Gaza and Charities at War: The Terrorism Tax Exemption Revocation Bill
Earlier this week, I told you that the House passed HR 6408, a bill amending IRC 501(p). IRC 501(p) allows summary revocation of charities accused of providing material support to terrorist organizations – by that the law intends revocation without the normal audit, notices, and declaratory judgment remedies under IRC 7428. All indications are that the bill will soon pass in the Senate as well. Under existing law, tax exemption can be summarily “suspended” – a nicer word for “revoked,” actually – for the same thing the bill addresses, but with a lot less pre- and post-deprivation due process. So I am not so sure the earliest commentary on the bill is justified.
The bill is worrisome, though, considering protests spreading through college campuses and the reaction by many people. I wholeheartedly agree that stochastic terrorists masquerading as charities should be denied tax exemption. I’ve written about it. And I was against hate speech on campus ever since, as a freshman at the University of Florida, one of my roommates – not knowing I had just moved into the room about an hour earlier – told a bunch of his friends in my unnoticed presence that “those n——s are in the hallway jumping up and down.” Apparently, there were a group of Alpha Phi Alpha fraternity brothers partying down the hall. Funny how and when certain memories come back like only yesterday. I was for regulating hate speech on campus — and I used to be a university attorney — long before the right put the pejorative on efforts against hate speech by labeling those efforts “political correctness” or “liberal indoctrination.”
It is legitimate to worry that people protesting against mass starvation of Palestinians don’t also engage in tax subsidized hate speech, and certainly not outright violence. Stochastic terrorists can speak hate all they want, but they are not entitled to my support via the tax code. But student protests – even civil disobedience – is a venerable tradition. It is effective only when it exposes injustice and makes the listener uncomfortable with that injustice.
People are entitled to the safety and security of their persons, but not to a comfortable unbothered intellectual or emotional existence necessarily. So even if I agree that the terrorism tax bill is spurred by the desire to shut student protests down – to shut anybody up who faults Israel for starving Gazans – I don’t agree that the bill is a naked government power grab by people who want to shut down any all criticism of Israel or support for Palestinians.
A bipartisan bill would give the secretary of the treasury unilateral power to classify any charity as a terrorist-supporting organization, automatically stripping away its nonprofit status. The bill, H.R. 6408, already passed the House of Representatives in November, and a companion bill, S. 4136, was introduced to the Senate by Sens. John Cornyn (R–Texas) and Angus King (I–Maine) last week. In theory, the bill is a measure to fight terrorism financing. At least, that’s what sponsor Rep. David Kustoff (R–Tenn.) claimed. “I urge the swift passage of this legislation that will significantly diminish the ability of Hamas and other terrorist groups to finance their operations and carry out future attacks,” he said in a November statement.
The new bill would allow the feds to shut down a charity without an official terrorism designation. It creates a new label called “terrorist-supporting organization” that the secretary of the treasury could slap onto nonprofits, removing their tax-exempt status within 90 days. Only the secretary of the treasury could cancel that designation. In other words, the bill’s authors believe that some charities are too dangerous the label is supposed to apply to supporters of designated terrorist groups, nothing in the law prevents the Department of the Treasury from shutting down any 501(c)(3) nonprofit, from the Red Cross to the Reason Foundation.
“Some observers seem to assume that it is merely about virtue signaling and grandstanding, but careful reading of the text of HR 6408 strongly suggests something much more serious,” wrote Lara Friedman in her Foundation for Middle East Peace newsletter. “This would be: enabling a new category of legal harassment of NGOs [non-government organizations], focused in the first instance on those that engage with Palestinians or on Palestinian issues, but also enabling attacks on NGOs working in any sector and on any issues.” Supporters of the bill do seem to have pro-Palestinian student organizations in mind.
As much as I support efforts to stop starvation in Gaza by an immediate cease fire and reopening of highways through which civil society delivers aid, I am not sure the author’s criticisms are justified. He suggests that the bill expands Treasury’s ability to revoke tax exemption for groups whose views are disfavored. Or in this case, misconstrued because it not synonymous with hating Jews to decry starvation of Palestinians. Even Israeli citizens are protesting in the streets about the latter.
It’s a convoluted path winding through executive orders and state department designations, but IRC 501(p) currently allows the Service to summarily revoke tax exemption with nary any process for charities accused of providing material support to terrorists. IRC 501(p) currently requires no prior notice or statement of reasons given to the accused charity, no opportunity to cure, and no independent agency appeal. HR 6408 provides all of that. It is clearly an improvement over the lack of process currently prevailing. So the bill restricts more than it expands government fiat. It restricts, even if only modestly, the ability of Treasury and the IRS to police pure speech by summarily revoking tax exemption. It does not provide “unilateral” authority because it is triggered by State Department designation or Executive Order. Still there is no provision for judicial review and that is indeed worrisome.
I wonder, though, whether the sudden interest in fixing the constitutional infirmities in IRC 501(p) is a precursor to even more aggressive efforts to shut people up who ought to be free to shout and holler about starvation in Gaza.
darryll k. jones