House Passes Bill Targeting Tax-Exempt Status of Nonprofits Supporting Terrorism

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The U.S. House of Representatives approved H.R. 9495, the Stop Terror-Financing and Tax Penalties on American Hostages Act, by a vote of 219–184 on Thursday. The legislation aims to empower the Treasury Department to revoke the tax-exempt status of nonprofits supporting terrorism. However, critics warn the bill could be weaponized to target civil society organizations and dissenting voices.

The bill raised a few eyebrows not for its implications but more for the bipartisan support it received. Unexpectedly, 15 Democrats joined Republicans in passing the measure. This decision is particularly striking given the potential for full utilization under the incoming Trump administration, which has made no secret of its willingness to target critics. President-elect Donald Trump has repeatedly promised to crack down on opposition, and this bill could give his administration a powerful tool to silence dissent.

What House Bill 9495 Means for Nonprofit Organizations

H.R. 9495 grants the Treasury Secretary the authority to designate organizations as nonprofits supporting terrorism without requiring detailed evidence. Once designated, a nonprofit loses its tax-exempt status and has 90 days to appeal. This process, however, does not mandate full transparency, leaving nonprofits in the dark about the evidence used against them. Critics argue this lack of clarity could lead to politically motivated decisions.

Proponents of the bill claim it is a necessary step to ensure that taxpayer money does not indirectly support terrorism. However, civil liberties advocates, such as the American Civil Liberties Union (ACLU), warn that the legislation’s broad language could easily be misapplied. Organizations advocating for contentious causes, such as pro-Palestinian rights or racial justice, might find themselves labeled as “nonprofits supporting terrorism” based on tenuous or politically charged accusations.

The potential scope of the bill has alarmed many in the nonprofit sector. Universities, civil rights groups, and even news outlets could be labeled as nonprofits supporting terrorism. This designation could damage their operations irreparably, even if they eventually clear their name. This concern is compounded by the precedent of other countries, like Russia, where anti-terrorism laws have been used to suppress dissent.

Democrats Split Over the Vote

While the vast majority of Democrats opposed H.R. 9495, 15 representatives, including Henry Cuellar of Texas and Jared Golden of Maine, voted in favor. Their support surprised many, especially given the bill’s potential to undermine organizations central to Democratic advocacy. Critics within the Democratic Party, such as Representative Rashida Tlaib, have been vocal about the dangers of the legislation. Tlaib labeled it “unconstitutional” and argued it could stifle legitimate dissent, especially when the opposition get tagged as nonprofits supporting terrorism.

This divide within the Democratic Party highlights a broader debate about balancing national security and civil liberties. Some argue that supporting such measures reflects a willingness to compromise on democratic principles in the name of combating terrorism. Others see it as an acknowledgment of the complex and evolving nature of global security threats.

The Trump Administration’s Potential Use of the Law Targeting Nonprofits Supporting Terrorism

The incoming Trump administration adds a new layer of urgency to the debate surrounding H.R. 9495. Trump has previously shown a willingness to use government power to target perceived enemies, including nonprofits and advocacy groups critical of his policies. The bill’s passage could provide a legal framework for dismantling organizations that oppose his agenda.

Civil liberties advocates worry that Trump could use the law to undermine organizations advocating for progressive causes, such as racial equity, climate justice, or Palestinian rights. The bill’s vague definitions and lack of transparency could make it an effective tool for suppressing opposition while avoiding direct legal challenges.

But Will H.R. 9495 Amount to Anything?

The bill now moves to the Senate, where its fate is uncertain. While Democrats hold a slim majority, the measure could gain traction if moderate senators view it as a necessary step against terrorism. Even if it fails to pass in the current session, the bill could resurface under the Trump administration, especially given Republican control of the House and Senate starting in January.

Organizations across the nonprofit sector are preparing for a prolonged fight. Advocacy groups warn that even the discussion of such legislation has a chilling effect, deterring nonprofits from engaging in bold or controversial work. The broader debate over H.R. 9495 reflects growing tensions between national security priorities and the preservation of democratic freedoms.

Wil House Bill 9495 make it harder for nonprofits to apply for or maintain tax-exempt status? More importantly, will the new restrictions affect nonprofits as a whole? Tell us what you think.