'Big Bill' Threatens Nonprofits

Late last year, the Foundation for Economic Freedom warned that a bill called the "Stop Terror-Financing and Tax Penalties on American Hostages Act" presented the danger of soft censorship of nonprofits the government does not like.

Peter Jacobsen of FEE noted that the law loudly promised income tax abatements for individuals being held hostage by terrorist organizations -- but quietly included another provision:

But then, we tack on one more thing -- no more tax-exempt status of terrorist-supporting organizations. This part of the bill has earned it a nickname: the "nonprofit killer." [bold added]

Obviously, this measure would have made it easier for the government to abuse the tax system to punish nonprofits the government disapproves of -- something even worse than the Republican Party vehemently objected to the Obama administration doing.

According to Slate, a similar measure is now part of the budget bill before Congress, and it will be much easier to pass under the same budget reconciliation process the Democrats abused to pass ObamaCare.

Supporters claim to be targeting Palestinian rights activists, but the piece warns of abuse:

The tax code already suspends the tax-exempt status of terrorist organizations, and criminal law already prohibits giving "material support" (funding, training, and other resources) to terrorist groups. But this bill needlessly creates a broad new category of "terrorist-supporting organizations" that would also lose their tax-exempt status.

Groups accused of supporting terrorism would have little meaningful opportunity to challenge their designations, especially since the bill lets the government claim they can't release information explaining a designation for reasons of national security.

Worse still, once one group is deemed a terrorist-supporting organization, the bill could be interpreted to allow the government to strip the tax-exemption of other charities that supported that group -- creating a daisy-chain effect that links liability from one group to the next to the next. And unlike the existing criminal law prohibiting material support to terrorist groups, this bill doesn't explicitly require that groups know that the money or services they provide are going to a terrorist organization. [links omitted, bold added]

The piece presents a hypothetical scenario, and then warns that conservative groups could become the targets under a future Democratic administration.

-- CAV