Skip to Content
IRS Whistleblowers, click here to contact the Ways & Means Committee about waste, fraud, and abuse.

Chairman Smith Opening Statement – Markup of 501(c) Legislation

May 15, 2024 — Markup    — Oversight    — Press Releases   

As prepared for delivery

“This committee has been concerned with the proliferation of tax-exempt organizations that receive generous benefits under section 501 of the U.S. tax code engaging in activities that may not be in line with the spirit or the letter of the law. Our investigation into this issue ranges from the antisemitic activities and harassment of Jewish students we see occurring on college campuses today, to the nexus between tax-exempt organizations and terrorism, to concerns over the level of community benefit being provided by tax-exempt nonprofit hospitals, to the undue influence of foreign money in U.S. elections and domestic policy debates.

“Today, we are considering five pieces of legislation to address those concerns as well as correct a deficiency in our current laws about the illegal disclosure of taxpayer information.

“The first bill we will consider, introduced by Congressman Smucker, requires tax-exempt organizations to provide information on grants they make to foreign entities. This bill brings transparency to tax advantaged money flowing overseas by requiring the same reporting that is already required for funds nonprofits provide to domestic entities. We know from the oversight work by the Select Subcommittee on the Coronavirus Pandemic – chaired by Dr. Wenstrup – that a 501(c)(3) by the name of EcoHealth Alliance received funds and then turned around and gave grants to the Wuhan Institute of Virology in China that was conducting gain-of-function research. Bringing transparency to where their money is going will help prevent donors and the American people from being duped into funding causes they do not support.

“The next bill, introduced by Congresswoman Tenney, will do much to shore up the integrity of our elections by preventing tax-exempt organizations from funneling donations to state and local election organizations. The End Zuckerbucks Act is aptly named because it was inspired by the actions of a wealthy billionaire who donated hundreds of millions of dollars to charitable organizations that funded state and local election organizations in a way that appears to have benefited one political party over another. In fact, in several states the majority of the grant funding went to counties won by President Biden. I doubt that’s a coincidence.  

“Our third bill, introduced by Congressman Schweikert, will help shine a light on the influx of foreign funding into tax-exempt organizations. Americans deserve to know whether the political or policy ads blanketing our airwaves are funded by foreign governments or actual American grassroots. Mr. Schweikert’s bill requires tax-exempt organizations receiving foreign donations to disclose general data on the amount, frequency, and source country of such donations.

“There are reports of a tax-exempt organization by the name of the Energy Foundation that claims to be U.S.-based but which appears to have operations primarily in China and is run by the former deputy director general of China’s National Center for Climate Change Strategy. The group has spent millions promoting ‘green’ energy policies that would make the U.S. more dependent on Chinese resources.

“This legislation also maintains critical privacy protections for Americans wishing to donate to a cause of their choice. Federal agencies should not be in the business of writing regulations demanding that tax-exempt organizations abide by disclosure requirements that Congress has not enacted into law.

“The fourth bill, introduced by Congresswoman Malliotakis, closes a loophole in the tax code that allows foreign nationals to funnel funds to influence U.S. elections. While foreign nationals are prohibited from making contributions in connection with any election, there is nothing that currently prohibits overseas funds from flowing through tax-exempt organizations and into the hands of political committees like Super PACs. In the most disturbing example that the Committee has come across, a foreign national from Switzerland has given hundreds of millions of dollars to fund left-wing groups that are connected to Arabella Advisors, a consulting group that has been described by The New York Times as the leading vehicle for ‘dark money’ on the left. The funds sent by this foreign national were ultimately sent to Super PACs during the 2020 election cycle that backed Democrats or opposed Republicans.

“This bill penalizes any tax-exempt organization that receives foreign contributions and then donates to political committees and includes language that would revoke their tax-exempt status entirely should the organization continue to violate these new prohibitions.

“Lastly, we will consider the Taxpayer Data Protection Act to help deter the unauthorized disclosure of confidential taxpayer information. After it was discovered that an IRS contractor stole and unlawfully disclosed the tax information of thousands of Americans – including President Trump – to The New York Times and ProPublica, the Department of Justice charged the contractor with just a single count of violating the prohibition against such disclosure. He was ultimately sentenced to just 5 years in prison – the maximum penalty allowed under existing law. This bill increases that maximum penalty to 10 years in prison, increases the potential fine up to $250,000, and clarifies that each individual taxpayer whose information is stolen represents a distinct instance of unauthorized disclosure. The committee’s work today will help protect the integrity of our political and policy debates, bring transparency to how tax-exempt organizations operate, especially those which accept foreign dollars, and send a strong message to would-be criminals that confidential taxpayer information should remain just that, confidential.”