Congress Revisits Terrorist-supporting Organization Legislation

Just before the holiday recess, Rep. David Kustoff (R-TN) introduced legislation that would revoke the tax-exempt status of any nonprofit organization found to provide material support to terrorist groups. Sen. John Cornyn (R-TX) introduced a companion measure in the Senate.

Similar legislation was introduced in the House in 2024 and attracted bipartisan support but stalled. The current iteration of the “terrorist-supporting organization” proposal has, to date, drawn support only from Republican lawmakers, and it remains unclear whether the tax-writing committees in either chamber will take up the measure in 2026.

The Kustoff bill would amend the Internal Revenue Code to revoke tax-exempt status for organizations that provide more than a de minimis level of support to a designated terrorist organization within a three-year period.

The legislation explicitly excludes lawful humanitarian aid approved by the Office of Foreign Assets Control or the State Department, with the concurrence of the attorney general. The Treasury-led designation process includes written notice, an opportunity to cure or contest the designation. It also includes administrative review through the IRS Independent Office of Appeals, and judicial review in federal district court. 

"Our tax laws should never be used to subsidize or shield organizations that help terrorists," Kustoff said. "There should be zero ambiguity and tolerance for non-profits that fund terrorists. This legislation ensures that groups providing material support to terrorist organizations lose their tax-exempt status and are held accountable. We must use every tool available to cut off support for terrorism and protect our national security."

This article was provided to OSAP by ASAE's Power of Associations and Inroads.