Reconciliation Provision Would Let Executive Branch Dismantle Nonprofits Under Pretext of Fighting Terrorism

If there’s one thing that generally unites Congress and American people across the political spectrum, it is the importance of preventing terrorist attacks. So, at first glance, one small provision of House Republicans’ massive tax reconciliation bill may not seem concerning. Section 112209—snuck into the last 10 pages of the nearly 400-page bill the day before its consideration by the House Ways and Means Committee—would give the executive branch a powerful and dangerous tool to strip nonprofit organizations of their tax-exempt status. The section in question, which is similar to provisions in H.R. 9495 and H.R. 6408, would amend the Internal Revenue Code and empower the treasury secretary, and by extension the president, to designate tax-exempt organizations as “terrorist supporting” without first having to go through due process and with limited guardrails.

An effort to target nonprofit organizations disguised as a counterterrorism initiative

Stopping terrorism is vital to U.S. national security. That is precisely why federal law already makes it illegal for any person or entity to provide material support or resources to a designated foreign terrorist organization and charges financial institutions with freezing related funds. It is also why the government already has the power to suspend the tax-exempt status of any designated terrorist organization. These federal laws and national security protections have been in place for decades, with key anti-terrorism financing laws enacted or amended following the September 11, 2001, terrorist attacks.

Despite no demonstrated need for additional measures, the House reconciliation bill would give the treasury secretary new and nearly unilateral power to designate a tax-exempt organization as a “terrorist supporting organization” and suspend its tax-exempt status. Under the provision, a terrorist-supporting organization could be any nonprofit organization, charity, or labor union that the treasury secretary determines has provided material support or resources to a designated terrorist organization. That designation can primarily happen in two ways: 1) by the secretary of state under existing authorities or 2) by an executive order issued on the basis of existing federal laws, such as the Immigration and Nationality Act. Especially in light of unconstitutional overreach by the Trump administration in attacking law firms, universities, and other entities, it is not unreasonable to think such a tool could be weaponized against nonprofit groups, including climate and conservation organizations, religious charities, public health and housing nonprofits, churches, youth groups, disaster relief organizations, and so much more.

Due process is guaranteed to all Americans accused of committing a crime; for example, a warrant generally must be issued by a judge before one can be detained or have their assets frozen. But in this case, the treasury secretary would not need to go through any judicial process upfront to designate an organization as “terrorist supporting.” Instead, they could unilaterally give notice to a tax-exempt organization that they believe is providing material support or resources to a terrorist group. The treasury secretary would then have 90 days to officially designate the organization as “terrorist supporting,” a period during which the organization could try to dispute the claim with the IRS. A final designation that an organization is “terrorist supporting” would result in the IRS revoking the tax-exempt status of the organization and likely directing financial institutions to freeze the funds of that organization.

Notably, only then could the tax-exempt organization dispute the designation through the IRS’ Independent Office of Appeals—a process that seems largely futile when the head of the Treasury Department made the claim and designation. The organization could also seek a review of the designation through U.S. district court. The 90-day period the IRS is given to make the official designation could mean that a tax-exempt organization is denied the ability to seek due process in the courts for up to three months, a delay of justice that could be disastrous for the organization’s operations and employees.

Targeting organizations under the guise of anti-terrorism would also likely scare off donors and financial backers who do not want to be caught in the legal crosshairs, as has already been the case with some of the Trump administration’s attacks on nonprofits and civil society. Unduly revoking an organization’s tax status and branding them with the scarlet letter of a “terrorist supporting organization” would likely spell their end.

The latest in a string of attacks against those who don’t align with the administration’s political agenda

It is common sense that organizations supporting terrorist activity should be shut down, but the new proposed provision is unnecessary and could be too easily abused. It is also being advanced at a time when the Trump administration has shown it is absolutely willing to weaponize the IRS and abuse the tax code in order to punish organizations that do not align with its political agenda. President Donald Trump made that clear when he directed the IRS to revoke Harvard’s tax-exempt status and when he empowered the Department of Government Efficiency (DOGE) to access sensitive and private taxpayer data, including to help identify people for deportation.

It was President Richard Nixon who last tried to weaponize the IRS, and Congress subsequently tried to shore up protections for organizations and Americans. Weaponizing the IRS to target political opposition is wrong and un-American. No president should go have the authority or power to target political opposition in this manner. Perhaps it was Vice President JD Vance who said it best during an interview with Fox News: “If the IRS can go after you because of what you think or what you believe or what you do, we’d no longer live in a free country.”

Additionally, sufficient powers have already been given to the president, the State Department, and the Treasury Department to combat terrorist organizations and those that illegally provide material support and resources to them. This raises real questions about why the Trump administration and congressional Republicans are seeking to further empower a newly weaponized IRS. None of this is happening in an isolated bubble. Simultaneously, the administration has claimed that religious charities are accepting “illegal payments,” baselessly alleging that they are even partaking in money laundering; attacked numerous universities in addition to Harvard; and gone after other private companies, including law firms and media outlets, in blatant violation of their constitutional right to free speech under the First Amendment.

Conclusion

Existing anti-terrorism financing laws have been crafted to “the fullest possible basis, consistent with the Constitution, to prevent persons within the United States, or subject to the jurisdiction of the United States, from providing material support or resources to foreign organizations that engage in terrorist activities.” These laws have kept Americans safe for decades. On the other hand, the provisions of the Ways and Means reconciliation bill would not put in place additional protections for Americans; they merely represent an insidious effort to politicize counterterrorism initiatives to secure new powers to attack nonprofits and punish political enemies, with limited accountability and delayed justice.

No administration should have this kind of authority or power. We have anti-terrorism measures to keep us safe; the last thing we need is deceptive laws that will be weaponized to punish American citizens and private companies.