Sponsor
David Kustoff
Representative · R-TN
Representative · R-TN
The bill aims to strengthen national security by stripping tax privileges from groups tied to terrorism while providing some procedural protections, but it risks erroneous, immediate economic harm to nonprofits and donors and increases administrative and litigation burdens.
Nonprofit organizations that materially support designated terrorist groups will lose federal tax-exempt status, removing tax benefits for entities that aid terrorism and reducing incentives for support of terrorist activity.
Nonprofits accused of providing such support receive written notice and a 90-day cure period to rebut allegations or return support, giving organizations an opportunity to respond before final suspension.
Treasury/IRS designations are subject to federal-court review with procedures for handling classified evidence, allowing judicial oversight of administrative actions.
Nonprofits (and their donors) can have tax-exempt status unilaterally suspended by the Secretary based on an administrative designation, risking erroneous, immediate loss of tax benefits, reputational harm, and financial costs before criminal or judicial findings.
Organizations may be hampered in rebutting allegations because descriptions or evidence can be withheld for national-security or law-enforcement reasons, undermining effective defense and meaningful due process.
The administrative designation/suspension regime may increase IRS/Treasury workload and spur litigation, raising costs for the government and taxpayers and creating implementation complexity.
Based on analysis of 2 sections of legislative text.
Creates a Treasury administrative designation that suspends tax-exempt status for organizations that provided material support to terrorist groups within the prior three years, with notice and a 90-day cure period.
Official title: To amend the Internal Revenue Code of 1986 to terminate the tax-exempt status of terrorist supporting organizations.
Introduced December 17, 2025 by David Kustoff · Last progress December 17, 2025
Creates a new Treasury designation called "terrorist supporting organization" and suspends federal tax-exempt status for any organization the Secretary of the Treasury designates under that title. The suspension applies where the organization provided material support or resources (per the federal criminal definition) to a terrorist organization during the prior three years, with limited exceptions for State‑Department‑approved support and OFAC‑approved humanitarian aid. The bill requires written notice to the organization (using its most recent IRS mailing address) describing the allegations and gives the organization 90 days to cure the issue before designation becomes effective; designation remains in place until the Secretary rescinds it. The Secretary must withhold some disclosure for national security or law‑enforcement reasons and may designate or rescind at the Treasury's discretion.