HR6800-119

What This Bill Does

This bill creates a new tax enforcement category for organizations that provide more than a de minimis amount of material support or resources to terrorist organizations during the prior three years. Once the Treasury Secretary designates an organization as a terrorist supporting organization, the organization is treated like an organization already covered by section 501(p): its tax-exempt status is suspended and related asset restrictions apply until Treasury rescinds the designation. The bill defines material support by reference to 18 U.S.C. 2339B, but excludes State Department-approved activities and OFAC-approved humanitarian aid. Treasury must mail notice to the organization, including the name, basis, administrative record, and a description of the material support. Organizations may correct inadvertent support by demonstrating that the support was made in error, using ordinary course business procedures to recover it, and certifying stronger internal controls. Treasury must rescind designations in specified circumstances and notify Congress before rescission.

Who Benefits and How

Counterterrorism agencies and national security officials benefit because tax-exempt entities that materially support terrorist organizations can lose the federal tax subsidy and related privileges. Federal taxpayers benefit because charitable tax benefits are not preserved for organizations that meet the designation standard. Legitimate charities benefit from explicit carveouts for State Department-approved activities, OFAC-approved humanitarian aid, and mistake-correction procedures.

Who Bears the Burden and How

Designated organizations bear the most direct burden because they lose tax-exempt status and face asset restrictions while designated. Treasury tax administrators must compile records, mail notices, review inadvertent-support certifications, and notify Congress before rescission. Charities operating near sanctions or conflict zones may need stronger controls and documentation to avoid or correct support issues. Donors may lose confidence in designated entities and may need to redirect charitable giving.

Key Provisions

• Creates a terrorist supporting organization category under section 501(p) of the Internal Revenue Code.
• Tightens tax-exempt status rules for organizations that materially support terrorist organizations above a de minimis amount.
• Excludes State Department-approved activity and OFAC-approved humanitarian aid from the material-support definition.
• Requires Treasury notice, administrative-record disclosure, rescission procedures, and congressional notice before rescission.
• Provides correction procedures for inadvertent support when the organization recovers resources and improves controls.