Washington D.C., – On Nov. 14, 2023, Congressman David Kustoff (R-TN) and Congressman Brad Schnieder (D-IL) introduced H.R. 6408, bipartisan legislation that would “revoke the tax-exempt status for any organization that provides financial support or resources to designated terrorist groups.” The accompanying press release claims “Recent reports have indicated that U.S. based, tax-exempt nonprofits may be providing funding and support to Hamas.” The key word in this quotation is “may,” as there is no concrete evidence of these allegations.
Charitable organizations, especially those who work in settings where designated terrorist groups operate, already undergo strict internal due diligence and risk mitigation measures and – thanks to misguided categorizations of nonprofits being labeled as “particularly vulnerable” to terrorist financing abuse in rushed policy directives immediately following 9/11 – face extra scrutiny by the U.S. government, the financial sector, and all actors necessary to operate and conduct financial transactions in such complex settings. While these categorizations have since been revoked, the scrutiny remains the same.
As the prohibition on material support to foreign terrorist organizations (FTOs) already exists, and is applicable to U.S. nonprofits, this proposed legislation is redundant and unnecessary. The potential harms far outweigh any potential “benefit” that its sponsors seek from the political parading or publicity that the bill produces. This legislation presents dangerous potential as a weapon to be used against civil society in the context of Gaza and beyond. As noted by the Foundation for Middle East Peace (FMEP), H.R. 6408, if passed, would “[enable] a new category of legal harassment of NGOs, focused in the first instance on those that engage with Palestinians or on Palestinian issues, but also enabling attacks on NGOs working in any sector and on any issues,” similar to the baseless False Claims Act cases that charities have faced over the years.
Furthermore, this legislation contributes to the continued false narrative that nonprofit organizations (NPOs) are vehicles for abuse by terrorist organizations. In fact, the U.S. Department of Treasury itself and the Financial Action Task Force (FATF) have both publicly stated that NPOs historically face little to no risk of terrorist financing abuse. Officials in the U.S. government and Congress must recognize that this type of rhetoric and discourse, without proper evidence to substantiate claims of abuse, is damaging to the charitable sector as a whole, and undermines the diligent work done by experts in the field of NPO operations to ensure that aid goes only to innocent civilians caught living in areas where terrorist groups operate. As has been stated a number of times, “NPOs themselves have the most to lose” if funding is redirected or does not end up in the hands of intended beneficiaries, and thus go to great precautionary lengths to prevent this.
C&SN urges Congress to reject this bill, as it is not only duplicative and its claims are not evidence-based, but also creates a tool that may be manipulated against NPOs by bad actors with political motives.
UPDATE Apr. 25, 2024:
On Apr. 15, 2024, H.R. 6408 passed the House of Representatives with broad bipartisan support. One day later, on Apr. 17, Senators John Cornyn (R–Texas) and Angus King (I–Maine) introduced a companion bill in the Senate, S. 4136. As noted above, the prohibition on material support to terrorist organizations already exists under U.S. law. This prohibition exists under the Anti-Terrorism Effective Death Penalty Act (AEDPA), the Immigration and Nationality Act (INA), the International Emergency Economic Powers Act (IEEPA), and other provisions of U.S. law, such as the Anti-Terrorism Act (ATA). Furthermore, Section 501(p) of the IRS code gives the IRS authority to suspend the tax-exempt status of any organization designated as supporting or engaging in terrorist activity.
The bipartisan support of the House bill signals a potential for this legislation to pass the Senate in the name of “fighting terrorism financing,” without due consideration of the potential costs and possible motivations behind the bills. As the bills’ purported objective of preventing terrorist financing is already fulfilled under U.S. law, legislators and advocates must question the bills’ broad implications.
The bill was clearly crafted with the intent to target pro-Palestinian groups and student groups, as evidenced by statements at a November Ways and Means Committee Hearing referencing baseless allegations against American Muslims for Palestine and Students for Justice in Palestine. However, a closer look demonstrates that this legislation could be wielded as a weapon against charities from any sector at the whims of any administration. This legislation would allow the federal government to strip charities of their tax-exempt status without an official terrorist designation, and nothing in the bill prevents the administration from targeting any 501(c)(3) organizations, as long as they have been deemed by the administration to be “terrorist supporting organizations.”
This is further evidenced by a recent letter from the House Ways and Means Committee to the IRS, sent on Apr. 24, which suggested the IRS should revoke the tax-exempt status of charities that “promote conduct that is counter to public policy,” and referenced funding by China to charities to fund “anti-semitic events” and “promote ‘green’ energy policies that would increase our country’s dependence on Chinese minerals and materials.”
Policymakers must take into account the parade of horribles that could cascade from this broad legislation that uses the targeting of charities as a vehicle for larger political motives. Across the globe, we have seen the ability for counter-terrorism measures to be weaponized against civil society and civic space. It is critical to prevent the enaction of broad legislation that enables this kind of weaponization from being passed in the first place.