Measure would strip tax exempt status from nonprofits deemed supporters of terrorism : NPR

LEILA FADEL, HOST:

A bill that passed the House last week would allow the Treasury Department to scrap the tax-exempt status of any nonprofit it decides is supporting terrorism. And it’s raising alarm among charities and nonprofits who say, if it becomes law, it could be abused to silence and punish activists in civil society. Now, this bill probably won’t become law this year. It still has to pass the Democratic-controlled Senate and be signed by the president. But next year’s Republican-controlled Congress and President-elect Trump could try again.

To learn more about the concerns from nonprofits around this bill, I’m joined by Beth Gazley. She’s a professor at Indiana University who studies nonprofit management and policy. Good morning. Thanks for being on the program.

BETH GAZLEY: Good morning, Leila.

FADEL: So this bill is called the Stop Terror-Financing and Tax Penalties on American Hostages Act. And that title – I mean, that sounds like a good thing – going after terrorism. It got almost unanimous support from the Republicans in the House – 15 Democrats. But what does this law do exactly that’s making nonprofits and charities worried?

GAZLEY: Well, it puts the power to revoke a tax-exempt status of a U.S. charity in the hands of a political appointee, the Treasury secretary. So it bypasses the due process rights that charities already have under the Internal Revenue Service apparatus. There’s a 90-day, quote-unquote, “curing” period. But that’s not the same as having the full administrative review and the full due process rights that charities have been entitled to.

FADEL: And why does that matter? I mean, if it goes into the hands of a political appointee, how does that change the calculation?

GAZLEY: I think the main thing people are concerned about is the amount of self-censorship that might happen. So universities – C3s – have student organizations that have been supporting Palestinian rights. They’ve already been threatened by congressional legislators for supporting these student organizations. And they’re not really providing material support. They’re just allowing student organizations a voice like any other advocacy organization might.

FADEL: So really, it might have a chilling effect on free speech. I mean, because there are already material support laws. It’s a felony to provide material support to a foreign designated terrorist organization, right?

GAZLEY: Yes, that’s correct. And we’ve had those laws on the books since after 9/11 for over 20 years. And so, you know, a lot of observers have said, well, what does this add? It adds a much quicker and much more effective political tool to the arsenal that the federal government already has. These kinds of efforts have been already tested at the state level by many conservative states. They’ve gone after migrant services, environmental advocacy, bail funds, nonprofit news media sources. And so this is about a lot more than Palestinian organizations.

FADEL: And so the concern here then is that an administration could use the law for its own political goals, whether it’s to stop certain types of speech or go after opponents or things it didn’t like.

GAZLEY: Yeah. We see this as a ideological tool, a partisan tool. We certainly see it as undemocratic, given the free speech rights that charities and advocacy organizations have.

FADEL: I’ve definitely worked in a lot of countries – frankly, not democratic countries – that have used terrorism laws to go after dissenters. Would organizations, if this bill were to become law, have recourse if they were accused of supporting terrorism by the Treasury?

GAZLEY: Yes, they have recourse, but they don’t have the kind of recourse that’s really going to be effective here. First of all, they’ve been delegitimized. They’ve got the terrorist label attached to them now. That means their funding sources are going to be concerned about continued support. And these are organizations that don’t necessarily have legal defense budgets. So they’re going to be fighting an uphill battle. That’s why it’s viewed as a civil liberties disaster with much wider implications.

FADEL: Beth Gazley is a professor at Indiana University who studies nonprofit management and policy. Thank you so much, Beth.

GAZLEY: Thank you.

(SOUNDBITE OF MUSIC)

Copyright © 2024 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.