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Taxpayer-funded terror: Congress must stop nonprofits supporting terrorist organizations

by Gregory T. Angelo, opinion contributor - 01/06/24 3:00 PM ET

FILE - A sign outside the Internal Revenue Service building in Washington, on May 4, 2021. Effective immediately, the Internal Revenue Service will end its decades-old policy of making unannounced home and business visits — in a nod to worker safety and combatting scammers who pose as IRS agents. (AP Photo/Patrick Semansky, File) — FILE – A sign outside the Internal Revenue Service building in Washington, on May 4, 2021. Effective immediately, the Internal Revenue Service will end its decades-old policy of making unannounced home and business visits — in a nod to worker safety and combatting scammers who pose as IRS agents. (AP Photo/Patrick Semansky, File)

The Oct. 7 attack by Hamas on Israel sent shockwaves through the American Jewish community — and left politicians in Washington at odds over how to help our nation’s strongest ally in the Middle East. As war rages in Gaza, there is one thing Congress has the power — and the bipartisan support — to do soon after it returns to work on January 9: End tax-exempt status for any organization in the U.S. that supports terrorism.

H.R. 6408, a bill to terminate the 501(c)(3) nonprofit status of U.S. organizations providing support for terrorist organizations, was introduced in the House last month by Rep. David Kustoff (R-Tenn.) and Rep. Brad Schneider (D-Ill.). The legislation quickly drew cosponsors from both parties and sailed through the Ways and Means Committee on November 30 in a 41-0 vote.

If you’re like most Americans, you’re probably asking yourself why the IRS bestowed tax-exempt status to terrorist-supporting organizations in the first place. Qualifications for nonprofit approval have always been vague. While the IRS is extremely strict about the paperwork needed for consideration and annual reporting requirements, organizations pursuing a 501(c)(3) letter of approval need only exist for a “charitable” purpose. Amateur sports leagues, save-the-guinea pigs, a foundation devoted to the needs of tall people, and a Star Wars cosplay advocacy group are all certified nonprofits — and that’s just the tip of the iceberg. Is it any wonder groups like Students for Justice in Palestine and the Council on American-Islamic Relations managed to secure the same?

A 2014 report by the Financial Action Task Force, a watchdog organization focused on global money laundering and terrorism financing, found that the nonprofit sector “has interconnected vulnerabilities, and terrorist entities seek to exploit more than one type of vulnerability.” It went on to say that “the diversion of [nonprofit] funds by terrorist entities was a dominant method of abuse. However, other types of non-financial abuse such as the abuse of programs, or the support for recruitment, also appeared regularly.”

Case-in-point: the Holy Land Foundation (HLF). Originally founded as the Occupied Land Fund, this Texas-based charity existed to ostensibly provide “practical solutions for human suffering through humanitarian programs.” In 2001, the U.S. officially declared HLF a terrorist organization and shut the organization down. Three years later, HLF leaders were brought up on federal charges for “aiding Hamas by raising funds through the corporate entity Holy Land Foundation.” HLF funds were distributed as grants to community groups in the Middle East, who in turn used those funds to grow grassroots support for Hamas. All HLF defendants were convicted, found guilty of funneling $12 million to terrorists.

The Kustoff/Schneider legislation would empower the Treasury Department to more easily and aggressively enforce the tax code and put scofflaw “charities” on notice — if you support terrorists, your days are numbered.

The bill is now open for consideration by the entire House. Speaker Mike Johnson can earn a quick win the first week Congress reconvenes in January by bringing it up for a floor vote immediately.

And when he does, the bill should be amended to include organizations that meet the International Holocaust Remembrance Alliance definition of antisemitism. Any institution “calling for, aiding, or justifying the killing” of Jewish people doesn’t deserve the luxury of 501(c)(3) recognition.

Tax-exempt status isn’t a right; it’s a privilege. Organizations that exploit it to facilitate deadly ends deserve to face consequences, and those who are considering it need to be deterred.

Gregory T. Angelo is the president of the New Tolerance Campaign.