I confess that I jumped to a conclusion after seeing the scroll at the bottom of the news feeds that read, “Trump vows to remove 501©(3) status from various charities.”
And so it begins, I thought. The 47th President of the United States has not even been inaugurated and he has not only proffered up his unqualified cronies to head various cabinet positions instead of choosing people with experience and education, but he’s also targeting nonprofits. Was removing the 501©(3) status of various nonprofits ever mentioned by Trump before? If so, I missed it.
I was horrified to think of what additional changes could mean to nonprofits if their tax-exempt status were removed. One of the provisions of the 2017 Tax Cuts and Jobs Act increased the standard deduction so that most people no longer benefit from itemizing. A small charity deduction was allowed on a short-form return. Otherwise, charity deductions no longer reduce a person’s tax liability unless they gave big sums and/or had other large deductible expenses. Charities suffered.
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I feared a new Trump-initiated tax plan would affect even more of them. Upon investigation, I discovered that the bill being discussed (HR9495) is not designed to remove tax-protected status for most nonprofits. However, it appears dangerous on other fronts. In fact, the American Civil Liberties Union and other critics call it the greatest threat to freedom of speech and expression since the Patriot Act.
Entitled the “Stop Terror Financing and Tax Protection on American Hostages Act,” it would allow Trump and any future presidents to shut down nonprofits by labeling them “terrorist supporting organizations,” based simply on the allegation that they are somehow being funded by or contributing “material support” to groups on one of our federal terrorists lists.
Many lawyers and political scientists have argued that this law could be used to target humanitarian aid groups and any other group that opposes a national policy. Campus groups protesting the continued financing of Israel at the expense of Palestinians, for example, could be targeted if it is alleged that they are being supported by such nonprofits.
The most worrisome issue with this bill is that it smacks of McCarthyism by allowing a president to take action based simply on an allegation that a nonprofit has connections with international terrorist groups. There is no due process.
The other part of this bill would amend the IRS regulations to allow late filing of income taxes for families of Americans being held hostage and refund any late filing penalties that have already been assessed incorrectly. This part of the bill is redundant because there are multiple protections for military and hostage families already in the IRS rules.
For years IRS regulations have provided special extensions (for filing of taxes) for military personnel serving in combat zones. Most of these people have 180 days after they leave the combat zone to file their taxes. Additionally, the tax code allows other exclusions for pay received while working in these zones. As of October 2024, the agency issued IRS Notice 2024-72 allowing individuals affected by the Palestinian Attacks on Israel until Sept. 30, 2025, to file their taxes. Having a family member being held hostage would certainly seem to qualify categorically. Hopefully, this date will be extended if there are still people being held captive, even without HR9495.
Most Democrats who initially supported this bill before Trump was elected have now reversed their positions, fearing that this would be one more step toward authoritarianism. Said Rep. Jamie Raskin, D-Maryland: “This is an unlawful power to vest in any president, and a dangerous power to vest in a president who shows no qualms about leveling threats of retribution and revenge against his enemies.”
A vote on this bill was taken in the House on Nov. 12 under a procedure called “suspension of the rules” typically used when a bill appears to have little opposition. Since it didn’t receive the required two-thirds majority that process demands, it failed. On Nov. 21, however, the bill was reintroduced for a regular roll-call vote which only required a simple majority to pass, which it did.
The Minnesota Council of Nonprofits, which opposed the bill, speculates that the bill won’t pass the current Senate if it arrives there before the new administration and new Congress take control. But all bets are off once the Senate is in Republican hands.
