WASHINGTON (JTA) — Since the days after Hamas’ Oct. 7 attack on Israel, lawmakers and American Jewish organizations have accused pro-Palestinian groups in the United States of aiding Hamas, and called for them and their funders to be scrutinized.
Now, if a bill moving through Capitol Hill is passed, that increased scrutiny will be enshrined into law. According to the measure, if the Treasury secretary determines that a nonprofit is delivering material support to a terrorist group, it can lose its tax-exempt status.
The bill passed the House of Representatives with broad bipartisan support and will now be considered by the Senate. Its proponents say it is a necessary step to curb terror financing at a time of heightened danger and antisemitism. But its opponents say it is a harbinger of authoritarian overreach that places too much power in the whims of one person.
Two Jewish congressmen, Republican Rep. David Kustoff of Tennessee and Democratic Rep. Brad Schneider of Illinois, introduced the bill last November, with the world still in a state of shock and outrage at the Oct. 7 attack that launched the Gaza war.
“To put it plainly, domestic financers of terrorism are currently being subsidized by U.S. taxpayer dollars,” Kustoff said last month before the House voted 382-11 to approve the bill. “Let me be clear: No American should receive a tax benefit for funding terrorism.”
But now, a coalition of Muslim, Palestinian advocacy and civil liberties groups are pushing to kill the Senate’s version of the bill. They say the bill is spurred by the pro-Palestinian protests that have roiled campuses across the country and aims to kneecap the groups organizing the protests.
“In a clear reaction to pro-Palestine protests, the Senate might pass legislation that would hand the government a dangerous tool to stifle free speech and punish disfavored groups,” the American Civil Liberties Union said in an action alert. “It isn’t a stretch to imagine how this bill could be used to pressure universities to shut down student groups and further criminalize dissent in this country.”
A letter the ACLU sent to senators this month, which the group shared with the Jewish Telegraphic Agency, said the bill grossly expands executive powers.
“This bill authorizes broad and easily abused new powers for the executive branch,” the letter said. “It grants the Secretary of the Treasury virtually unfettered discretion to designate a U.S. nonprofit as a ‘terrorist supporting organization.’”
While much of the opposition to the bill comes from the left, a writer for Reason, the flagship outlet for libertarians, also was troubled by the bill. Existing law, the column by Matthew Petti pointed out, already banned material support for terrorist groups.
“Financing terrorism is already very illegal,” he wrote last month. “Anyone who gives money, goods, or services to a U.S.-designated terrorist organization can be charged with a felony under the Antiterrorism Act and the International Emergency Economic Powers Act,” referring to laws passed respectively in 1996 and 1977.
Under current law, the government must take to trial any group that authorities deem to be providing material support to terrorists, which can be a lengthy ordeal.
The bill under consideration now gives the Treasury secretary broad discretion to designate a group as “terrorist supporting” without first testing it in the courts. Under the bill, the designated groups have the burden of challenging the ban in court, an arduous process that could knock a charity off the tax exempt list for months.
“The bill’s authors believe that some charities are too dangerous to give tax exemptions to, but not dangerous enough to take to court,” the Reason column said.
Also at issue for those debating the bill are two questions: What counts as a terrorist organization? And what counts as material support?
The answer to the first is clear: Established U.S. law references a “foreign terrorist organization that has been designated by the Secretary of State.” That designation applies to groups that have committed acts of terrorism and that pose a national security threat to the United States. It includes Hamas and Islamic Jihad in Gaza, as well as Hezbollah in Lebanon.
The question of how to define “material support” for those groups, however, is murkier.
The House and Senate bills hew to a definition of the term in earlier laws that were enacted after terrorist attacks in the United States in the 1990s and then toughened following the 9/11 attacks in 2001. Some of the clauses in the definition are specific, such as direct funding of terror groups or providing them with fraudulent documents.
But other terms, like providing “service” or “training” or “expertise,” are dangerously vague, civil rights groups argue. The groups have in the past joined legal efforts to challenge the material support definition, contending that it hinders funding for humanitarian relief groups.
Opponents of the pro-Palestinian groups have already employed the “material support” argument. In October, Florida Gov. Ron DeSantis cited a similar state statute banning “material support” for terrorist groups when he ordered state universities to ban chapters of Students for Justice in Palestine due to the groups’ expressions of support for Hamas. Civil liberties organizations said that order impinged on free speech rights.
And earlier this month, 16 Republican senators called for an investigation into groups that support National Students for Justice in Palestine, citing “the heinous support NSJP chapters across the country have voiced for Hamas, a U.S.-designated Foreign Terrorist Organization.”
In an interview, Kustoff said the government needed greater flexibility to keep taxpayers from underwriting groups moving money and other material support to terrorists. He said the Treasury secretary would have to hew to the aforementioned legal definition of material support for a terrorist group — but would have some ability to interpret what that means.
“When the bill talks about any material support, it gives some discretion” to the secretary, Kustoff said, referring to the ability of the secretary to bypass the courts. “But it’s a smart bill, and it allows for smart discretion, if you will, by the Treasury Department.”
Kustoff ridiculed the notion that he was seeking to shut down campus speech, noting that he and Schneider introduced the bill in November, before the campus protests became a major issue.
“When we were working on this bill with Congressman Schneider, I wasn’t even thinking about campus protests,” he said. The intent of the House committee that advanced the bill, he said, “is specifically to go after or to look at the groups that provide material support to terrorist groups or terrorist organizations.”
Lara Friedman, the president of the Foundation for Middle East Peace, who has championed free speech protections for pro-Palestinian advocates and has researched the bill extensively, argues that the absence of judicial review is a recipe for abuse, regardless of the bill’s intent.
“This will gives a single U.S. official authority to strip U.S. non-profits organizations of their non-profit status in a peremptory manner, with virtually no limitations, accountability, or meaningful recourse, based merely on his declaration they are ‘terrorist supporting organizations’,” she said on X.
An array of the bill’s opponents wrote earlier this month to Sen. Ron Wyden, the Jewish Oregon Democrat who chairs the Senate Finance Committee, which must pass the bill, and Idaho Sen. Mike Crapo, the committee’s top Republican, urging them to quash the bill.
“If enacted, this act would grant the Secretary of the Treasury broad discretionary powers to terminate the tax-exempt status of nonprofit organizations based solely on a subjective declaration that they are ‘terrorist supporting organizations,’” the letter said.
Opponents of the bill may get traction in the Senate, where Democrats are in the majority and where some libertarian Republicans might also be wary of handing the government excessive discretionary authority. Another complicating factor could be the trend among Democrats to focus their criticism on Israel as its war with Hamas incurs heavy Palestinian casualties; the mood in Congress is much different than it was when Schneider and Kustoff introduced the bill in November.
Sen. Chris Murphy, a Connecticut Democrat whose views are often a bellwether of where much of the party stands on an issue, has said the bill is problematic.
“Doesn’t feel like the House did a great job vetting this bill,” Murphy posted on X on May 4, quoting a New Republic analysis critical of the bill. “The Senate needs to do better.”
The New Republic article, by staff writer Kate Aronoff, warned that the bill could have much broader applications than targeting groups supposedly aligned with Hamas or other terrorist groups targeting Israel. In particular, she warned that a future Donald Trump administration could use the bill to pursue its adversaries.
“While clearly imagined by its sponsors as a means of targeting pro-Palestinian organizations, civil liberties organizations warn it could have sweeping consequences for groups working on climate and environmental causes (among several other issues) should the next occupant of the Oval Office choose to use it as a means of attacking his political enemies,” Aronoff wrote.
Donald Trump wants to press for expansion of executive powers and limitations on how the courts could restrict him if he is elected again. That threat looms large for liberals opposed to the bill. “It isn’t out of the question … that a Trump administration would find an excuse to declare environmental protests eco-terrorism,” Aronoff wrote.
The conservative press has depicted opposition of the bill as directed by Muslim and pro-Palestinian advocacy groups, focusing especially on one, American Muslims for Palestine, that is under investigation by Virginia’s Republican attorney general for alleged technical violations of the state’s tax laws. AMP is also among groups targeted in a federal lawsuit by families of some of the victims of Hamas’ Oct. 7 attack.
The bill’s Senate sponsors are Angus King, a Maine Independent who caucuses with Democrats, and John Cornyn, a Texas Republican. The fate of the bill is now up to Wyden, whose office did not return requests for comment.
Wyden has been outspoken throughout his career against government overreach and in protecting civil liberties. However, in the wake of the deadly Jan. 6 Capitol riot by pro-Trump activists seeking to overturn President Joe Biden’s election, he sought an IRS investigation into whether the groups organizing the riot had tax exempt status.
Kustoff said that what he depicted as the accelerating threat of antisemitic violence since Oct. 7 necessitated a tool for the government to protect Americans from terrorists seeking to expand their ambit.
“Without access to resources and funding, terrorist organizations are seriously restricted in their ability to carry out attacks in the first place,” he said in his floor speech in April before the vote. “Right now, our ability to crack down on tax-exempt organizations that support terrorism is inadequate. Doing so, under current law, requires a time-consuming bureaucratic process that has sometimes prevented federal authorities from acting.”
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