Will Trump Be a Civil Society Dictator?
The Intercept, a tax-exempt online newspaper, has a worrisome story out last Sunday. The alarming headline says, “Congress is About to Gift Trump Sweeping Powers to Crush His Political Enemies.” The story reports that the House has fast-tracked HR 9495, a bill that will allow the the Treasury Secretary to revoke tax exemption for charities designated as terrorist supporting organizations.
Up for a potential fast-track vote next week in the House of Representatives, the Stop Terror-Financing and Tax Penalties on American Hostages Act, also known as H.R. 9495, would grant the secretary of the Treasury Department unilateral authority to revoke the tax-exempt status of any nonprofit deemed to be a “terrorist supporting organization.” The resolution has already prompted strong opposition from a wide range of civil society groups, with more than 100 organizations signing an open letter issued by the American Civil Liberties Union in September.
With Trump set to return to office, it’s more urgent than ever to beat the legislation back, said Kia Hamadanchy, a senior policy counsel at the ACLU. “This is about stifling dissent and to chill advocacy, because people are going to avoid certain things and take certain positions in order to avoid this designation,” Hamadanchy told The Intercept. “And then on top of that you have a president-elect who’s spent a lot of time on the campaign trail talking about punishing his opponents and what he wants to do to student protesters — and you’re giving him another tool.”
The Bill needed 265 votes (two-thirds) to pass under the special fast track rules. In a strange twist of politics, the Bill ended up dying Tuesday night by a vote a vote of 256 in favor, 145 against. We should expect it will be revived under the normal rules requiring a simple majority when Congress votes on whether to extend the Tax Cuts and Jobs Act next year.
Lord knows I appreciate that too many politicians throw around the word “terrorism” too often in an attempt to shut Civil Society up. That’s what most of the wannabe dictators are doing. I’ve railed about it on this blog and I have received a smattering of hate mail in response. You would have to live under a rock not to understand that students and nonprofit organizations that protest against Israel’s conduct in Gaza are almost invariably labeled terrorists or terrorist supporters whether that label really fits or not. I usually push back because history proves that in war time people lose their damn minds, labeling anybody who questions anything about the war effort a traitor, a terrorist, a terrorist supporter or worse. Here is what Ways and Means Chairman Jason Smith said about the Bill yesterday as the House opened floor debate:
This legislation would also close the IRS loophole that terrorist organizations have exploited for years. It builds on the Committee’s anti-terror financing efforts by prohibiting organizations from maintaining tax-exempt status if they are found to have provided material support or resources to a terrorist or terrorist-supporting organization within a three-year period. “This issue is not theoretical. Let me provide two examples. One U.S. based tax-exempt organization hired a so-called journalist in Gaza, who was a member of Hamas and was literally holding Israelis taken hostage on October 7 in his own home. He was paid using tax-exempt funds. That organization is still an operating tax-exempt organization here in the U.S. today. Another tax-exempt organization based in the U.S. financially sponsored and funded a foreign group that was just designated by Treasury as a sham charity and a funder of terrorism. The IRS has yet to revoke the sponsor’s tax-exempt status.
Smith makes assertions that are still in dispute and I am not qualified to be the arbiter. His rhetoric explains why the ACLU and so many other civil libertarians are worried. But I gotta tell you. The people wringing hands and gnashing teeth about this Bill just don’t understand current law. If anything, the Bill improves on a bad situation. Because under current law, the Treasury Department already has the power to designate a charity as a supporter of terrorism and to summarily revoke the charity’s tax exemption. It did so just two weeks ago. Oh sure, IRC 501(p) only authorizes “suspension,” but that “suspension” is tantamount to revocation. Let’s just be honest about it. And current law requires Treasury to “consult” with State and DOJ before doing so. “Consult” only means “to ask the advice or opinion of” or to “consider.” Worriers think the Bill gives Treasury the unilateral authority without even having to consult. But there is a good argument that Treasury would still have to consult with the same people under the Bill. Because the Bill authorizes Treasury to revoke tax exemption for organizations that support organizations previously designated under current law. And, as explained below, current law requires consultation. Here is part of HR 9495:
“(B) TERRORIST SUPPORTING ORGANIZATION.—For purposes of this paragraph, 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 (within the meaning of section 2339B of title 18, United States Code) to an organization described in [IRC 501(p)(2)] (determined after the application of this paragraph to such organization) in excess of a de minimis amount. [emphasis added]
The Bill allows Treasury to designate a supporter of organizations previously determined to be terrorists by a separate process requiring consultation. IRC 501(p) has never ever been a model of clarity. It takes a very close reading to know that the Bill is an improvement so far as due process is concerned. Even under current law’s consultation requirement, Treasury need only pick up the phone or shoot a group email to State and DOJ. That’s pretty much it, unless consult means get “advice and consent.” I expect Congress would have said so if that were the case. It did not.
IRC 501(p) is hardly a model of clarity. But it currently allows Treasury to suspend exemption for any group designated (1) under the Immigration and Nationality Act, (2) pursuant to executive order issued under the International Emergency Economic Powers Act, or (3) pursuant to an executive order issued under any other federal law if the executive order refers to IRC 501(p). George W. Bush signed Executive Order 13224 on September 23, 2001 pursuant to IEEPA. It authorizes Treasury to designate as a terrorist supporter:
[organizations] determined by the Secretary of the Treasury, in consultation with the Secretary of State and the Attorney General [to engage in activities that] (i) . . . assist in, sponsor, or provide financial, material, or technological support for, or financial or other services to or in support of, such acts of terrorism or those [organizations] listed in the Annex to this order or determined to be subject to this order;
IRC 501(p) is just so hard to follow but right now it gives Treasury more power than Treasury would have under the Bill. IRC 501(p) incorporates and requires readers to find several other non-tax laws, and then hunt down executive orders issued pursuant to those other laws. But once you arrive, it is pretty clear. By the way, Trump amended EO 13224 by EO 13886 but that amendment did not change Treasury’s current authority to designate an organization as a terrorist supporting organization. If current law already provides the authority, why amend it? The original sponsor of the HR 9495 said he was not ever thinking about shutting down student or nonprofit protests against Israel’s conduct of the war in Gaza. He says that he started working on the bill before those protests blew up.
Kustoff ridiculed the notion that he was seeking to shut down campus speech, noting that he and Schneider introduced the bill in November, before the campus protests became a major issue. “When we were working on this bill with Congressman Schneider, I wasn’t even thinking about campus protests,” he said. The intent of the House committee that advanced the bill, he said, “is specifically to go after or to look at the groups that provide material support to terrorist groups or terrorist organizations.”
Fair enough, but in light of our collective lurch to the far right one can’t help being worried. Not just for progressive nonprofits today, but conservative nonprofits tomorrow when we lurch back to the left. The political pendulum is always swinging, history shows. The counter to that expressed worry is that Treasury already has the authority we think might be abused. In fact, current law makes abuse much easier because current law provides none of the admittedly scant due process provided for in the Bill – notice of impending revocation, a “summary” of the reasons but not the evidence itself, 90 days to plead the case, though only in writing, and an internal post revocation 7803 appeal, again presumably without access to evidence in support of revocation. None of that exists under current law.
Notwithstanding Kustoff’s dismissal of the abuse potential, one must also wonder why the bill is suddenly being fast-tracked. Maybe Treasury has indicated a reluctance to use current law because of the complete lack of process. That might be the case even though Treasury just recently relied upon current law to “suspend” a domestic organization’s tax exemption. With no process at all other than a notice in the Federal Register. Revocation is still a rare event and perhaps by adding even minimal process, Treasury might be emboldened to revoke tax exemptions more often. Or legislators might have a better reason to haul Treasury in if it doesn’t. Or, just maybe, the sponsors recognize constitutional issues in current law and are trying to balance the needs of Civil Society with national security.
Current law doesn’t sufficiently protect exempt organizations from political reprisals but the bill does not make the situation worse. Trump may yet become a dictator. “Just on day one,” he said. But this Bill would not have helped that effort. Quite the opposite. If anything, the Bill makes a bad situation a little less unconstitutional.
darryll k. jones