New US legislation aims to eliminate tax-deductible gifts to terror-tied groups

Senator Tom Cotton (R-Ark.) has introduced the Fiscal Sponsorship Transparency Act, a bill aimed at preventing “far-left terrorist organizations” from exploiting U.S. tax laws. The legislation, also sponsored in the House by Rep. Lloyd Smucker (R-Pa.), targets “passthrough charities” that act as “fiscal sponsors” by forwarding tax-deductible donations to unregistered entities. Cotton stated, “Far-left terrorist organizations shouldn’t be able to manipulate our tax code for their advantage.” The bill would require these charities to disclose the destinations of donations on Form 990, impose an excise tax on improper conduit arrangements, and deny tax write-offs for donors if the charities fail to oversee recipients. This initiative seeks to close a loophole that critics say allows groups like the Palestinian Youth Movement and other terror-linked organizations to benefit from tax-exempt donations.