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House Passes Legislation to Terminate Tax-Exempt Status of Terrorism-Linked Charities

The bill was expedited after Iran attacked Israel over the weekend.

Following the Oct. 7 attack on Israel, financial investigations show a 70% increase in donations to Hamas-linked charities, according to Israeli authorities. In the months since, Israel has requested assistance in stopping the funding of these charities, which are scattered around the world.

Stopping these charities proves difficult, as many often change their names, are difficult to track and have fluid structures. Another issue is identifying funds that are meant for legitimate humanitarian aid and preventing them from ending up in the hands of Hamas for military purposes. Adding to the difficulty of monitoring where these charitable donations end up is the use of non-traditional methods of transferring money, including the ancient Islamic money-transferring system Hawala, known for its privacy features and reduced traceability. This system bypasses Western-style banks and cryptocurrency,

The Treasury Department acted swiftly following Israel’s request to help stop the flow of money to these charities, imposing sanctions on several Hamas-linked organizations in the weeks following the attack.

Now, in a move to further curtail terrorism funding, the House has passed a bill, H.R. 6408, which would terminate the tax-exempt status of terrorism-linked charities. The bill passed the House by a vote of 382 to 11 and is now headed to the Senate for consideration.

Bill to Expand Existing Authority

The legislation would expand Treasury’s existing authority to terminate the tax-exempt status of organizations under Internal Revenue Code Section 501(p) and authorize to revoke the status of any organization “designated by the Secretary as having provided, during the 3-year period ending on the date of such designation, material support or resources (within the meaning of section 2339B of title 18, United States Code) to an organization described in paragraph (2) (determined after the application of this paragraph to such organization) in excess of a de minimis amount.”

The bill was initially introduced in November 2023 in response to antisemitic incidents and pro-terrorist rhetoric at some U.S. universities following the Oct. 7 attack on Israel by Hamas.

In light of escalating tensions in the Middle East and Iran’s attack on Israel over the weekend, the bipartisan bill was brought to the floor yesterday under an expedited procedure that allows it to be heard without going through the House Rules Committee but requires a two-thirds majority to pass. 

In his opening statement, House Ways and Means Committee Chair Jason Smith (R-Mo.) remarked, “There are multiple fronts in this battle against terrorism and this bill addresses one that perhaps does not get as much attention as it should.”

“It should go without saying that America’s tax code should not be used to support or finance violent terrorism around the world,” he added.

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