Score One for Nonprofits?

I’m still looking for silver linings in the budget reconciliation bill, folks. I might be looking too hard, and as such, I might have missed something. But bear with me.

I direct your attention to Section 501(p). Under current law, tax-exempt status can be suspended for an organization designated as a “terrorist organization” or an organization “supporting or engaging in terrorist activity” pursuant to executive order or federal law. Pretty uncontroversial.

In fact, there’s executive order on point: EO 13224, which authorizes the Secretary of the Treasury, “in consultation with the Secretary of State and the Attorney General,” to designate organizations as terrorist organizations. Again, no beef from me here.

But when the House Ways & Means Committee’s budget reconciliation bill was introduced last week, it added a definition of a “terrorist supporting organization” to Section 501(p) and defined it as any organization designated by the Secretary of the Treasury as having provided material support or resources to a terrorist organization. In essence, this would have given the Secretary of the Treasury the authority to designate such an organization without consulting with the Secretary of State and Attorney General. Whoa, Nelly!

It goes without saying that giving this heightened power to the Secretary of the Treasury might have been disastrous for the many nonprofits that find themselves at odds with the current presidential administration. Tax-exempt organizations are already on edge, given the way that the administration has cracked down on those deemed hostile to its political agenda. But gifting the unilateral power to Treasury to designate such an organization and suspend tax-exempt status based on this determination could have spelled trouble with a capital “T.”

I’m burying my lede, here, but I say “would have given” and “might have been,” because it appears that the bill advanced late Sunday no longer includes this provision. When the bill left the House Budget Committee, it appears to have been removed. I’m hope I’m not premature on this. But score one for nonprofits?

Christopher J. Ryan, Jr.

Indiana University Maurer School of Law