policy if passed into law.
One, Darsel, has built an A.I. chatbot to teach math over WhatsApp to children in poor countries, including refugees living in Jordan and Syria who may have come into those countries from Gaza and could be branded as being affiliated with terrorist organizations.
“These are innocent bystanders,” she said.
In his floor remarks, Smith accused opponents of the measure of fear-mongering. He noted that the Treasury would allow nonprofits that get their tax-exempt status stripped to appeal.
“Every concern raised by Democrats has been addressed in this bill to ensure due process and to protect legitimate nonprofits,” he said.
17,000 Messages
The measure attracted opposition from a number of U.S.-based Jewish and Muslim organizations, including Bend the Arc and the Council on American-Islamic Relations, the latter of which sent lawmakers 17,000 messages over the past week urging them to vote down the bill.
Hadar Susskind, president of Americans for Peace Now, a Jewish nonprofit that promotes Arab-Israeli peace, said the legislation sent “alarm bells” throughout the nonprofit sector. Not only did his organization call members of Congress, it worked closely with reproductive rights, arts, and environmental organizations to push Democratic members to switch their votes.
Susskind said the purpose of the bill had little to do with supporting Israel.
“This bill was being pushed by a party whose president happily talks about his enemies list and revenge,” he said. “It clearly was about empowering the incoming administration to really go after anyone they want in the nonprofit sector to really decimate civil society.”
Foundation leaders warned that the bill is an attempt to dampen the work of progressive philanthropy in areas seemingly far removed from global terrorism.
E. Bomani Johnson, senior director of special initiatives of ABFE, formerly known as the Association of Black Foundation Executives, said the bill is an effort to dismantle organizations that support racial justice and other policy areas at odds with the incoming Trump administration.
“The ones that will be targeted do stuff in the space around race and around justice.”
