House passes H.R. 9495, next up: Senate vote
Last Thursday, the U.S. House of Representatives passed H.R. 9495, the Stop Terror-Financing and Tax Penalties on American Hostages Act, with a vote of 219-184, signaling a new approach to managing the tax status of nonprofits suspected of aiding terrorism.
H.R. 9495 empowers the U.S. Treasury to revoke the tax-exempt status of organizations providing material support to terrorism, a move designed to prevent the misuse of charitable status. The bill now moves to the Senate, likely sometime in 2025.
Prior to Trump’s election, the bill progressed without significant controversy, enjoying bipartisan support. However, the landscape shifted post-election, with critics now expressing pleading worries over the potential for executive overreach. The primary concern is the perceived lack of due process, as the legislation allows the Treasury to act without fully disclosing evidence or reasoning, which could limit an organization's ability to defend itself.
Notably there are due process elements of the legislation including notification to the organization before revocation and the opportunity for an administrative hearing. However, critics like the ACLU seem to gloss over these. In its November 21, 2024 press release titled ACLU Statement on House Passage of Dangerous Civil Society Attack Bill, Kia Hamadanchy, senior federal policy counsel writes, “By voting for H.R. 9495 today, the House of Representatives chose fear over freedom . . . After over 100 years of defending civil liberties in this country, we know that the American people won’t sit quietly as politicians try to ram through anti-democratic legislation like this one. Over the last few weeks, we’ve seen hundreds of thousands of people make their opposition to this bill known, flooding members with so many phone calls, texts, and emails that dozens of representatives flipped their vote.”
The Association of Fundraising Professionals (AFP) takes a more balanced approach; they do not opposed the fundamental goals of the legislation but advocate for the inclusion of safeguards to ensure that the bill's implementation does not infringe upon the rights of legitimate nonprofits. In fact, they note: “Many of us remember the controversy of Lois Lerner and concerns the IRS was targeting politically aligned groups.”
The tax-exempt status of nonprofits should never enable the funding of terrorism or extremism, period. As the Senate examines H.R. 9495, they have opportunities to re-visit due process elements of the legislation to ensure it appropriately balances national security interests against tax-exempt organizations’ rights to transparency and opportunities to be heard. Just as it was wrong for Lois Lerner to use the IRS power to eliminate Tea Party conservative groups from the nonprofit ranks, so, too, it would be unacceptable for the Trump administration to misuse this legislation for political gain. However, we should give this well-intended legislation a chance without assuming the worst, focusing on its potential to address genuine concerns about the misuse of nonprofit status for terrorism financing.
