House Republicans look to help Trump strip tax-exempt status of nonprofits he says support terrorism
House Republicans look to help Trump strip tax-exempt status of nonprofits he says support terrorism
WASHINGTON (AP) — A proposal by Republicans in Congress would allow President Donald Trump’s administration to remove the tax-exempt status of nonprofits that it says support terrorism, creating what some nonprofits say is an arbitrary standard to financially punish charities that advocate for issues that don’t align with his agenda.
Unusual language added Monday to a reconciliation bill from the House Ways and Means Committee — the tax-writing committee — would allow for terminating the tax-exempt status of groups the administration deems “terrorist supporting organizations.” The language mirrors a bill from the last Congress that passed in the House but did not pass the Senate.
The definition and criteria for determining whether or how an organization supports terrorism are unclear. The bill also targets nonprofits in other ways, echoing complaints by Trump, who has called the tax-exempt status a “privilege” that has been “abused.” Trump has threatened to revoke tax-exempt status for groups that don’t abide by his directives or agree with his views.
GOP Rep. Jason Smith of Missouri, who chairs the Ways and Means panel, said during debate on the bill last fall that members of Congress “have the duty to make sure that taxpayers are not subsidizing terrorism.” Smith didn’t immediately respond to a message seeking further comment Tuesday.
House Republicans are conducting hearings this week for the so-called budget reconciliation process on various sections of the bill as a self-imposed Memorial Day deadline to pass Trump’s tax breaks and spending cuts looms. Committees will then stitch the various sections together in what will become a massive package that is likely to include trillions of dollars in tax cuts.
The provision in the Ways and Means bill would create a new way to strip tax exemptions granted by the Internal Revenue Service to charitable organizations.
Churches and religious entities, universities, private foundations, political associations and other nonprofits such as labor groups are among those that often qualify as 501(c)(3). There are other 501(c) groups including (c)(4) trade unions, and (c)(6), including business groups. The exemption is powerful because the groups don’t pay certain taxes and their donors get a federal tax deduction.
Concern among advocacy groups
The Ways and Means proposal would hand “unchecked power” to administration officials “to punish organizations that do not fall in line with the administration’s ideology,” sad Diane Yentel, CEO of the National Council of Nonprofits, “without due process, without a third-party investigation and without public evidence.”
The previous bill faced backlash from a variety of groups warning it could be a way to punish those at odds with the administration. The new one faces similar concerns.
“This is a five-alarm fire for nonprofits nationwide,” said Lia Holland, campaigns and communications director at the nonprofit group Fight for the Future, which advocates free speech online. “Any organization with goals that do not line up with MAGA can be destroyed with a wink from Trump to the Treasury.”
Holland said the “terribly thought-out legislation” puts environmental, racial justice, LGBTQ+ and other groups at risk.
The provision is one of several in the GOP bill causing concern for nonprofits and foundations, including one that would take away resources from foundations by increasing a tax on the income they earn from investing their endowments.
Additionally, the bill would require that corporations give at least 1% of their taxable income to charity to receive a tax benefit. Any donations below that threshold would not be deductible.
Trump’s feud with nonprofits
Trump has previously called the tax-exempt status a “privilege” that has been “abused,” and he’s already threatened to revoke it for those that don’t abide by his directives or agree with his views. Most recently that’s included Harvard University, which defied the administration’s demands to limit on-campus activism. Trump froze more than $2.2 billion in grants and $60 million in contracts to the school, moved to terminate $450 million more and questioned its tax-exempt status. Harvard has sued to stop the grant freeze.
Michelle Roos, executive director of the Environmental Protection Network, which represents hundreds of former scientists and regulators, said last month “we all pay the price” when charitable organizations are silenced based on politics.
For example, the move to revoke tax-exempt status could choke off funding for groups that urge greater action to promote clean air, water and land, work to help communities most affected by industrial pollution and advocate for projects and policies to combat climate change — among other issues.
“It threatens the rights, health, and future of every community,” Roos said in a statement.
Last month, Trump said he could target environmental groups and the ethics watchdog organization Citizens for Responsibility and Ethics in Washington.
Though past presidents have tried to influence and direct the IRS, presidents cannot order the agency to conduct tax investigations under a law passed by Congress in 1998. The IRS can examine an organization’s tax-exempt status and can rescind it if it’s not operating for charitable purposes as required. Still, the IRS’ independence under Trump is in question.
Speaking generally about the Trump administration’s stance toward nonprofits before the bill was unveiled, Thomas Kelley, a professor at the University of North Carolina School of Law, told The Associated Press it would devastate charitable groups if donations were no longer deductible. He also said most private grant-making foundations have internal policies that they give only to 501(c)(3) organizations.
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St. John reported from Detroit. Associated Press writer Thalia Beaty contributed reporting.
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Read more of AP’s climate coverage at http://www.apnews.com/climate-and-environment.
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Follow Alexa St. John on X: @alexa_stjohn. Reach her at: ast.john@ap.org.
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By ALEXA ST. JOHN and MATTHEW DALY
Associated Press
