Support dwindles for cracking down on nonprofit terror financing

A plan moving through Congress may soon revoke tax exemptions for nonprofits deemed supportive of terrorist organizations.

The overwhelming bipartisan support it once enjoyed, however, has dwindled as critics worry about constitutional overreach.

Supporters blame the sudden reversal on something more immediate: distrust of the incoming presidential administration.

In April, the House passed H.R. 6408 in a vote 382-11. It is a bill extending power to the Secretary of the Treasury to revoke tax-exempt status from any organization that supports terrorist organizations.

Though the bill did not gain traction after the initial vote, lawmakers again voted on the exact same language added into H.R. 9495, a proposal that would also alleviate fines and penalties from missed tax deadlines for Americans held hostage abroad.

This time, however, it made a public splash as members of Congress received pushback from constituents and non-profit organizations alike. Joining activists long concerned for the future of Palestinian aid, domestic organizations were moved to speak out against the bill out of concern for their own survival.

The first attempt to pass the proposal with a supermajority failed mid-month, and it returned to the House floor last Thursday for debate. The margin of support this time was much narrower at 219-184.

The only difference, Republicans say, is the incoming president.

Sponsor Rep. Claudia Tenney, R-N.Y., said that since the election, the bill had become the subject of “mass political hysteria.”

“I urge my colleagues to grab some common sense,” she said, noting that they were suffering from “Trump derangement syndrome.”

Rep Lloyd Smucker, R-Penn., called the reversal "the most bizarre argument I've heard since I've been in Congress."

Opponents across the aisle worried that the bill could sanction Trump’s retaliation against non-profit organizations he deems to be hostile toward him, including major bodies like the American Civil Liberties Union.

“This is the death penalty bill that we’re considering today, the bill that empowers Donald Trump to extinguish the life of any non-profit, of any civic society group which happens to be on his enemies list,” said Rep. Lloyd Dogget, D-Texas.

He and others argued that the House could easily find unanimous consent for the first half of the bill granting tax relief to hostages, but the addition of the tax status portion goes too far.

The first time the language was floated with near-unanimous consent, it was presented within the context of the Israel-Hamas War. In the days prior, Iran had launched a direct missile attack on Israel, and the appetite to reign in potential terrorist threats was high.

In defending the bill, Rep. Jason Smith, R-Mo., chairman of the House Ways and Means Committee, evoked another era in which similar sentiment was at a public high: in 2001, when the Holy Land Foundation, a tax-exempt organization run by Palestinian-Americans, was designated a terrorist organization by then-President George W. Bush.

The prosecution of “The Holy Land 5” has continued to loom large as a major civil rights controversy.

The bill's language gives the Secretary of Treasury unilateral authority to determine if an organization has supported a terrorist organization and revoke its 501c3 status. It does provide the opportunity for any such organization to argue this determination after the fact, but the secretary makes the final decision.

Opponents say this reverses the burden of proof and eliminates due process, pointing to laws already on the books criminalizing support of a terrorist organization with far more serious implications than tax status.

“A sixth grader would know this is unconstitutional,” said Rep. Jamie Raskin, D-Md., who voted for H.R. 6408 in April.

“The potential for abuse under H.R. 6408 is immense as the executive branch would be handed a tool it could use to curb free speech, censor nonprofit media outlets, target political opponents, and punish disfavored groups across the political spectrum,” wrote a coalition of over 300 non-profits headed up by the ACLU.

“The lack of guardrails creates the potential for future administrations to weaponize these powers against groups on both ends of the ideological spectrum,” the letter continued. “Even if they may never be designated as ‘terrorist-supporting,’ let alone charged with a crime, nonprofits will curtail their activities as a precaution in order to avoid stigmatizing and financially devastating punishments.”

The American-Israel Public Affairs Committee, or AIPAC, celebrated the passage in a post on X, saying it "provides important tools to combat terrorism." AIPAC is the largest pro-israel lobby in the US, funding politicians on both sides of the aisle. It spent over $42 million in campaign contributions in 2024.

In the end, it was a small minority within the House who applied concern for this principle in a non-partisan fashion – just 10 Democrats and one Republican voted against both H.R. 6408 and H.R. 9495.

Rashida Tlaib, D-MI, was one such naysayer.

“I don’t care who the President of the United States is,” she said. “This is a dangerous and unconstitutional bill.”

Rep. Cori Bush, D-Mo., called the bill "an affront to democracy." Smith praised her consistency despite their disagreement.