Smucker Introduces “Friends of” Organization Disclosure Bill
Nativism emerged in America well before the Israeli/Hamas war. But its been stoked by the war. And we are witnessing attempts at fundamental restrictions of civil society everyday as a result. The latest effort casts suspicion on any sort of international nongovernmental organizations domiciled in America.
“Friends of” organizations are domestic tax exempt organizations that support causes in foreign lands. They are international nongovernment organizations even if they work in just one other country. IRC 170(c)(2) grants charitable contribution deductions only if donations are made to domestic organizations but it does not restrict where those donations can be spent for charitable purposes. So altruists who want to support charitable causes in foreign places with charitable contributions set up domestic organizations that intend to spend their donations in foreign lands. That’s cool because the world is not as big as we sometimes think and suffering and deprivation overseas often has a domestic impact anyway. Its also consistent with government expenditures overseas which are presumably motivated by the same reasons. A new bill introduced in Congress would add some lines to the 990 requiring exempt organizations to itemize foreign expenditures. The actual bill was not posted as of press time yesterday. But here is the press release:
Washington—Rep. Lloyd Smucker (PA-11), a member of the tax law writing Ways and Means Committee, has introduced H.R. 8290, The Foreign Grant Reporting Act.
This legislation would address a loophole in current law. Currently, certain U.S.-based nonprofits must disclose information regarding grants they make to other domestic organizations, but not grants made to foreign entities. The Foreign Grant Reporting Act would require any tax-exempt organization to include in their annual filing certain information regarding any grants they provide to foreign entities.
Information required to be reported would include: the name and address of the foreign entity, the aggregate amount of such grants, and whether the foreign entity is a charity.
“American tax law should not shield bad actor non-profit organizations who seek to fund terrorism abroad and sow discord at home. This commonsense measure would provide greater transparency into the work of non-profits by requiring the disclosure of information already required of grants made to domestic organizations. We should ensure that our tax code does not provide cover to tax-exempt organizations who funnel money abroad to organizations who wish to harm our national interests,” said Rep. Smucker.
“Rep. Smucker’s bill, the Foreign Grant Reporting Act, closes an existing loophole in the tax code by requiring tax-exempt organizations to publicly disclose grants made to foreign entities. Americans deserve to know what activities their charitable donations are funding, either at home or abroad. Recently, it was revealed at a Congressional hearing on the COVID pandemic that gain-of-function research facilitated by EcoHealth Alliance, a 501(c)(3), was conducted after EcoHealth received federal grants but then used those funds to facilitate research at the Wuhan Institute of Virology. Better transparency standards like those contained in this bill will require disclosure by tax exempt entities when foreign grants are made in the future, just as such disclosure requirements are already required domestically. This will help prevent future bad actors from using tax-exempt organizations to mislead or deceive donors about what activities their money is truly funding,” said Chairman of the Ways and Means Committee Rep. Jason Smith (MO-08).
Smucker’s legislation builds on work of the Ways and Means Committee which held hearings to examine how the nation’s tax laws have been used by foreign entities and nations hostile to the United States to promote antisemitism fueling hate on college campuses and how foreign nationals exploit the tax-exempt sector to influence U.S. elections and the media.
Unlike the just dumb bill introduced yesterday, this bill might have a chance in the current political environment.
darryll k. jones