S-3554 : Still Just a Bill

This bill, titled "To amend the Internal Revenue Code of 1986 to terminate the tax-exempt status of terrorist supporting organizations" (S. 3554), seeks to amend the Internal Revenue Code of 1986 by adding a new paragraph to Section 501(p). The core purpose of this legislation is to revoke the tax-exempt status of organizations determined to provide material support to terrorist groups. Key provisions of the bill include:

• Definition of a "Terrorist Supporting Organization": An organization designated by the Secretary of the Treasury as having provided, within the preceding 3-year period, material support or resources (exceeding a de minimis amount) to an organization whose tax-exempt status has been suspended due to terrorist activities.
• Exclusions from "Material Support": The term "material support or resources" generally aligns with 18 U.S.C. 2339B(g)(4), but specifically excludes:
  • Support or resources approved by the Secretary of State with the concurrence of the Attorney General.
  • Humanitarian aid provided with the approval of the Office of Foreign Assets Control (OFAC).
• Designation Procedure:
  • Notice Requirement: Before designation, the Secretary must mail a written notice to the organization, detailing the intent to designate, the supported organizations, and a description of the material support (unless national security or law enforcement interests prevent full disclosure).
  • Opportunity to Cure: Organizations have 90 days from the notice date to avoid designation by:
    • Demonstrating they did not provide the alleged support.
    • Making reasonable efforts to retrieve the support and certifying in writing that no further support will be provided (this certification is not valid if used within the prior 5 years).
    • If the Secretary withheld descriptive information for national security reasons, filing a complaint in a U.S. district court alleging the determination was erroneous.
• Rescission of Designation: The Secretary must rescind a designation if it was erroneous, if the organization did not receive the initial notice and subsequently satisfies the cure requirements (subject to a 5-year limitation on re-certification of non-receipt), or if the tax-exempt suspension periods for all supported organizations have ended.
• Administrative and Judicial Review:
  • Disputes regarding designation are subject to resolution by the Internal Revenue Service Independent Office of Appeals.
  • U.S. district courts have exclusive jurisdiction to review the Secretary's determination to withhold information for national security reasons and any final designation as a terrorist supporting organization.
  • Classified information, if relevant, may be submitted to the reviewing court ex parte and in camera.
• Effective Date: The provisions of this bill will apply to designations made after the date of its enactment in taxable years ending after such date.