What is Old is New Again: Politically Weaponizing the Tax Code Against Nonprofits

A bipartisan group of House and Senate members seem intent on reviving one of the most odious tactics ever developed to go after civil society nonprofits they don't like

If you work for or otherwise support one or more nonprofit organizations active in the public policy arena, you need to know about some recent and ongoing action on Capitol Hill that represents a frightening return to one of the darkest chapters in American history.

On April 15--the very same day the House voted in favor of an atrocious Foreign Intelligence Surveillance Act (FISA) "reform" bill--the House passed H.R. 6408, a bill "To amend the Internal Revenue Code of 1986 to terminate the tax-exempt status of terrorist supporting organizations."

The bill was passed under what is known as "suspension of the rules"--a status whereby the bill is deemed noncontroversial by the leadership of the two political parties and which requires a 2/3 affirmative vote to pass. H.R. 6408 passed by a crushing bipartisan margin of 382-11. In reality, the bill is radical in its scope and implications and anything but non-controversial.

Introduced by Rep. David Kustoff (R-TN) on November 14, 2023, H.R. 6408 would allow the Secretary of the Treasury to designate a U.S. nonprofit as a "terrorist supporting organization" if it is found to have provided "material support or resources" or "training" or "expert advice or assistance" to a designated foreign terrorist organization per 18 U.S.C. § 2339A. Shortly after Kustoff introduced the bill, the Charity and Security Network--itself a nonprofit--condemned the measure, noting that Kustoff's claim that “Recent reports have indicated that U.S. based, tax-exempt nonprofits may be providing funding and support to Hamas” lacked any factual basis.

More recently, Matthew Petti at Reason.com wrote that, "Under the proposed bill, murky innuendo could  be enough to target pro-Palestinian groups. But it likely wouldn't stop there."

We know from American history that it will almost certainly not stop there.

The infamous House Committee on Un-American Activities--known by its acronym, HUAC--weaponized the use of tax and business records to target individuals and groups with alleged Soviet connections. And it was the Executive branch that enabled HUAC to do it.

Throughout his long tenure as America's president, Franklin Delano Roosevelt was frequently falsely accused by his critics of harboring pro-communist sentiments. Under pressure from then-HUAC Chairman and fellow Democrat Rep. Martin Dies (D-TX), FDR took some specific steps designed to deflect charges that he was "soft" on communists. One fateful and ill-considered decision he made on July 14, 1938, was to sign Executive Order 7933‑A. That order provided Dies and his HUAC investigators with access to the tax returns of individuals, groups, and businesses that the committee merely alleged were Soviet controlled or otherwise sympathetic to the USSR.

But Dies wasn't content to just let FDR's administration hand over taxpayer records.

In October 1939, Dies had his investigators raid the offices of the League for Peace and Democracy and seize not only tax information but membership and contributor rolls. Dies subsequently published the names of 600 federal employees who were League members.

It should be noted that the Constitution gives the Congress no police powers; the Dies raid was flagrantly illegal, but FDR let him get away with it.

In the years between 1938 and 1975 (when HUAC was finally abolished by Congress), HUAC used sensitive personal information on American citizens to conduct anti‐​communist persecutions that destroyed the professional and personal lives of thousands of citizens from all walks of life and career fields.

As described in last year's movie blockbuster Oppenheimer, Robert Oppenheimer's brother Frank--also a physicist--had his university teaching career destroyed by HUAC as a result of its hearing targeting him for his past and brief membership in the U.S. Communist Party. Indeed, the Communist "witch hunt" mentality of the Cold War era would also result in Robert Oppenheimer losing his government clearance to work on classified projects, a painful professional and personal odyssey Christopher Nolan's film viscerally recreates.

What Kustoff and his supporters seem to be doing now is trying to get the Biden Treasury department to engage in HUAC-like activities against pro-Palestinian groups. And Kustoff is getting help from the man who hopes to be the Senate Majority Leader in 2025--Senator John Cornyn (R-TX). Just two days after Kustoff's bill passed the House, Cornyn introduced a companion bill, S. 4136, that mirrors Kustoff's.

The political play here seems obvious. If Cornyn attempts to bring up his bill or Kustoff's and Senate Majority Leader Chuck Schumer (D-NY) refuses to give it a vote, Cornyn, Kustoff and their allies will try to tag Senate Democrats as being "Hamas terrorist lovers" or something similarly false and outrageous. But if Schumer does allow a vote and it passes, President Biden would then have to decide which of two undesirable paths to take.

If he were to veto the bill--as key Arab and Muslim American groups and House members, among others, would demand--it seems certain his veto would at least be overridden in the House and possibly the Senate as well. Biden would then suffer the humiliation of the veto override and political attacks from Trump and his allies that Biden was "coddling Hamas terrorists and their American supporters" or some such formulation.

If instead Biden signed the bill and then lost the election, he would be handing Trump a huge legal club to employ against pro-Palestinian Americans, and potentially others Trump views as political enemies.

There is still time to prevent this extremely dangerous bill from becoming law and avoid the scenarios I've outlined.

1. Go to the Senate website to get the contact info for your Senators or use Resistbot for the same purpose.

2. Make it clear you want them to oppose H.R. 6408, S. 4136, or any other bill designed to target any nonprofit for Internal Revenue Service investigations on the basis of political advocacy or otherwise constitutionally protected First Amendment activity.

3. If one of your Senators is up for re-election in 2024, let them know that if they support any such measure, you will absolutely vote against them in November.

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