Why a House Bill Could Put Your Nonprofit's Tax-Exempt Status at Risk

Nonprofits are the heart and backbones of our communities. They provide food to families in need, stand up for social justice and offer critical services when no else will. But right now, these vital organizations are currently facing a serious threat. 

The proposed Stop Terror-Financing and Tax Penalties on American Hostages Act, aka H.R. 9495, could severely jeopardize the work of nonprofits across the United States by stripping them of their tax-exempt status without warning or due process. The bill, which passed in the U.S. House of Representatives Nov. 21, This is beyond a financial issue. It’s a direct attack on nonprofits’ independence and their ability to make meaningful change.  

Here’s what nonprofit professionals and decision-makers need to understand about this bill — and how they can take action.

What Is H.R. 9495?

Though it claims its aim is to only terminate tax-exempt statuses for terrorist-supporting organizations, this bill proposes to give the U.S. Treasury Department sweeping authority to revoke the tax-exempt status of nonprofits without requiring clear evidence or a due process framework. Historically, nonprofits have had robust protections to ensure their tax-exempt statuses could not be arbitrarily or politically targeted. This bill threatens to dismantle those safeguards by removing transparency and accountability protocols. 

If passed, this bill could have chilling effects on organizations working in areas that may challenge powerful interests or controversial topics. From environmental advocacy groups to health equity organizations, nonprofits would face increased uncertainty, potentially stifling their impact.

Why Does This Matter?

Nonprofits do the heavy lifting when it comes to solving society’s biggest problems — from addressing systemic inequalities to protecting vulnerable communities. A nonprofit’s tax-exempt status enables the organization to:

• Operate without undue financial burden. This allows more resources to go toward programming and outreach rather than taxes.
• Advocate for change. Tax-exemption protects nonprofits from being penalized for addressing systemic inequities or challenging harmful policies.
• Stay mission-focused. Removing the threat of arbitrary status revocation lets organizations concentrate on fulfilling their missions.

Beyond the threat to nonprofits’ financial viability, the Stop Terror-Financing and Tax Penalties on American Hostages Act poses a serious danger to freedom of speech. By allowing the government to target organizations for their advocacy or activism, it could silence dissent and undermine the core democratic principle of free expression. Nonprofits that challenge powerful interests or speak out on controversial issues would face increased pressure and potential legal risks, stifling important public discourse.

The Broader Impact of H.R. 9495

This bill doesn’t just affect nonprofits – it has ripple effects that will touch all of us.

• Reduced public trust. A perception that nonprofits are subject to political manipulation could erode the trust organizations have spent years building with donors, partners and the communities they serve.
• Hindered innovation. Organizations may shy away from tackling complex or controversial issues for fear of losing their tax-exempt statuses.
• Economic consequences. Nonprofits contribute to local and national economies. A less stable nonprofit sector could lead to job losses and reduced economic activity in vulnerable communities.

What Can Nonprofit Leaders Do Right Now?

This is a crucial moment for nonprofit professionals and decision-makers to rally together. Here’s how you can help:

Spread awareness. Share information about H.R. 9495 with your board, staff and donors. Many people may not realize how damaging this bill could be.

Contact your senators. Let your elected officials know how this bill could harm nonprofits in your state. Use email, social media or make a phone call. 

Engage your supporters. Use your organization’s channels to educate donors, volunteers and community members about the threat H.R. 9495 poses to nonprofits.

Now’s the Time to Act

As the season of giving approaches, it's a moment to appreciate how nonprofits enrich our lives — whether by feeding families, advocating for change or preserving culture. This bill threatens to undermine this vital work by jeopardizing the independence and impact of these organizations.

To protect the sector that strengthens our communities, we must act now. Share your story, contact legislators and rally your network to oppose H.R. 9495. Together, we can ensure nonprofits continue to thrive and make a lasting difference.

The preceding post was provided by an individual unaffiliated with NonProfit PRO. The views expressed within do not directly reflect the thoughts or opinions of NonProfit PRO.