Hey Senate, a Vote Against Nonprofit Killer Bill HR 9495 Is a Vote for Democracy

On November 21, 2024, the House of Representatives passed bill H.R. 9495, the “Stop Terror-Financing and Tax Penalties on American Hostages Act” and passed it to the Senate for consideration.

The bill contains two separate elements, one of which is not controversial and another which is highly controversial.

The first part of the legislation proposes to postpone the tax obligations of Americans being held hostage overseas. It seems fair and right and has almost universal bipartisan support.

It’s already illegal for NGOs in this country to support terrorism, so one intent of HR 9495 must be to limit democratic participation that makes legislators uncomfortable.

The second piece of the bill would allow the Secretary of the Treasury to, unilaterally and with no concrete justification, designate nonprofits as “terrorist supporting organizations.” These organizations would then lose their nonprofit status. As the ACLU has pointed out, any community news outfit, university, or civil association targeted by this law would be required to prove Treasury’s error in order to reclaim their tax-exempt status. By then, of course, the damage would have been done. The scarlet letter “T” would likely haunt the organization for as long as it attempted to act in the world. The potential effects of HR 9495, however, extend far beyond the fates of a handful of nonprofits.

This bill echoes one passed near the end of President Richard Nixon’s first year as president. President Nixon and his surrogates pitched their Tax Reform Act of 1969 in populist terms. It would, they said, prevent millionaires from squirreling away money in foundations and nonprofits in order to dodge paying their fair share to the common good. What really drove the passage of the bill, however, was another concern. Major foundations, including the Ford Foundation, had been contributing to President Lyndon Johnson’s “War on Poverty” and his mission to bring the nation’s poor in from the “outskirts of hope.” President Johnson had called for the “maximum feasible participation” of poor people in the democratic politics of their localities, states, and the nation. With funding from the Office of Economic Opportunity and Ford, the voices of the poor and marginalized were being heard. Cleveland elected its first Black mayor. Parents in Bedford Stuyvesant took control of the public schools. And in Durham and Greensboro, as well as in rural North Carolina counties, foundation-funded organizers were helping poor and working people, Black and white, to make coherent demands that would improve their lives and the lives of their children.

Threatened political and business bosses saw in Nixon an ally who could help them maintain their grip on power, as they reinforced the president’s grievance-driven “silent majority” with race-baiting and red-baiting tactics. Meanwhile, Roy Wilkins, the director of the NAACP, saw the Tax Reform Act of 1969 for what it was. “Negro citizens,” he wrote in a New York Times op-ed, “are not deceived by the ‘tax reform’ label. They view the move (and rightly so) as an attempt to halt the increase of Negro voting strength.”

After the passage of the Tax Reform Act, over 200,000 people lost nonprofit jobs funded by the OEO and private foundations. Beyond the economic impact of the law, powerful government and private institutions cut ties with committed activists, causing many of these activists to lose faith in the country’s commitment to broadening our democracy. This pushed some of them to imagine ever-more radical solutions beyond the voting booth, even stirring in a few dreams of overthrowing the American government.

When Alexis de Tocqueville visited America in 1831 and 1832, he saw American associations as “fundamental” to our democracy. They give voice to our citizens’ myriad thoughts, concerns, and creative ideas for improving lives and the laws that govern them; nonprofits inspire and improve democratic debate.

As the Tax Reform Act of 1969 siphoned the political power from associations, HR 9495 seems designed for political purposes, to limit debate about the most pressing issues—war, climate, economic access—our country faces today. It’s already illegal for NGOs in this country to support terrorism, so one intent of HR 9495 must be to limit democratic participation that makes legislators uncomfortable.

Before they vote, we should make sure our Senators realize that by shutting people up, they will damage our democracy. They may even push some to more desperate, provocative, and unruly attempts to be heard. Instead of reducing social conflict, passing HR 9495 could well increase it.