House Passes Bill to Strip Tax-Exempt Status From Nonprofits That Support ‘Terrorism’

The U.S. House passed legislation on Thursday that would give the Treasury Department unilateral authority to strip the tax-exempt status of nonprofits it claims support terrorism, alarming civil liberties groups about how a second Trump presidency could invoke it to punish political opponents.

The bill passed 219–184, with the majority of the support coming from Republicans who accused Democrats of reversing course in their support for the “common sense” proposal only after Donald Trump was elected to a second term earlier this month.

Speaking on the House floor ahead of the vote, Rep. Jason Smith, GOP chair of the House Ways and Means Committee, said his colleagues across the aisle would still be supporting the bill if Vice President Kamala Harris won the presidential race. “And we, as members of Congress, have the duty to make sure that taxpayers are not subsidizing terrorism,” the Missouri lawmaker said. “It’s very, very simple.”

However, the proposal has drawn concern from a range of nonprofits who say it could be used to target organizations, including news outlets, universities, and civil society groups, with which a future presidential administration disagrees. They say it does not offer groups enough due process.

“This bill is an authoritarian play by Republicans to expand the sweeping powers of the executive branch, to go after political enemies and stifle political dissent,” Rep. Pramila Jayapal, the chair of the Congressional Progressive Caucus, said on the House floor ahead of the vote.

Critics also see it as redundant as it is already against U.S. law to support designated terrorist groups. The proposal, which now goes to the Democratic-controlled Senate where its fate is uncertain, would also postpone tax filing deadlines for Americans held hostage or unlawfully detained abroad.

The bill would create a new category of “terrorist supporting organizations,” according to an analysis by the Congressional Research Service of a previous version of the legislation. This category is defined as any organization the Treasury Secretary designates as having provided material support to a terrorist organization in the past three years.

“We think this legislation is an overreach,” said Jenn Holcomb, vice president of government affairs at the Council on Foundations. “It would allow the Secretary of the Treasury to designate a 501c nonprofit as a terrorist organization at their discretion. And our concern is it doesn’t have enough in there to really ensure that a nonprofit understands the reasoning that a secretary designated as such.”

The bill would give a nonprofit designated as a “terror-supporting” 90 days to appeal that designation. Nonprofits like the American Civil Liberties Union have said that the bill does not require that the Secretary of Treasury disclose all the evidence that was used to make the designation.

The bill text outlines how the Treasury must send “a description of such material support or resources to the extent consistent with national security and law enforcement interests.”

In a joint statement with the Independent Sector, National Council of Nonprofits, and United Philanthropy Forum, the Council on Foundations also said the bill would shift the burden of proof to the nonprofit, and even if an organization was eventually cleared, the nonprofit would “risk irreparable damage to their operations and reputation.”

If it were to become law, the bill could apply to a range of nonprofits, including membership organizations, unions and private foundations.

A version of the bill was first introduced after the Oct. 7, 2023 Hamas attack on Israel and the House passed a previous version of the bill in April, including with the support of some Democrats.

The bill was also brought up for a vote last week but failed to garner a two-thirds majority required under the suspension of the rules.

Democrat Rep. Rashida Tlaib, the only Palestinian-American representative in Congress, said Thursday before the vote it would be her third time voting against the bill.

“I don’t care who the president of the United States is,” she said. “This is a dangerous and unconstitutional bill that would allow unchecked power to target nonprofit organizations as political enemies and shut them down without due process.”