The U.S. House of Representatives this week fell just 14 votes short of passing H.R. 9495, dubbed the “Stop Terror-Financing and Tax Penalties on American Hostages Act.”

The bill would have allowed future presidents, including the incoming Trump administration, to strip nonprofit organizations of their tax-exempt status if they are deemed to be providing “material support or resources” to a terrorist group. The government could take this action without due process and without having to jusify its action, and without any providing any evidence to prove its allegations.

The measure’s grant of unbridled power was broadly opposed by a broad range of charitable organizations, including 130 tax-exempt groups that joined in a letter to Congress in September.

The potential for abuse under H.R. 6408 is immense as the executive branch would be handed a tool it could use to curb free speech, censor nonprofit media outlets, target political opponents, and punish disfavored groups across the political spectrum. Moreover, the addition of this authority to the tax code would allow the IRS to explicitly target and harass domestic nonprofits using its investigative authority. It is also not hard to imagine a future administration using this power in far broader circumstances that have nothing to do with the hostilities in Gaza.6 And as more recent congressional oversight efforts make clear, these efforts are part of concerted attack on civil society that is targeted at more than just groups involved in the campus protests regarding Gaza.

The executive branch could use this authority to target its political opponents and use the fear of crippling legal fees, the stigma of the designation, and donors fleeing controversy to stifle dissent and chill speech and advocacy.

In a joint statement, the Council on Foundations, Independent Sector, National Council of Nonprofits, and United Philanthropy Forum, also spelled out their reasons for strongly opposing the measure.

This legislation would allow the Secretary of the Treasury to designate section 501(c) nonprofits as “terrorist supporting organizations” at the Secretary’s discretion, without requiring the Secretary to share their full evidence or reasoning with accused nonprofits. Furthermore, the legislation runs counter to constitutional due process protections by placing the burden of proof on the accused organization and providing only 90 days for organizations to demonstrate their innocence before revoking their tax-exempt status.

Even if the Secretary’s decision were successfully reversed, designees would risk irreparable damage to their operations and reputation. The implication that an organization could be associated with terrorism could cause it to lose not only access to banks and other financial institutions but also the trust of donors and the communities it serves. In the end, the beneficiaries of nonprofits’ work would suffer the most.

In addition, under H.R.9495, law-abiding organizations could be stripped of their tax-exempt status for providing humanitarian assistance in conflict zones even when operating under Office of Foreign Assets Control authorizations. These authorizations protect nonprofits under sanctions law, but not under tax law.

It is already illegal to provide material support to foreign terrorist organizations. Organizations suspected of violating the law are rightly subject to criminal investigation and prosecution. Section 4 of H.R.9495 may achieve the goal of expediting these cases, but it does so at the expense of fairness and transparency. If the investigation process needs refinement or expedition, we stand ready to work with policymakers on changes that protect due process rights of nonprofit organizations and guard against future abuse.

As reported by The Intercept:

Under the bill, the Treasury secretary would issue notice to a group of intent to designate it as a “terrorist-supporting organization.” Once notified, an organization would have the right to appeal within 90 days, after which it would be stripped of its 501(c)(3) status, named for the statute that confers tax exemptions on recognized nonprofit groups.

The law would not require officials to explain the reason for designating a group, nor does it require the Treasury Department to provide evidence.

“It basically empowers the Treasury secretary to target any group it wants to call them a terror supporter and block their ability to be a nonprofit,” said Ryan Costello, policy director at the National Iranian American Council Action, which opposes the law. “So that would essentially kill any nonprofit’s ability to function. They couldn’t get banks to service them, they won’t be able to get donations, and there’d be a black mark on the organization, even if it cleared its name.”

Case’s Congressional website does not provide any explanation for why he joined a minority of Democrats in voting for the bill. I’m hoping Rep. Case will take another look at the issues involved when the matter comes up again in the new congress, as it surely will.