Nonprofit leaders brace for possible targeting by the Trump administration after tax measure advances in Congress

Yahoo

17-05-2025

A House measure that would make it easier to yank the tax-exempt status of nonprofits the Trump administration deems as supporting terrorism marks the latest effort by the president and his Republican allies to hobble organizations that oppose his agenda, some nonprofit leaders argue.
The provision comes as President Donald Trump has used the powers of his office in extraordinary ways to target top law firms, elite universities and other perceived political enemies. Last month, for instance, Trump directed his Justice Department to launch a probe of ActBlue, the main fundraising platform for Democratic candidates and liberal causes.
The language – added this week by the House's tax-writing committee to the massive 'One Big Beautiful Bill Act' that's a top priority for Trump – would allow the Treasury secretary to suspend the tax-exempt status of organizations the administration says are 'terrorist supporting.'
More than 200 groups – ranging from the American Library Association to the Sierra Club – recently signed onto a public statement urging the House to remove the provision. They say it's a tool for the president to take aim at his opponents.
'We have seen this administration use every lever of power they have been able to grab to target the people they see as their enemies,' said Cole Leiter, executive director of Americans Against Government Censorship, one of the groups objecting to the House language. 'This is a broad-based weaponization of government, and this is only the latest manifestation of that.'
Nonprofit groups fear more is on the way – with a White House deadline looming for government agencies to identify large publicly traded corporations, foundations and nonprofits, universities and state and local bar and medical associations for potential civil investigations.
In a statement, a White House official contended that Trump is operating within his rights and the law.
'President Trump will always stand for law and order, ending the weaponization of the legal system, and rooting out fraud in the federal government,' said White House spokesperson Harrison Fields in an email to CNN, echoing the president's familiar refrain that the Biden administration used the judicial system against him when Trump was out of office.
'Every action he has taken in his second term reflects these priorities and is authorized by the Constitution,' Fields said. 'Outside groups that ignored the previous administration's egregious legal abuses against President Trump have no credibility today.'
The tax provision, recently added to a nearly 400-page legislative proposal by the GOP-controlled House Ways and Means Committee, hews closely to language in a bill written by New York Republican Rep. Claudia Tenney that the House approved in the last Congressional session but did not pass the Senate.
It would allow the Treasury secretary to suspend the tax-exempt status of charities the secretary determines have provided 'material support or resources' to an organization the government has designated as a terrorist organization.
Aides to Tenney and Ways and Means Chair Missouri Rep. Jason Smith did not respond to CNN's inquiries about the measure. During floor debate on the Tenney bill last November, Smith said lawmakers have a 'duty to make sure that taxpayers are not subsidizing terrorism.'
Groups opposing the measure said it lacks adequate safeguards to protect organizations' due-process rights.
Kia Hamadanchy, a senior policy counsel with the ACLU, noted that it already is illegal to provide material support to a terrorist organization. The new provision, Hamadanchy said, is problematic because gives the Treasury secretary exclusive discretion to designate a group as terrorist-supporting and would allow the agency to suspend a nonprofit's tax-exempt status 'before you've had a chance to go before a neutral decision maker like a judge.'
Lisa Gilbert – the co-president of the liberal watchdog group Public Citizen – said she fears organizations with international networks could unwittingly become ensnared should the provision become law.
'Think about foreign humanitarian aid, for example, or groups that receive funds from foundations that are not solely based in the United States,' he said. 'There is a lot of activity that could be swept up.'
The White House referred questions about the bill's language to the Treasury Department. A Treasury spokesperson declined to comment.
The overall bill currently faces a rocky path in the House, although the chamber's Republican leaders have said they want to bring it to the floor for a vote next week. A group of GOP hardliners on Friday blocked its passage in a key committee as they demanded steeper cuts and changes to its Medicaid provisions.
If the bill passes the House, organizations opposed to the language regarding nonprofits' tax status say they will fight to kill it in the Senate.
The legislation deals with a range of the president's priorities, from tax cuts to immigration enforcement. But to pass it through Congress, where Republicans hold slim majorities in both chambers, GOP leaders are relying on a tool called budget reconciliation – allowing a simple majority to approve it without any Democratic votes.
Under strict Senate rules, however, the chamber's parliamentarian must determine whether its provisions have an actual impact on the budget, not merely an 'incidental' one. An early analysis by a congressional joint taxation panel found the provision has a 'negligible' effect in revenue, buoying opponents' hopes that it could be stripped from the larger bill in the Senate.
Federal law bars the president from ordering tax investigations of specific people or organizations, but Trump has publicly threatened to revoke the tax-exempt status of Harvard University for refusing to accede to his policy demands.
In remarks last month about Harvard's tax status, Trump indicated other organizations could be targeted, and singled out Citizens for Responsibility and Ethics in Washington, or CREW, a nonprofit watchdog group that tackles public corruption and has sued the Trump administration over several of its actions.
Some nonprofit leaders now are warily watching for other potential administration moves, arising from executive order that Trump signed January 21, aimed at encouraging the private sector to end what the administration deems as 'illegal discrimination.'
Among other things, the order directed agencies to identify up to nine potential targets among foundations, corporations, colleges and other entities, for 'civil compliance' probes as part of the administration's effort to root out diversity, equity, inclusion and accessibility policies. Groups that could be subjected to scrutiny include what the order calls 'large' nonprofits and associations, foundations with assets of at least $500 million and colleges and universities with endowments that top $1 billion.
Attorney General Pam Bondi already has directed the department's Civil Rights Division to review whether universities are trying to skirt a 2023 Supreme Court ruling that said schools could no longer take race into consideration as a specific basis for granting admission. A Justice Department task force aimed at combatting antisemitism on campuses is also investigating nearly a dozen universities and the entire University of California system.
Trump's Jan. 21 order also calls on the attorney general to issue a report to the White House recommending actions within 120 days – a deadline that will arrive next week. But it's not clear whether lists of potential targets have been assembled or will be released publicly.
A DOJ spokesperson did not respond to an inquiry about the report.
Even so, leaders of nonprofit groups are having conversations with their lawyers and looking for ways to avoid risks and prepare for potential audits, several people familiar with internal discussions tell CNN.
'People are trying to brace for it,' said Gilbert of Public Citizen. 'It's very unclear what it will mean to be on a list in Trump's America.'
CNN's Hannah Rabinowitz contributed to this report.