Paul L. Caron

Saturday, November 18, 2023

Terrorism And Tax Advantages: Universities And Anti-Israel Groups May Face Scrutiny Of Their Nonprofit Status

Wall Street Journal Op-Ed:  Terrorism and Tax Advantages, by Leslie Lenkowsky (Indiana):

Missouri Rep. Jason Smith denounced universities and student organizations for statements “celebrating, excusing, or downplaying” the Oct. 7 attacks by Hamas in Israel. “Releasing such statements, or failing to condemn them,” he said last month, “is unforgivable and runs counter to our values as a nation.”

Mr. Smith’s comments have more weight than most because he is chairman of the House Ways and Means Committee, which has jurisdiction over tax policy. That includes policies governing nonprofit organizations, including colleges and universities as well as groups issuing statements and staging rallies throughout the U.S. Statements celebrating Hamas’s violence, Mr. Smith adds, “call into question the academic or charitable missions they claim to pursue”—in other words, their tax breaks.

The U.S. has traditionally given charities and their supporters great leeway in handling controversial issues. Constitutional guarantees of free speech and assembly protect their activities and require government to demonstrate a strong reason for restricting them. But Congress and the Supreme Court—as well as nearly three dozen states—have agreed that providing aid to terrorist groups like Hamas is a justifiable reason to forbid donors from supporting them.

Mr. Smith’s statement suggests the tax exemptions of organizations backing Hamas—or tolerating such activity—may be in for congressional scrutiny. Virginia’s Attorney General Jason Miyares has launched an investigation of AJP Educational Foundation, aka American Muslims for Palestine. Mr. Miyares’s office said in a press release that it is looking into whether the group “used funds raised for impermissible purposes under state law, including benefitting or providing support to terrorist organizations,” as well as whether it was properly registered to solicit contributions in the state.

But apart from the constitutional issues involved, taking action against these groups won’t be easy. ...

“Charities that encourage violence and cheer on extremism are not contributing to society with any of the purposes the IRS allows,” Elizabeth Schmidt, a nonprofit-law expert at the University of Massachusetts Amherst, wrote last spring. She was looking at right-wing extremism, particularly whether the Oath Keepers Foundation—the fundraising arm of the main group involved in the attack on Congress in 2021—deserved the tax exemption it had at the time. Her conclusion seems to apply with even greater force to the organizations now defending Hamas, minimizing terrorism and calling for the destruction of Israel.

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