On November 9, 2024, HR 9495, an act amending the Internal Revenue Code, was introduced in the U.S. House of Representatives. This bill seeks to terminate the tax-exempt status of organizations that support terrorism. While the goal of the legislation is to crack down on organizations that provide material support to terrorist groups, its broader implications, particularly for immigrant rights and civil rights organizations, are complex and potentially far-reaching, especially when migrants and asylum seekers are being cast as the new terrorist threat. Understanding its provisions and implications is crucial for nonprofits as they navigate this evolving legal landscape.
What is HR 9495?
While stopping and limiting the support of terrorism by tax-exempt organizations has always been a priority of the IRS through its enforcement of Section 501(p) of the Internal Revenue Code, HR 9495 (titled “Stop Terror-Financing and Tax Penalties on American Hostages Act”) introduces the concept of a “terrorist supporting organization” and gives the government significant authority in making such a determination without proportional accountability.
Key provisions of the bill include:
- Designation of Terrorist Supporting Organizations: The Secretary of the Treasury would have the authority to designate an organization as a “terrorist supporting organization” if it is found to have provided material support to terrorist groups within a three-year period.
- Suspension of Tax-Exempt Status: Once designated, the organization would lose its tax-exempt status under Section 501(c)(3), and the suspension would continue until the designation is rescinded.
- Opportunity to Respond: Organizations would have an opportunity to refute the designation by demonstrating that they did not provide material support or by certifying that they will not provide further support to terrorist organizations.
The Impact on Immigrant and Civil Rights Organizations
Immigrant rights organizations and civil rights groups, many of which are 501(c)(3) nonprofits, work closely with marginalized communities and are often tied to movements that have challenged systemic oppression. Such groups that focus on racial justice, political advocacy, and immigrant rights could be especially vulnerable to the implications of this bill. Here are some concerns:
- Broad Definitions and Overreach: The bill’s broad definition of “terrorist supporting organizations” could lead to concerns about overreach. While the bill specifically targets organizations that provide material support to terrorist groups, the terms “material support” and “resources” are often interpreted broadly in U.S. law. This could lead to ambiguity about what constitutes support, potentially implicating organizations involved in controversial or politically sensitive advocacy, particularly those critical of U.S. foreign policy or advocating for the rights of oppressed groups.
- Targeting of Legacy Civil Rights Movements: The fear of HR 9495 being misapplied to groups with historic or current affiliations to marginalized or oppressed communities is real. For instance, organizations with historical ties to the Black Panther Party—a group that was originally designated as a “terrorist organization” by the FBI in the 1970s under COINTELPRO (Counter Intelligence Program)—may be particularly vulnerable. Even though the Black Panther Party’s mission was focused on civil rights, self-defense, and community empowerment, its radical stance made it a target for government surveillance. While the modern-day groups that descend from or are inspired by the Black Panther Party (such as the Black Lives Matter movement) are focused on racial justice and reform, HR 9495 could create new risks for them. The bill’s broad designation process might subject organizations that challenge systemic racism or U.S. foreign policies to scrutiny and potentially the loss of their tax-exempt status.
- Increased Scrutiny for Advocacy Work: Groups that engage in advocacy or that support international human rights organizations may be vulnerable to heightened scrutiny under this law. In particular, organizations involved in humanitarian aid in conflict zones or those who advocate for global policy changes might find themselves at odds with the criteria for material support. The fear of designation could stifle free speech and activism, which are essential to the mission of many nonprofit organizations
- Fear of Misidentification and Due Process: The process by which an organization could be designated as a “terrorist supporting organization” includes the possibility of being informed only after the designation is made. This raises significant due process concerns, as organizations may not have sufficient time to respond or challenge the decision before their tax-exempt status is suspended. For smaller, grassroots organizations that are less equipped to navigate legal challenges, the risk of designation could be especially harmful.
Conclusion
HR 9495 is a significant piece of legislation designed to combat the support of terrorism through the suspension of tax-exempt status. While the intent of the bill is to target organizations that provide material support to terrorist groups, its broad application could have serious consequences for immigrant rights, civil rights, and social impact organizations, especially in a politically charged and uncertain time such as we find ourselves today.
As HR 9495 continues to make its way through the legislative process, organizations like the ACLU, the Center for Constitutional Rights, and other civil rights and immigrant rights groups are mobilizing to address the potential impacts. For updates on the bill visit https://www.congress.gov/bill/118th-congress/house-bill/9495.
This blog is for general information purposes only and should not be relied upon as specific legal advice. This article, or contacting Apex, does not in any way form an attorney-client relationship. If you have any questions or would like to learn more, please contact us or visit our blog.