Sen. Tom Cotton (R-Ark.) is introducing a bill to require so-called “passthrough charities” to report on the destinations of donations they receive and forward to other entities, and to subject the charities to a heavy tax penalty if they don’t conduct oversight of the recipients of their largesse.
The development was reported by the Washington Free Beacon.
“Far-left terrorist organizations shouldn’t be able to manipulate our tax code for their advantage,” Cotton stated. “My bill would require public disclosure of these activities, tax the charities that don’t control where their money is spent and end tax write-offs for donors who bankroll these unchecked arrangements.”
Current law dictates that a charity registered with the Internal Revenue Service and handling tax-deductible donations can choose to send that money to an unregistered, non-charitable group, in a process known as “fiscal sponsors.”
Cotton stated that the law “allows far-left radical groups, like the Palestinian Youth Movement, to manipulate the U.S. tax code.”
Critics have noted that tax-exempt donations have also been passed to other U.S.-sanctioned and terror-linked anti-Israel groups.
The Fiscal Sponsorship Transparency Act would mandate Form 990 disclosure of fiscal sponsorship arrangements, impose an excise tax on improper conduit arrangements and deny the charitable deduction for conduit contributions.
Rep. Lloyd Smucker (R-Pa.) is leading companion legislation in the House.
