H.R. 9495 – Some Definitions – Nonprofit Law Blog

The word "Definition" under a magnifying glass and the definition of the word below

There has certainly been intense reactions to the Stop Terror-Financing and Tax Penalties on American Hostages Act. It’s been labeled the “Nonprofit-Killer Bill” by some. I consider it more the “Nonprofit-Chiller Bill” designed not to stop terror-financing, but to chill the speech of nonprofits not adequately conforming to the ruling party’s agenda.

So … how bad is H.R. 9495 for progressive organizations that might support policies that contradict those of the soon-to-be ruling party? In my TL;DR opinion, it’s not likely to result in hundreds of charities and foundations losing 501(c)(3) status, but its more limited use will likely discourage the speech and activities of thousands of 501(c)(3) organizations, adversely impacting their work and harming their intended charitable beneficiaries.

Some of the arguments against H.R. 9495 proclaim that the bill provides the Treasury Secretary (“Secretary”) with unilateral power (under the ultimate authority and influence of the President and likely exercised through the IRS) to shut down 501(c)(3) organizations, without any evidence or due process, by designating them as terrorist supporting organizations. While there may be some truth to how it might play out, this is an inaccurate reading of the bill.

Here is what the bill does provide:

The Secretary would have unilateral power to designate an organization as a terrorist supporting organization.
The designation of terrorist supporting organization would result in the revocation of the organization’s 501(c)(3) status, but not its right to raise funds or operate. This may provide nonprofits with little comfort because, for practical purposes, a designated organization may no longer be able to raise funds or continue operations for very long because of the stigma associated with the designation.
Before the designation comes into effect, the Secretary must mail to the organization a notice of intended designation and the name of the terrorist organization(s) to which the organization in question has provided material support or resources and a description of such material support or resources to the extent consistent with national security and law enforcement interests. The preceding phrase in bold font is probably necessary for public safety but could be abused by the Secretary if the Secretary chooses not to describe the support or resources allegedly provided by the organization.
The Secretary must designate such identified organization as a terrorist supporting organization if, and only if, within the 90-day period after the notice has been sent, it has not (1) demonstrated to the satisfaction of the Secretary that it did not provide material support or resources to the terrorist organization(s) identified in the notice or (2) made reasonable efforts to have such support or resources returned and certified in writing to the Secretary that it will not provide any further support or resources to the terrorist organization(s). Of course, an adequate response may not be possible if the notice doesn’t identify the material support or resources at issue, which could be left up to the Secretary’s sole discretion even if the Secretary has no relevant national security or law enforcement experience or expertise.
The designated terrorist supporting organization may appeal the designation with the IRS Independent Office of Appeals. The Chief of Appeals who supervises the Independent Office of Appeals is appointed by the IRS Commissioner who in turn is appointed by the President of the United States, with the advice and consent of the Senate (a check-and-balance that appears to have weakened substantially in recent years).
Federal courts have exclusive jurisdiction to review a final determination with respect to an organization’s designation as a terrorist supporting organization.

Definitions

For the Treasury Secretary to designate an organization as a terrorist supporting organization, they would need to claim that the organization provides material support or resources to a terrorist organization. How are these terms defined?

Terrorist Supporting Organization

Under HR 9495, a terrorist supporting organization is defined as follows:

any organization which is 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) [i.e., a terrorist organization] (determined after the application of this paragraph to such organization) in excess of a de minimis amount.

Terrorist Organization

A terrorist organization as referenced the definition of a terrorist supporting organization in HR 9495 (see above) is defined in Paragraph (2) of Section 501(p) of the Internal Revenue Code as follows:

[an] organization [that] is designated or otherwise individually identified—

(A) under section 212(a)(3)(B)(vi)(II) or 219 of the Immigration and Nationality Act as a terrorist organization or foreign terrorist organization [note that only 17 organizations are listed as designated foreign terrorist organizations under section 219 since 2016],

(B) in or pursuant to an Executive order which is related to terrorism and issued under the authority of the International Emergency Economic Powers Act or section 5 of the United Nations Participation Act of 1945 for the purpose of imposing on such organization an economic or other sanction, or

(C) in or pursuant to an Executive order issued under the authority of any Federal law if—

(i) the organization is designated or otherwise individually identified in or pursuant to such Executive order as supporting or engaging in terrorist activity (as defined in section 212(a)(3)(B) of the Immigration and Nationality Act) or supporting terrorism (as defined in section 140(d)(2) of the Foreign Relations Authorization Act, Fiscal Years 1988 and 1989 [which is codified in section 2656f(d)(2) of Title 22 of the U.S. Code]); and

(ii) such Executive order refers to this subsection.

Section 212(a)(3)(B)(vi)(II) of the Immigration and Nationality Act defines a terrorist organization as an organization:

otherwise designated, upon publication in the Federal Register, by the Secretary of State in consultation with or upon the request of the Attorney General or the Secretary of Homeland Security, as a terrorist organization, after finding that the organization engages in the activities described in subclauses (I) through (VI) of clause (iv) ….

And subclauses (I) through (VI) of clause (iv) provides as follows:

(I) to commit or to incite to commit, under circumstances indicating an intention to cause death or serious bodily injury, a terrorist activity;

(II) to prepare or plan a terrorist activity;

(III) to gather information on potential targets for terrorist activity;

(IV) to solicit funds or other things of value for-

(aa) a terrorist activity;

(bb) a terrorist organization described in clause (vi)(I) or (vi)(II); or

(cc) a terrorist organization described in clause (vi)(III), unless the solicitor can demonstrate by clear and convincing evidence that he did not know, and should not reasonably have known, that the organization was a terrorist organization;

(V) to solicit any individual-

(aa) to engage in conduct otherwise described in this subsection;

(bb) for membership in a terrorist organization described in clause (vi)(I) or (vi)(II); or

(cc) for membership in a terrorist organization described in clause (vi)(III) unless the solicitor can demonstrate by clear and convincing evidence that he did not know, and should not reasonably have known, that the organization was a terrorist organization; or

(VI) to commit an act that the actor knows, or reasonably should know, affords material support, including a safe house, transportation, communications, funds, transfer of funds or other material financial benefit, false documentation or identification, weapons (including chemical, biological, or radiological weapons), explosives, or training-

(aa) for the commission of a terrorist activity;

(bb) to any individual who the actor knows, or reasonably should know, has committed or plans to commit a terrorist activity;

(cc) to a terrorist organization described in subclause (I) or (II) of clause (vi) or to any member of such an organization; or

(dd) to a terrorist organization described in clause (vi)(III), or to any member of such an organization, unless the actor can demonstrate by clear and convincing evidence that the actor did not know, and should not reasonably have known, that the organization was a terrorist organization.

Section 219 of the Immigration and Nationality Act provides the Secretary of the Treasury to designate a terrorist organization if the Secretary finds that:

(A) the organization is a foreign organization;

(B) the organization engages in terrorist activity (as defined in section 1182(a)(3)(B) of this title or terrorism (as defined in section 2656f(d)(2) of title 22), or retains the capability and intent to engage in terrorist activity or terrorism) ¹; and

(C) the terrorist activity or terrorism of the organization threatens the security of United States nationals or the national security of the United States.

“Terrorist Activity” as defined in section 1182(a)(3)(B)

any activity which is unlawful under the laws of the place where it is committed (or which, if it had been committed in the United States, would be unlawful under the laws of the United States or any State) and which involves any of the following: (I) The highjacking or sabotage of any conveyance (including an aircraft, vessel, or vehicle). (II) The seizing or detaining, and threatening to kill, injure, or continue to detain, another individual in order to compel a third person (including a governmental organization) to do or abstain from doing any act as an explicit or implicit condition for the release of the individual seized or detained. (III) A violent attack upon an internationally protected person (as defined in section 1116(b)(4) of title 18 ) or upon the liberty of such a person. (IV) An assassination. (V) The use of any— (a) biological agent, chemical agent, or nuclear weapon or device, or (b) explosive, firearm, or other weapon or dangerous device (other than for mere personal monetary gain), with intent to endanger, directly or indirectly, the safety of one or more individuals or to cause substantial damage to property. (VI) A threat, attempt, or conspiracy to do any of the foregoing

“Terrorism” as defined in section 2656f(d)(2)

premeditated, politically motivated violence perpetrated against noncombatant targets by subnational groups or clandestine agents

Material Support or Resources

any property, tangible or intangible, or service, including currency or monetary instruments or financial securities, financial services, lodging, training, expert advice or assistance, safehouses, false documentation or identification, communications equipment, facilities, weapons, lethal substances, explosives, personnel (1 or more individuals who may be or include oneself), and transportation, except medicine or religious materials

The statutory source for the definition of material support or resources is from 18 U.S. Code section 2339A. However, in that statute, there is an additional knowledge or intent qualifier for the provision of material support or resources to become unlawful (“knowing or intending that they are to be used in preparation for, or in carrying out, a violation …”). In HR 9495, that knowledge or intent qualifier is glaringly missing.