Legislation ends tax-exempt status for U.S. nonprofits materially supporting terrorist organizations and fairly treats the back-due taxes of American hostages and those wrongfully detained abroad.
WASHINGTON, D.C. – Despite strong bipartisan support – including unanimous approval by the Ways and Means Committee and with provisions already adopted by the U.S. House of Representatives by a vote of 382-11 – House Democrats blocked passage of the Stop Terror-Financing and Tax Penalties on American Hostages Act (H.R. 9495) on Tuesday. The legislation, which included similar policies already approved by unanimous consent in the Senate, would halt tax subsidies going to U.S. nonprofits that materially support terrorist organizations and provide fair tax treatment for Americans held hostage or wrongfully detained abroad and their families by preventing the Internal Revenue Service (IRS) from charging penalties or assessing interest on their past-due taxes.
During debate on H.R. 9495, House Democrats specifically cited the election of President Trump as their reason for now opposing legislation they previously supported – with one member saying, “With Trump’s election, the conditions have changed.”
Ways and Means Committee Chairman Jason Smith (MO-08) issued the following statement in response to Democrat opposition to halting taxpayer-funding for terrorist organizations and protecting Americans held hostage from tax penalties upon returning to the U.S.:
“Before he even takes the oath of office, Democrats are wasting no time using President Trump as an excuse to oppose common sense, bipartisan solutions. The Democrats’ attacks against this legislation ring particularly hollow given that this bill passed with unanimous support through the Ways and Means Committee on two separate occasions and includes policies already approved with broad bipartisan support in the House of Representatives earlier this year by an overwhelming margin of 382-11. This shameful partisan play only sets back efforts to halt the abuse of America’s tax code by terrorist organizations, and it furthers the abuse suffered by Americans held hostage by terrorist groups or foreign governments who Democrats just voted to continue punishing for tax bills they could not pay while in captivity. Going forward, I encourage our Democrat colleagues to put the defense of our nation and the needs of American taxpayers first.”
For months, the Ways and Means Committee has been investigating the troubling pattern of nonprofits operating in the U.S. with suspected ties to terrorism while still maintaining their tax-exempt status. Multiple committee hearings exposed the activities of these groups, such as the Alliance for Global Justice (AGJ), a U.S. non-profit with tax-exempt status which was found to be funding a group recently designated by the U.S. government as a sham charity and funder of terrorism. Despite this fact, the IRS has yet to revoke Alliance for Global Justice’s tax-exempt status. In September, Chairman Smith demanded the IRS revoke the tax-exempt status of AGJ and other organizations tied to foreign terrorist organizations and support for illegal activity domestically.
While Democrats refuse to advance this legislation, Americans continue to be wrongfully detained across the world. Unfortunately, even after being released, many individuals report being subject to tax bills including penalties and interest that went unpaid while being held hostage or wrongfully detained abroad.
Stop Terror-Financing and Tax Penalties on American Hostages Act
H.R. 9495 terminates the tax-exempt status of American organizations found to be materially supporting designated terrorist groups, such as Hamas, and provides fair tax treatment to Americans held hostage or wrongfully detained abroad.
- The Ways and Means Committee has held multiple hearings which uncovered how some tax-exempt organizations have abused America’s tax code to fund disruptive and illegal activity nationally and terrorism abroad.
- Taxpayers should not be required to fund such activity through the tax code.
- The bill requires the Treasury Department to strip organizations found to have provided material support to a listed terrorist organization of their tax-exempt status.
- According to the James W. Foley Foundation, 38 Americans have been held hostage in 16 countries in 2024 alone.
- The bill prevents penalties on past-due taxes, prohibiting the IRS from issuing new penalties, and postpones tax deadlines.
Read the one pager here.
H.R. 9495 passed the Ways and Means Committee 38-0.
H.R. 6408, legislation to terminate the tax-exempt status of terrorist supporting organizations, passed the Ways and Means Committee 41-0 and was approved by the U.S. House of Representatives 382-11.
Legislation preventing the IRS from imposing fines and tax penalties on Americans held hostage upon their return was approved by unanimous consent in the Senate.
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