Correction: A previous version of this article incorrectly stated that the proposed tax provisions would lower the threshold for itemizing charitable deductions. Rather, they would allow charitable deductions by non-itemizers. We regret the error.
Update 05-20-2025: As reported by NPQ, the measure in question was dropped from the Republican-led legislative package. Read more …
Nonprofit leaders are raising alarms over various provisions included in new GOP-led tax legislation, including one that would grant unilateral power to the US treasury secretary to deem a nonprofit to be a “terrorist supporting organization.” The organization’s tax-exempt status could then be stripped at the sole discretion of the secretary, who is appointed by the president.
The provision is one of several included in the tax package that nonprofit leaders say could harm the sector and its ability to provide services to millions of Americans.
The measure regarding tax-exempt status is reminiscent of a recent move by legislators last year, HR 9495, which would have granted the treasury secretary essentially the same powers, and which was seen by many across the nonprofit sector as a means to punish nonprofits whose policies or practices fall out of line with the Trump administration’s social agenda.
The House Ways and Means Committee released the text of the new provisions earlier this week, which reads, in part:
The term “terrorist supporting organization” means any organization which is designated by the Secretary as having provided, during the 3-year period ending on the date of such designation, material support or resources to [a terrorist organization] (380–381).
Nonprofit leaders are warning again that such legislation essentially ignores due process and could allow appointed officials to target nonprofits arbitrarily—and according to arbitrary standards.
In a statement provided to NPQ, Diane Yentel, president and CEO of the National Council of Nonprofits (NCN)—which has sued the Trump administration over other measures targeting nonprofits—called the provision dangerous:
This tax bill introduced by House Republicans is a direct assault on organizations that serve the most vulnerable Americans, stepping in to provide support in overlooked communities. Families that rely on church food pantries, veterans that depend on nonprofits for mental health services, moms and babies that receive low-cost health care, and domestic violence survivors living in shelters are all harmed when Congress denigrates nonprofits and makes their work more difficult to do.
The bill hands unchecked power to [Treasury] Secretary Bessent to punish organizations that do not fall in line with the administration’s ideology, by labeling them as terrorist-supporting groups without due process, without a third-party investigation and without public evidence—all while concealing details under the pretext of national security.
In another statement, Cole Leiter, the executive director of Americans Against Government Censorship called the bill “dented power grab that gives any administration—Republican or Democratic—the power to punish any group that doesn’t fully align with its political agenda.”
“This tax bill introduced by House Republicans is a direct assault on organizations that serve the most vulnerable Americans.”
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Leiter warned that the bill would give Treasury Department appointees the authority and the ability to strip critical groups like churches, food banks, and charities of their tax-exempt status and potentially cause long-term reputational damage to organizations.
The new measure is sure to draw the quick attention of nonprofits and advocates, who rallied against the similar GOP-led measure, HB 9495, last fall.
Matt Watkins, principal of Watkins Public Affairs, posted on LinkedIn:
In practice, this creates serious risk for nonprofits engaged in contentious but lawful work: environmental groups challenging fossil fuel infrastructure, organizations supporting Palestinian rights, protest networks, or those working in international conflict zones.
The “terrorism” provision is just one of several that nonprofit leaders say could pose significant harm to the sector, taking away critical resources and essential services at a time when they may be most needed and as thousands of nonprofits have seen federal funding cut or threatened.
“[The bill is] an unprecedented power grab that gives any administration—Republican or Democratic—the power to punish any group that doesn’t fully align with its political agenda.”
NCN noted on its website that the proposed legislation contains various other provisions that would hurt nonprofits, noting the draft bill:
- Increases and expands Unrelated Business Income Tax (UBIT) to include any qualified transportation fringe benefit, such as transit benefits or parking benefits, for charitable organizations. The provision also carves out an exception for church-affiliated organizations. In essence, this provision applies an income tax on an expense. This provision was previously passed in the 2017 and subsequently repealed due to the confusing nature of applying an income tax on an expense and difficulty of quantifying the expense of certain benefits such as the cost of a parking spot already owned by a charitable organization. [emphasis in original]
- Increases taxes on large private university endowments. The Administration has continued to target universities on ideological grounds, and the President has threatened to rescind nonprofit status for Harvard University and other institutes of higher education.
- Creates a 1-percent floor for charitable contributions made by corporations and allows such corporations to carry forward the tax benefit for 5 years.
- Extends excise tax on executive compensation for all employees earning $1 million or more.
- Temporarily increases the standard deduction. This will further limit the number of tax filers who itemize their deductions, including for donations to charitable organizations.
The bill would also, Yentel noted on LinkedIn, “gut Medicaid, exclude certain low income families from the Child [T]ax Credit, and cut food assistance to hungry families.”
NCN voiced support, however, for one provision in the proposed legislation, which would allow for charitable deductions by non-itemizers, providing a tax incentive to more average taxpayers to make charitable donations.
“It’s terrific that it’s in there,” NCN Chief Communications Officer and Chief Operating Officer Rick Cohen told NPQ Monday. “But the problem is it’s offset by so many damaging provisions.”
The House Ways and Means Committee has scheduled a markup of the bill Tuesday, May 13, at 2:00 pm EST. The legislation is expected to quickly move through the House of Representatives, but faces a stronger chance of defeat in the Senate. Advocates are urging nonprofit groups to call upon their representatives in Congress to oppose the harmful provisions of the bill.
On its website, the NCN is encouraging people concerned about this bill to call upon their Representatives and Senators to:
- Oppose granting the Executive Branch the unprecedented authority to revoke an organization’s nonprofit status without due process.
- Oppose new or expanded taxes on nonprofit organizations–including private foundations.
- Support and expand tax incentives for charitable giving, particularly legislation like the Charitable Act, which was introduced by Sen. James Lankford (R-OK) and Rep. Blake Moore (R-UT). This legislation would create a non-itemizer tax incentive for charitable donations to nonprofit organizations.
