Background
While this has been a historically unproductive Congress with the fewest bills being signed into law in decades, there has been oversight activity and marker bills being introduced that could fundamentally impact the philanthropic and charitable sector if passed.
As an example, last August, the House Ways and Means Majority released a request for information to “understand and examine the political activity of tax-exempt organizations.” In April, the House overwhelmingly passed a bill by a vote of 382-11 to give the Treasury Department the authority to dismantle any nonprofit organization they deem to have provided “material support” to terrorist groups. There is a concern that this would give the executive branch more power to potentially stifle free speech by allowing the IRS under different Administrations to investigate and harass nonprofits and target political opponents.
Ways and Means Advances Bills Aimed at Nonprofits
In May, United Philanthropy Forum joined partner organizations in sending a letter to the leaders of the House Ways and Means Committee expressing concerns about the potential impact recently introduced bills could have on the charitable sector.
The House Ways and Means Committee recently approved five bills to address the Majority’s concerns with election integrity and foreign interference. The bills that passed (H.R. 8290, H.R. 8291, H.R. 8292, H.R. 8293, and H.R. 8314) would target international activities and funding of nonprofits, donor disclosure, foreign influence on political campaign activity, funding to support election administration, and increase the penalty for disclosure of taxpayer protected information from $5,000 and five years in prison to $250,000 and 10 years for each violation.
Here is more information on a few of the bills that were passed by the Committee that should require further review:
- Foreign Grant Reporting Act (H.R. 8290) would require 501(c) organizations to include foreign grant recipients in their annual reports to the IRS. It would also require organizations to disclose this information for indirect contributions, i.e., subgrantees. It was approved unanimously. According to the analysis done by our colleagues at the Council on Foundations, this could have a negative impact on philanthropy. While private foundations are already required to disclose grant information to non-US-based organizations, this bill would expand that requirement to public charities, which could create significant risks for organizations and individuals with these groups receiving these funds doing work in sensitive areas.
- American Donor Privacy and Foreign Funding Transparency Act (H.R. 8293) would require tax-exempt organizations to publicly report aggregate contributions from foreign nationals, grouped by country. Again, a concern raised by the Council is that the bill would create a burden on nonprofits to have to verify the nationality of their donors. Currently, nonprofits must report the names and addresses of substantial donors to the IRS. Asking charities to also collect information about their donor’s nationality could mean losing the trust of their donors and the communities they serve.
From the U.S. Senate, there has not been this organized skepticism or oversight of the sector, but individual partisan bills have been introduced. For example, Senator Vance recently proposed a 50% tax on the endowments of universities that fail to remove pro-Palestinian protestors from campus.
Advocacy Opportunity: Forum Seeks Stories to Educate Lawmakers
Some questions being raised by these bills:
- Will there be a negative impact on giving and trust in the sector if groups are asking donors for their citizenship status?
- Could these efforts that seem commonsense on the face be potentially weaponized?
- How much of an administrative burden will be added to public charities and the agencies, such as the IRS, who would be required to build a public database of contributions from foreign nationals?
- Will this invite other countries to penalize US-based non-governmental organizations?
The Forum would like to invite PSO members and their foundation networks to share examples or stories, even anonymously, on the potential negative impact of either of these bills.
Should you have any questions on the bills and/or how the Forum is educating policymakers on the potential unintended consequences of these bills, please contact Matthew L. Evans.
