Ways and Means Completes Mark-Up of Terrorist Tax Exemption Revocation Bill

Yesterday, Ways and Means completed its mark-up of the Stop Terror-Financing and Tax Penalties on American Hostages Act (H.R. 9495), Section 4 of which expands Treasury's authority to revoke tax exemption for organizations that provide material support to terrorist organizations.  The bill passed Ways and Means by a vote of 38-0, an indication that  the bill has bipartisan support.  The Council on American-Islamic Relations immediately issued a statement urging the full House to reject the bill:

The Council on American-Islamic Relations (CAIR) is calling on the U.S. House of Representatives to reject the advancement of a bill that would allow any future administration’s Secretary of the Treasury to revoke the nonprofit tax status of religious and advocacy organizations without justification, charges or due process.

TAKE ACTION: URGE CONGRESS TO OPPOSE ANTI-NONPROFIT TAX BILL H.R. 9495

Today, the House Ways and Means Committee during a mark-up hearing voted to advance H.R. 9495, misleadingly titled the “Stop Terror-Financing and Tax Penalties on American Hostages Act.” This bill grants the Secretary of the Treasury excessive discretionary power to strip the tax-exempt status of nonprofits based on subjective determinations that they are “terrorist-supporting organizations.” 

While CAIR acknowledges that Representatives Lloyd Doggett (D-TX) and Don Beyer (D-VA) expressed concerns about the act’s harmful impact on due process during the committee’s markup of H.R. 9495, it was disappointing to see both ultimately join their Democratic colleagues in voting to support the bill. Yesterday, CAIR sent a private letter to members of the committee recommending they “oppose H.R. 9495 in its current form” and “at a minimum” “the harmful language of H.R. 6408 be removed from the larger bill.”

CAIR supports the primary goal of H.R. 9495—to postpone tax deadlines and reimburse late fees for U.S. nationals wrongfully detained or held hostage abroad. However, the legislation is tainted by a provision allowing for the termination of nonprofit tax status, which draws from the text of H.R. 6408 and S. 4136. These companion bills, introduced earlier this year, represent a deliberate attempt to stifle criticism of Israel and advocacy for Palestinian human rights.

In May, CAIR joined 135 civil liberties, human rights, community, faith, and privacy organizations in a letter to the U.S. Senate Committee on Finance opposing S. 4136. The letter raised several concerns, including:

• • Broad Discretionary Powers and Potential for Abuse: The bill would grant the Secretary of the Treasury broad powers to revoke the tax-exempt status of nonprofits based on subjective determinations of being “terrorist-supporting organizations.” Without sufficient accountability, this power could be misused by any administration to arbitrarily target organizations, especially in an increasingly polarized political environment.
  • Threat to Free Speech and Legitimate Advocacy: The proposed legislation poses a serious threat to free speech, as it could be used to target organizations advocating for politically sensitive issues. Recent attempts by state governors and universities to suppress Jewish and Palestinian advocacy groups underscore the dangers of such unchecked powers. The inclusion of provisions aimed at silencing criticism of Israel and advocacy for Palestinian rights, especially in light of ongoing humanitarian crises in Gaza and the West Bank, is particularly concerning. Codifying this bias would institutionalize prejudice and undermine America’s commitment to human rights and equality.
  • Due Process and Legal Concerns: The bill would allow the use of “classified information” to designate organizations as “terrorist-supporting,” without permitting them to review or challenge this evidence in court. This lack of transparency is a violation of due process and mirrors the problematic federal terrorism watchlists, which have been criticized for their arbitrary and opaque nature.
  • Existing Legal Framework: Laws already exist to address the financing of terrorism, including the Antiterrorism and Effective Death Penalty Act of 1996 and the International Emergency Economic Powers Act (IEEPA), both of which prohibit designated entities from claiming tax-exempt status. Additional legislation is unnecessary and increases the risk of abuse and legal challenges.

CAIR remains committed to challenging this legislation in all its iterations and forms, and will continue to advocate for the protection of nonprofit organizations’ rights to free speech, due process, and equal treatment under the law.

darryll k. jones