Stop Terror-Financing and Tax Penalties on American Hostages Act

Floor Speech

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Mr. SMITH of Missouri. Mr. Speaker, pursuant to House Resolution 1576, I call up the bill (H.R. 9495) to amend the Internal Revenue Code of 1986 to postpone tax deadlines and reimburse paid late fees for United States nationals who are unlawfully or wrongfully detained or held hostage abroad, to terminate the tax-exempt status of terrorist supporting organizations, and for other purposes, and ask for its immediate consideration in the House.

The Clerk read the title of the bill.

Mr. Speaker, I rise today in support of H.R. 9495, the Stop Terror- Financing and Tax Penalties on American Hostages Act.

This legislation ends the flow of tax subsidies to any U.S. nonprofit that has clearly violated its tax-exempt status by providing material support to terrorist organizations.

At the same time, this bill ends the unfair treatment of Americans who are held hostage by terrorist organizations or wrongfully detained by foreign governments by ensuring that when they return home, they are not dealing with penalties from the IRS for past-due taxes owed from the time that they were held in captivity.

To be clear, we were here just last week to consider this same piece of legislation. This piece of legislation received unanimous approval by the Committee on Ways and Means and contains provisions that already passed this House with overwhelming bipartisan support and received unanimous consent in the U.S. Senate.

Yet, despite that consistent showing of bipartisan support, the majority of our Democrat colleagues voted last week to block passage of this bill.

Why? Why did they block passage of this bill?

Because President Trump won the election.

Don't take my word for it. Our Democrat colleagues said it themselves on this very House floor. Nevertheless, we are back here today to consider this bill under a rule so that we can advance this commonsense policy despite the partisan antics we witnessed last week.

Those who opposed this legislation last week invented all sorts of excuses. We heard a number of fear-mongering scenarios under which they now believe the authorities in this bill might be abused. Every concern raised by Democrats has been addressed in this bill to ensure due process and to protect legitimate nonprofits.

Moreover, instead of engaging in the myths we hear from the other side, we have real-world examples that show why this bill is desperately needed to end the tax-exempt status of organizations that have provided material support to terrorists.

As I noted last week, we have evidence of a U.S.-based, tax-exempt entity that helped fund the hiring of a so-called journalist whose real day job was working for Hamas and holding Israeli hostages in his home.

There is also the U.S.-based, tax-exempt organization that financially sponsors a foreign entity that the Biden Treasury Department has designated a sham charity because of its support for terrorism.

Yet, both of those U.S.-based nonprofits still enjoy tax-exempt status under the Biden administration. In fact, this week I once again called on the IRS to revoke the tax-exempt status of the organization supporting that fake charity because the Biden administration has yet to do so.

In no circumstances, not one circumstance, should the U.S. taxpayer be asked to subsidize this activity by allowing such organizations to retain their tax-exempt preferential status. Unlike the made-up stories our colleagues told last week, and that they will no doubt continue to tell this week, this is the reality, and there is absolutely no excuse for it, Mr. Speaker.

Congress must act to stop the abuse of our tax code that is funding terrorism around the world. We must act to end the unfair tax treatment of Americans who have already suffered enough and whose families have suffered enough from being held hostage or wrongfully detained abroad.

This is the right thing to do, and I encourage my colleagues to do the right thing and support this legislation.

I will point out the reason why this Chamber cannot take up the bill that was passed by the United States Senate to make sure there are not penalties for hostages is because of a thing called the U.S. Constitution. It is called Article I, Section 7, that says all revenue measures must come from the House of Representatives. That is why we are doing this piece of legislation.

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I include in the Record a September 24, 2024, letter from the Committee on Ways and Means to the IRS that refers the Alliance for Global Justice to the IRS for revocation of its tax-exempt status. House of Representatives, Committee on Ways and Means, Washington, DC, September 24, 2024. Hon. Daniel Werfel, Commissioner, Internal Revenue Service, Washington, DC.

Dear Commissioner Werfel: I write today to refer the Alliance for Global Justice, an Arizona-based 501(c)(3) tax- exempt organization, for investigation and ultimately revocation of its tax-exempt status. The Alliance for Global Justice, in conjunction with its fiscally sponsored project, Samidoun, has funded and supported conduct intended to incite violence and instill chaos and holds suspicious ties to designated terrorist organizations. This is despite receiving tax-exempt status as a charitable organization. This conduct is designed to sow chaos and discord in our society, has involved illegal activities, and certainly is not in furtherance of any tax-exempt purpose.

As you know, section 7803 of the Internal Revenue Code (``IRC'') grants the Commissioner of the Internal Revenue Service (``IRS'') the authority to execute and apply internal revenue laws, including section 501 of the IRC's requirements and prohibitions. Pursuant to section 501(c)(3), tax-exempt organizations must be organized and operated exclusively for a tax-exempt purpose, which includes charitable, educational, literary, and other purposes. However. if a nonprofit organization conducts substantial activities that do not further its exempt purposes, such activity may result in the loss of the organization's tax-exemption.

Tax-exempt organizations must meet other requirements to maintain their tax-exempt status. For example, under section 501(c)(3) of the IRC. organizations seeking to receive an exemption from federal taxes are prohibited from certain activity, including being involved in certain types of political activity. In addition to the prohibitions of section 501, the IRS has also noted that violations of the law are an ``antithesis of the public good'' and, as such, may be a bar to tax-exemption. Not only has the IRS found conducting illegal activities to be inconsistent with tax- exemption, but it has stated that the ``planning and sponsoring of such activities are also incompatible with charity and social welfare.''

For example, while mass demonstrations and other confrontational activities are generally permissible under section 501, the IRS previously found that an organization that sponsored protests where members were pressed to commit acts of civil disobedience ``did not qualify for IRC 501 (c)(3) or (4) exemption.'' When determining whether these types of demonstrations are consistent with IRC section 501(c)(3), the IRS has historically implemented a three-part test which states that such activities are permissible if: (1) the organization's tax-exempt purpose is charitable; (2) the activities are not illegal, contrary to established public policy, or in conflict with statutory restrictions; and (3) the activities further the organization's exempt purpose and are reasonably related to the accomplishment of that purpose.

Additionally, under Section 501(p) of the Internal Revenue Code, organizations which have been designated as terrorist organizations cannot maintain tax-exempt status, and the IRS has revoked the tax-exempt status of terrorist organizations. Along with the prohibition on tax-exempt status for terrorist organizations themselves, the IRS also previously revoked the tax-exempt status of organizations that could not show that it directed funding exclusively for charitable purposes as required under the IRC.

Aside from restrictions on conducting illegal activity and acts supporting or promoting civil disobedience, Internal Revenue Manual (``IRM'') Part 7, Chapter 20, Section 6, asserts that ``[c]ases involving grants or activities in foreign countries present a higher risk of terrorism, especially in countries where there is war and civil unrest. Given the language of the IRC, IRM, and previous IRS revenue rulings. I am referring the Alliance for Global Justice and its fiscally sponsored project, Samidoun, to the IRS based on the facts and reasons stated in the appendix attached below.

I ask that you use your authority to make this and similar referrals a top priority and make certain the IRS moves as quickly as possible to examine and revoke the tax-exempt status of the Alliance for Global Justice. Operating at the agency's historically slow pace is not acceptable given what is occurring in our streets and on our college campuses. The IRS must act quickly to address these serious issues. Thank you in advance for your time, cooperation, and response. If you have any questions, please contact Ways and Means Majority staff.

Sincerely, Jason Smith, Chairman, Committee on Ways and Means. [Attachment 1--Appendix] Alliance for Global Justice: Relevant Facts Introduction

The Alliance for Global Justice (the ``Alliance'') is an Arizona-based 501 (c)(3) organization that serves as a fiscal sponsor to over 130 ``projects.'' The Alliance is an offshoot of the Nicaragua Network, an organization that previously supported the socialist Sandinista regime in Nicaragua. According to their website, the Alliance envisions ``societies which explore and implement alternatives to the unjust domination of governments, global financial institutions and multinational corporations'' and their mission is to ``achieve social change and economic justice by helping to build a stronger more unified grassroots movement.'' According to the Alliance's 2023 Form 990, its mission is to ``achieve social change and economic justice by helping to build a stronger and more unified grassroots movement.''

To help bring these visions to life and fulfill its mission, the Alliance fiscally sponsors more than 130 projects. Samidoun is one of the Alliance's fiscally sponsored projects, and describes itself as ``an international network of organizers and activists working to build solidarity with Palestinian prisoners in their struggle for freedom.'' However, Samidoun's conduct and activity suggests more than activism in support of Palestine. Samidoun's Ties to a Foreign Terrorist Organization

For example, in February 2021, the National Bureau for Counter Terror Financing of Israel (``NBCTF'') designated Samidoun a terrorist organization and a ``part of the Popular Front for the Liberation of Palestine (PFLP)'' which ``was founded by members of the PFLP in 2012.'' The PFLP was designated as a foreign terrorist organization by the U.S. Department of State on October 8, 1997. According to the NBCTF, one of Samidoun's leaders is part of the leadership of the PFLP, has been involved in the establishment of militant cells, and has motivated terrorist activity in ``Judea & Samaria and abroad.'' Actions Taken Against Samidoun by Private Companies and Foreign Governments

In January 2023, it was reported that the Alliance and Samidoun were actively fundraising for a France-based organization which partners with the PFLP. Later in February 2023, the Alliance announced that it was unable to process credit card donations following reports that the group was fundraising for the PFLP, a U.S. designated foreign terror organization. Additionally in 2023, Germany outlawed Samidoun after determining that the group spread ``anti-Israel and antisemitic propaganda under the guise of solidarity for Palestinian prisoners.'' The ban of Samidoun in Germany came after the group's leadership was deported from the country in 2019. Two of Samidoun's leaders were also deported from the European Union in 2022.

In January 2020, Mastercard, Visa, and American Express began blocking direct donations to Samidoun. Discover, the credit card company, also cut ties with the Alliance a few months after Israel's NBCTF designated Samidoun a terrorist organization. IRS Guidance on Fiscal Sponsorships

Although fiscal sponsorship is not defined in statute and the IRS has not provided comprehensive guidance regarding fiscal sponsorships, Revenue Ruling 68-489 provides insight into the IRS's policy regarding fiscal sponsorships. Revenue Ruling 68-489 states that 501 (c)(3) tax-exempt organizations may accept tax-deductible funds on behalf of an entity that is not tax-exempt under 501(c)(3) if the following three conditions are satisfied: (i) the 501 (c)(3) organization ensures that funds are used for exempt purposes ``by limiting distributions to specific projects that are in furtherance of its own exempt purposes;'' (ii) the 501 (c)(3) organization ``retains control and discretion as to the use of the funds;'' and (iii) the 501(c)(3) organization ``maintains records establishing that the funds were used for section 501 (c)(3) purposes. Conclusion

Samidoun's designation as a terrorist organization associated with the PFLP does not further the Alliance's stated tax-exempt purpose. The European Union, Israel, and major credit card companies have recognized Samidoun and the Alliance for what they are, yet tax-exempt dollars continue to flow to the Alliance and ultimately to Samidoun. This must stop. The IRS should revoke the Alliance's tax-exempt status. Please see the exhibits below for numerous examples of activity that fails to advance any tax-exempt purpose.

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Mr. SMITH of Missouri. Mr. Speaker, the Alliance of Global Justice, an Arizona-based, tax-exempt organization currently fiscally sponsors Samidoun, a group which was recently designated as a sham charity in financial support of terrorists--by what? The Biden Department of the Treasury.

Despite this letter to the IRS, the Alliance still maintains its tax- exempt status in the United States. This letter, coupled with their recent designation as a financial supporter of terrorist organizations, demonstrates the need for H.R. 9495 and the risk of not passing this legislation.

I would also point out that, as the prior speaker said that we should rip out the controversial legislation within this bill, that controversial piece of legislation passed this body by a vote of 382- 11. It doesn't sound too controversial to me.

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Mr. SMITH of Missouri. Mr. Speaker, only in Washington is a bill that passed 382-11 considered deeply controversial, a bill that says that U.S. tax dollars should not subsidize terrorist organizations.

The other side views that as deeply controversial. That is the statement you just heard from the prior speaker. That is very, very unfortunate. That is why the American public is so upset with Washington. It is because they are completely out of touch with reality.

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Mr. SMITH of Missouri. Mr. Speaker, we just heard that a sixth grader could see that this is unconstitutional. However, a Harvard lawyer thought this was okay in April when it passed with only 11 dissenting votes, so to me, I believe that argument does not hold water.

Tax-exempt status, Mr. Speaker, is not a constitutional right. It is not a constitutional right, but there is still robust due process protection in this bill that we worked out with our Democratic colleagues before passage in the Ways and Means Committee.

That didn't stop, though, the gentleman from Maryland from voting in favor of these same exact identical provisions earlier this year.

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Mr. SMITH of Missouri. Mr. Speaker, one of the speakers on the other side who had previously voted in support of this bill said last week, when explaining his new opposition: ``With Trump's election, the conditions have changed.''

We just heard that from the prior speaker, as well. If the minority thought Ms. Harris would have been the President-elect, my colleagues would still be supporting this bill.

Terrorism exists regardless of who the President of the United States is, and we as Members of Congress have the duty to make sure that taxpayers are not subsidizing terrorism. It is very, very simple.
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Mr. SMITH of Missouri. Mr. Speaker, I point out that the prior speaker voted in April for the exact language that she was railing against, for due process. The only thing that has changed for the majority of the people changing their votes over there is Donald Trump was elected President. That is unfortunate.

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Mr. SMITH of Missouri. Mr. Speaker, I disagree with everything the gentlewoman from Missouri (Ms. Bush) said.

What I will say is that at least she is consistent. She was 1 of the 11 that voted against the bill in April. Unfortunately, we have seen a lot of other people flip-flop, and that is what is unacceptable.

Mr. Speaker, I am extremely grateful that the American people have been able to watch the debate of this piece of legislation today because they have seen with their own eyes the differences between the House Republicans and the House Democrats, and the insanity that just in April, 382 individuals in this Chamber voted for and 11 voted against.

The provisions are the same. The only thing that has changed, Mr. Speaker, according to their quotes on the floor, is Donald Trump was elected President. That is the only thing that has changed.

This bill is very simple. If a nonprofit organization is funding terrorism, you lose your tax-exempt status. If we are truly against terrorism, our actions will speak louder and we will vote for this legislation, but we will see. We will see who is brave on the other side, who wants to stand with real America and not woke policies.

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Mr. SMITH of Missouri. Mr. Speaker, on that I demand the yeas and nays.

The yeas and nays were ordered. Announcement by the Speaker Pro Tempore

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