House Approves Controversial Bill That Targets Nonprofits Labeled as ‘Terrorist’ by Treasury

In a controversial move, the U.S. House of Representatives has passed the Stop Terror-Financing and Tax Penalties on American Hostages Act, granting the Treasury Department broad powers to revoke the tax-exempt status of nonprofit organizations accused of supporting terrorism. The bill secured approval on November 21, 2024, with a vote tally of 219-184, garnering support primarily from Republicans, with only 15 Democrats voting in favor.

This legislation is part of an ongoing conversation about national security and political dissent. Scholars and nonprofit advocates have raised alarms about potential implications. Beth Gazley, an expert in nonprofits from Indiana University, expressed concern over the bill’s potential use as a tool for political suppression, suggesting that it could deter activists from opposing government policies due to fear of retribution.

U.S. Rep. Jamie Raskin, formerly a constitutional law professor, criticized the measure, describing it as “a werewolf in sheep’s clothing.” He highlighted that support for terrorism is already a criminal offense under current law, warning that the new legislation could undermine due process rights. A coalition of nonprofit organizations, including the Council on Foundations and National Council of Nonprofits, condemned the bill, citing worries about the expansive authority it grants to the executive branch.

The origins of this legislation trace back to earlier proposals introduced in late 2023, which many interpreted as attempts to quell protests sympathetic to Palestine amid increasing tensions regarding military operations in Gaza. Critics argue that the vagueness of the term “terrorism” within the bill allows for ambiguous interpretations, potentially leading to unwarranted actions against both domestic and international entities.

Historically, the Treasury Department has maintained a careful approach to defining domestic terrorism, emphasizing the importance of safeguarding protected expressions. This bill, however, marks a significant shift towards politicizing what constitutes terrorism, raising fears that it could disrupt lawful demonstrations and protests across the country.

Legal experts warn that this legislation could greatly alter the landscape of civil society, particularly in states with strong Republican control. A study indicates that at least 22 states have already enacted or tightened laws against protests, escalating penalties for public demonstrations. Activists are concerned that this could further target movements advocating for environmental protections, social justice, and civil rights.

The current climate has even seen attempts to shut down nonprofit organizations focused on immigrant assistance in Texas, as well as investigations into nonprofits by state attorneys general in other regions. Should this bill become law, observers predict a chilling effect on nonprofit advocacy with activists potentially forced to operate underground to evade legal repercussions.

As the bill awaits Senate consideration, the ramifications of such a measure loom large for the future of nonprofit work and political dissent in the United States. The potential for public perception toward labeled groups to shift—mirroring tactics employed by authoritarian regimes—poses a significant challenge to First Amendment rights, particularly the freedoms of speech, assembly, and petition.