UPDATE – May 20, 2025: Section 112209 was removed from the House budget reconciliation bill Sunday evening (May 18). Thanks to all who mobilized and contacted your House members in opposition to this harmful provision!
At Nonprofit VOTE, we know that a vibrant and independent nonprofit sector is a key to creating healthy communities and a thriving democracy that can meet the needs of the communities they serve. That’s why we are alerting our partners about a deeply flawed provision in the new congressional budget reconciliation bill that threatens nonprofit independence and opens the door to politicized enforcement: Section 112209 (a repackaged H.R. 9495).
Protect Nonprofits from Executive Overreach
This new provision, Section 112209 in the federal tax reconciliation bill, grants the Executive Branch unprecedented authority to revoke the tax-exempt status of nonprofits it labels as “terrorist supporting organizations”—without requiring due process, transparency, or public accountability. While combating terrorism is a universally shared goal, enforcement mechanisms must be consistent with our values as a nation: due process, clearly established standards of evidence, and adherence to the rule of law.
Section 112209 is modeled after the Stop Terror-Financing and Tax Penalties on American Hostages Act (H.R. 9495), which passed the House last year but failed to advance in the Senate. Now it’s back, buried deep within the budget reconciliation bill.
It allows the Treasury Secretary and, by extension, the President, to unilaterally revoke a nonprofit’s 501(c)(3) status if it deems the organization to be “terrorist supporting” without presenting full evidence or ensuring fair procedures. It lacks clear language and criteria, opening the door to ideological targeting of nonprofits by administration officials. Finally, wrongfully -accused nonprofits would lose donors, community trust, and their ability to serve vulnerable populations, even if charges are later reversed on appeal.
Nonprofits Deserve Transparency and Fairness
Let’s be clear: Nonprofits stand firmly against terrorism in all forms. But combating it must be done in an evidence-based manner rooted in respect for civil liberties, due process, and free expression that underpins our entire system.
Charitable nonprofits provide shelter, health care, job training, disaster relief, and voter education—often stepping in where the government and markets fall short. To do this work effectively, they must be trusted by their communities, their donors, and the public.
The lack of due process in Section 112209 undermines the civic infrastructure that supports a healthy democracy. At a time when our communities need trusted messengers more than ever, we cannot afford to politicize nonprofit oversight.
Additional Resources:
- Joint Independent Sector and Council on Foundations statement re: Section 112209
- National Council of Nonprofits explainer on Section 112209
- Chronicle of Philanthropy story on Section 112209
Other Concerning Provisions
In addition to Section 112209, there are other concerning provisions in the budget reconciliation bill. Among them: new or expanded taxes on private foundations, restrictions on access to the Child Tax Credit for low-income families, and expanded Unrelated Business Income Tax (UBIT) rules that penalize nonprofits for providing basic employee benefits. These changes would divert vital resources from nonprofits already under strain and deepen economic hardship for the communities they serve. To learn more about these other provisions, see the National Council of Nonprofits’ summary of budget bill provisions impacting nonprofits.
