Nonprofit Proposal: House Vote Threatens Charities
The House is poised to vote on a proposal giving the Treasury Secretary unprecedented power: the ability to revoke a U.S. nonprofit’s tax-exempt status. This controversial move, if passed, could silence organizations deemed “Terrorist Supporting Institutions,” sparking immediate backlash from civil liberties groups and hundreds of nonprofits. Critics are sounding the alarm, warning that the bill—a rehash of a previously rejected measure—threatens free speech and lacks due process, possibly targeting groups advocating for vulnerable communities, including those focused on racial justice, LGBTQ rights, and human rights. The bill’s lack of transparency, coupled with an appeals process, leaves nonprofits vulnerable to politically motivated attacks. News Directory 3 is following this crucial story closely. Discover what’s next regarding this serious threat to nonprofit organizations and their crucial work.
House Bill Targets Nonprofits’ Tax-Exempt Status
Updated May 27, 2025
The House Ways and Means Committee advanced a proposal this week that could allow the Treasury Secretary to unilaterally revoke a U.S. nonprofit’s tax-exempt status if deemed a ”Terrorist Supporting Institution.” Critics argue this measure grants excessive power to the executive branch and poses a significant threat to nonprofit organizations nationwide.
The proposal, incorporated into the House’s budget reconciliation bill, mirrors a previously rejected House bill. Organizations like the ACLU and hundreds of other nonprofits voiced strong opposition to the original bill last fall. The Senate rejected the bill, and opponents are urging the house to do the same when the budget reconciliation bill is voted on.
Opponents contend the bill’s true aim isn’t to combat terrorism, as existing laws already address that. Instead, they say it seeks to stifle free speech by discouraging nonprofits from working with or advocating for marginalized groups, such as Venezuelans or Palestinians, who might be linked, even tangentially, to organizations the U.S.considers terrorist groups. advocates for racial justice, LGBTQ rights, immigrant communities, climate action, and human rights could also be affected.
Critics also point out the bill lacks due process protections for nonprofits. The Treasury Secretary wouldn’t be required to disclose the reasons or evidence behind a “Terrorist Supporting Organization” designation. This, coupled with a solely after-the-fact appeals process, places a heavy burden on nonprofits to prove their innocence.
“the authority to target its political opponents and use the fear of crippling legal fees, the stigma of the designation, and donors fleeing controversy to stifle dissent and chill speech and advocacy.And while the broadest applications of this authority may not ultimately hold up in court, the potential reputational and financial cost of fending off an investigation and litigating a wrongful designation could functionally mean the end of a targeted nonprofit before it ever has its day in court.”
The proposal also creates a loophole in current tax law, which prohibits high-level officials from ordering IRS investigations based on policy disagreements.This new measure could have a chilling effect on nonprofits for years to come.
What’s next
With the House expected to vote on the budget reconciliation bill soon, the fate of this controversial proposal remains uncertain. Opponents are intensifying their efforts to persuade lawmakers to reject the measure, emphasizing its potential to undermine free speech and due process for nonprofit organizations.