If you work in the nonprofit space, you’ve probably run across this term “nonprofit killer” over the last several weeks in regard to the swirling sector concerns over H.R. 9495, the Stop Terror-Financing and Tax Penalties on American Hostages Act. While phrasing as charged as “nonprofit killer” is the sort of alarmism we at Nonprofit VOTE prefer to avoid, the existential threat of a bill like H.R. 9495 to the nonprofit sector simply cannot be overstated.
One Law, Two Motives
Introduced to the House by Rep. Claudia Tenney (R-NY), H.R. 9495 has two distinct components. The first would delay IRS tax deadlines and erase penalties for Americans being unjustly held in foreign countries. This aim actually passed unanimously in the US Senate this past May in the form of the Stop Tax Penalties on American Hostages Act. This bill is currently being held in the Senate and could be signed into law if the House were to pass an identical bill. However, it’s that second “nonprofit killer” component of H.R. 9495 that makes it anything but identical.
As written, H.R. 9495 would empower the Treasury Secretary, and by extension, the President, to unilaterally designate a nonprofit as a “terrorist-supporting organization” and strip them of their 501(c)(3) tax status. The bill outlines no evidentiary standard that must be followed in making this determination; it does not require the disclosure of any evidence, allowing for the use of “classified information” that cannot be reviewed by the nonprofit being accused or challenged in court. And other than a 90-day period in which nonprofits can attempt to appeal the ruling before it goes into effect, the bill outlines no due process by which an organization can regain its status.
The loss of tax-exempt status alone is enough to shutter many nonprofits, to say nothing of the onerous legal expenses that would come with any attempt at a court challenge. But the harms run deeper than that, with the stigma and reputational damage that designation as a “terrorist-supporting” organization could have on donors, community members, and other stakeholders. Could a food pantry be designated as supporting terrorism if a single patron, unknown to the nonprofit, had loose familial ties to an international drug cartel? Could a human service organization be designated for donating humanitarian relief supplies to war-torn communities in the Middle East? Or, since there’s no requirement to provide evidence, could a nonprofit be designated as a terrorist organization for no other reason than they made someone in the administration angry? In the bill’s current form, we have no way of knowing.
Put quite simply, H.R. 9495 would amount to a death sentence for nearly any nonprofit that found itself in law’s crosshairs. This is why many are calling it a “nonprofit killer.
Passing Interest
There was an initial attempt on November 12 to fast-track H.R. 9495 with what’s called a “suspension vote”, which is meant to expedite “non-controversial” matters and requires a two-thirds majority vote of the entire House. However the suspension vote failed, so the bill passed in the traditional manner on November 21 with a simple majority of 219 to 184.
The bill currently sits in the Senate, which appears both uninterested in passing it and unlikely to even take it up before the end of the year. However, control of the Senate will officially change hands on January 3, 2025, when the 219th Congress is officially sworn in. What that Senate will do with H.R. 9495 remains a very open question. A bill like H.R. 9495 will, in all likelihood, require a filibuster-proof supermajority of 60 Senators in order to pass and move to what will be President-elect Trump’s desk. While this makes its passage more challenging, it’s absolutely not out of the question. Indeed, H.R. 9495 has already demonstrated an ability to garner support from both sides of the aisle, having passed the House on a bipartisan basis with the votes of 204 Republicans and 15 Democrats.
What Nonprofits Can Do
Remember: nonprofits and their members CAN lobby for or against legislation as 501(c)(3) organizations. And in cases like H.R. 9495 where legislation represents an existential threat to a nonprofit’s mission and existence, we’d argue that the sector should take a strong stand against its passage. Many already have and it’s made a big difference. And for evidence of this, look no further than H.R. 9495 itself, receiving 54 fewer yays during that second vote on November 21, following substantial pushback from many constituents, civil society groups, and nonprofits.
We cannot and should not allow ourselves to be paralyzed by anxieties of potential threats ahead. When it comes to H.R. 9495, Nonprofit VOTE joins with others to voice our opposition to any further advancement of this bill in its current form.
