The legislation would allow the Secretary of the Treasury to revoke the tax exemptions of organization that provide ’material support' to terrorism.
WASHINGTON—Republicans in the U.S. House of Representatives are planning to give the Trump administration powers to revoke the tax-exempt status of nonprofit organizations that support terrorist groups like Hamas.
Hamas, a designated foreign terrorist organization in the United States, nominally controls the territory of Gaza along the Mediterranean Sea, bordering Israel and Egypt. Since 2023, the group has been at war with Israel after waging a brutal terrorist attack on Israeli civilians on Oct. 7 of that year, leading to over 1,000 civilian fatalities. The war, and subsequent Palestinian deaths in Gaza exceeding
50,000, according to the Hamas-controlled Ministry of Health, has ignited political controversy all over the world and sharply divided public opinion, including in the United States, between pro-Israeli and pro-Palestinian groups.
Many critics of Israel’s conduct during the war—including social progressives, college students, and elected officials of the Democratic Party—have been accused by Republicans of either anti-Semitism or support for terrorism, in the latter case alleging these Israel critics are acquiescent of Hamas’s conduct. In the draft text of
tax reform legislation—intended for the “budget reconciliation” process underway in Congress—the House Ways & Means Committee has included amendments that would revoke the tax-exempt status from certain nonprofit organizations that support terrorism.
“American taxpayers are rightfully outraged by what has transpired on American college campuses this past year, and they are even more disgusted to learn their tax dollars have subsidized the groups organizing this illegal activity at home and potentially terrorist organizations overseas,”
wrote the committee’s chairman, Rep. Jason Smith (R-Mo.), in a statement in 2024 demanding that the Biden administration revoke tax-exempt status of some groups critical of Israel.
“[S]everal American tax-exempt organizations are operating outside of their tax-exempt purpose, fueling antisemitic activities, breaking multiple laws, and fueling hate and chaos in America,” he added. Smith’s committee has not released a statement about the provisions in this latest draft.
The legislation would penalize any organization that provides “material support or resources” to certain listed terrorist organizations, using a definition of the phrase in the criminal law:
section 2333A of title 18, United States Code. That law defines “material support” as providing property, services, currency, monetary instruments, lodging, expert advice, training, communications equipment, and personnel to such organizations, among other things. However, medicine and religious materials are exempted.
The Secretary of the Treasury (in practice, the IRS) would determine whether any conduct qualifies as material support. Some activities—such as humanitarian aid and other support authorized by the U.S. government—are expressly exempted.
Terrorist organizations, themselves, are already
prohibited from holding tax exempt status, but since most do not operate openly or generate taxable income in the United States, it is unlikely that many of them are liable to pay taxes.
Under the legislation, there would be a process to revoke the nonprofit status of organizations supporting terrorism—the most common being the 501(c)(3) status. It would require the secretary to inform a nonprofit organization at least 90-days in advance of a decision to revoke their status and provide information supporting the decision, except if classified. These organizations would have the ability to “cure” their violations of the law by ceasing such support. They would also be able to challenge that decision through the IRS’s Independent Appeals Office or a lawsuit in a U.S. District Court.
The provision has been heavily criticized by civil liberties groups and other activist groups—many themselves being nonprofit organizations—as an attack on free speech.
“We’ve already seen the Trump administration falsely conflate students protesting in support of Palestinian rights with Hamas. ... It is not a stretch to imagine how this bill could be used to pressure universities to shut down student groups, scare human rights organizations away from working with vulnerable communities, and further stifle dissent in this country,”
wrote Kia Hamadanchy, senior policy counsel with the American Civil Liberties Union (ACLU), in a statement. “The Ways & Means Committee must strip this provision from the tax bill before it heads to the floor,” she added.
“If enacted, [the legislation] would allow the Secretary ... to unilaterally revoke nonprofit status ... without requiring the Secretary to share full evidence or ensure due process,”
wrote the National Council of Nonprofits in a statement. “This provision allows Administrations to target charitable nonprofits based on ideological grounds.”
Others were more blunt. “WE NEED CALLS NOW!”
wrote Fight for the Future, a non-profit organization that focuses on technological freedom, on social media. It shared a phone number and directed readers to call congressional offices to complain.
Many provisions of this legislation were separately passed by the House in a similar standalone bill at the end of the 118th Congress—the
H.R. 9495, the Stop Terror-Financing and Tax Penalties on American Hostages Act. The bill initially
failed to pass but was later amended and passed by a narrow vote of
219 yeas to 184 nays, with 15 Democrats voting in favor and one Republican, Rep. Thomas Massie (R-Ky.) voting against it. The bill received no action in the Senate and lapsed at the end of the 118th Congress one month later.
Several pro-Israel organizations did not immediately respond to a request for comment.
Jackson Richman contributed to this report.
