Sponsors (2)
The bill increases donor confidence and encourages stronger nonprofit oversight but does so by raising liability, compliance burdens, and legal uncertainty that may reduce fiscal sponsorship availability and chill funding for lawful protest-related activities.
Fiscal sponsors and nonprofits will adopt stronger due-diligence and oversight practices to prevent misuse of charitable funds, improving nonprofit governance and accountability.
Donors (taxpayers) get greater assurance that donations claimed under §170 are less likely to be diverted to terrorism or violent obstruction of rights or commerce, improving confidence in charitable giving.
Nonprofits and fiscal sponsors face higher legal liability, compliance costs, and uncertainty about what constitutes adequate 'due diligence,' prompting defensive over-compliance and heavier administrative burdens—especially for small charities.
Donors and charitable projects may lose access to fiscal sponsorships or see reduced fundraising if sponsors decline relationships to avoid added liability, reducing support for grassroots or emerging charitable activities.
Nonprofits and communities (including immigrants and activist groups) could face a chilling effect on funding for lawful protest or civil disobedience–adjacent activity if sponsors fear those activities will be labeled as 'covered' obstruction or interference.
Based on analysis of 4 sections of legislative text.
Makes certain 501(c)(3) fiscal sponsors liable when sponsored projects commit terrorism, use force to interfere with constitutional rights, or block lawful commerce unless sponsors show due diligence.
Introduced February 26, 2026 by Rafael Edward Cruz · Last progress February 26, 2026
Creates a new rule in the tax code that can hold certain 501(c)(3) charities liable for wrongful acts carried out by projects they fiscally sponsor when donors give with tax-deduction treatment. It defines covered misconduct to include aiding a designated foreign terrorist organization, using force or credible threats to interfere with people exercising constitutional rights, and using force or blocking movement of goods to stop lawful commerce. The sponsor relationship is defined so that organizations that receive, control, and disburse funds for non‑exempt projects are presumed responsible for lawful use of those funds, but they may defend themselves by showing they exercised due diligence and reasonable oversight.