Proposed Bill Raises Guilt By Association Problems

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Date: 
April 10, 2017

A bill introduced by Rep. Ted Poe (R-TX) on April 6, 2017 ( HR 2058), the "Charity Transparency Act," would require U.S. charities and foundations to disclose to the Internal Revenue Service whether any leadership and highly compensated employees have at any time been “implicated in terror finance,” broadly defined as past employment or membership in a group found to be a supporter of terrorism or being named as an unindicted co-conspirator in a “terrorist financing scheme.” It would apply to applications for tax exemption and annual Form 990 returns, both of which are available to the public. In a statement about a similar bill proposed last year, Poe said the purpose is to inform donors. The bill raises serious concerns about guilt by association.

The bill would require disclosure of the names and addresses of officers, directors, trustees and highly compensated employees who “at any time” was:

·  a member or employee of a charity listed by Treasury (see the list here)

·  an unindicted co-conspirator "with respect to a terrorist financing scheme" of a listed group, or

·  an employee of a charity found civilly liable for a terrorist act (under 18 USC 2333)

The requirement would apply to both applications for tax-exemption and annual Forms 990. Poe introduced a similar bill in 2016. The bill has been assigned to the Ways and Means Committee. It has three co-sponsors: Paul Cook (R-CA), Scott Perry (R-PA) and Randy Weber (R-TX).

This proposal was made by Jonathan Schanzer of the Foundation for Defense of Democracies, who raised it in a Congressional hearing in May 2016 .(See related C&SN blog.) Schanzer also thinks the U.S. should be shutting down more charities despite lack of evidence that U.S. charities are funding terrorism. Then Treasury Assistant Secretary for Terrorist Financing Daniel Glaser answered a question from Rep. Poe about why more charities are not shut down by explaining that there are fewer such "for a variety of reasons," including the fact that Treasury has worked with the charitable sector over many years and has "reduced the opportunity for [charities] to be abused to facilitate financial support for terrorist groups" and the traditional terrorist group fundraising model of relying on charitable organizations is "not as prevalent as it used to be" in the U.S. Instead, groups now seek to raise funds "under the auspices of charitable giving, but outside of any charitable organization recognized by the U.S. Government." 

Including the names of individuals listed as unindicted co-conspirators in cases involving terrorist financing appears to be a reference to such a list associated with the Holy Land Foundation case, where the list was published despite a Justice Department policy that such lists are sealed. In that case the Fifth Circuit Court of Appeals held that such disclosure violated the due process rights under the Fifth Amendment. 

Detailed talking points on HR 2058 are available here.

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