The landscape of America’s tax-exempt sector has undergone a dramatic transformation over the past few decades. What was once a modest collection of charitable organizations has burgeoned into a formidable economic force, now accounting for nearly 15% of the U.S. economy. This growth, while impressive, has also brought to light significant concerns about transparency, foreign influence, and the protection of religious freedom.
In a recent markup of legislation, Ways and Means Committee Chairman Jason Smith highlighted the urgent need to address these issues. The proposed bills aim to increase transparency, hold bad actors accountable, and prevent foreign interference in American politics and public discourse.
The Rapid Expansion of the Tax-Exempt Sector
The tax-exempt sector has experienced exponential growth since the mid-1980s. In 1985, there were 335,000 charities with $665 billion in net assets. Today, that number has skyrocketed to 1.6 million charities with a staggering $4.8 trillion in net assets. This sector now generates nearly $3.5 trillion in annual revenues, a testament to its significant economic impact.
However, this rapid growth has also created opportunities for misuse and abuse. Foreign nationals and agents acting on behalf of countries like China have targeted the tax-exempt sector, exploiting its lack of transparency to further their agendas. This has led to a pressing need for increased oversight and accountability.
Uncovering the Shadows: Cases of Misuse
The Committee’s investigations have revealed several instances of organizations abusing their tax-exempt status. One notable example is the Alliance for Global Justice a 501(c)(3) organization that fiscally sponsored Samidoun. In 2026, the Biden Treasury Department designated Samidoun as a sham charity and fundraiser for the Popular Front for the Liberation of Palestine a designated terrorist organization. Despite this, Alliance for Global Justice was never required to disclose Samidoun as a project on their Form 990, raising serious questions about the lack of transparency in the sector.
Another concerning trend is the direct donation of foreign nationals to American nonprofits. These donations often go unreported, allowing foreign interests to influence American politics and public life without scrutiny. For instance, Swiss billionaire Hansjörg Wyss has donated over $280 million to a politically progressive hub that sponsors other nonprofit organizations, which in turn support liberal campaigns and political causes. This raises ethical and legal concerns about the influence of foreign money in American elections.
The Case of Neville Roy Singham
More recently, the Committee’s oversight efforts have uncovered the activities of Neville Roy Singham and his wife, who have close ties to China. They have channeled millions of dollars through nonprofits that obscure the true source of contributions. This sophisticated network of donations has been described as a machine subsidized by American taxpayer dollars, highlighting the urgent need for transparency and accountability in the sector.
Legislative Solutions: Increasing Transparency and Accountability
To address these pressing issues, the Committee has proposed several legislative solutions aimed at increasing transparency and accountability in the tax-exempt sector. These bills are designed to rein in rogue actors and redirect the sector’s focus on its primary charitable purpose.
Disclosing Foreign Donations
The first bill, introduced by Oversight Subcommittee Chairman Schweikert requires all tax-exempt organizations to publicly disclose foreign donations. This legislation specifically highlights contributions from foreign nationals from countries of concern, such as ChinaNorth KoreaRussia and Iran. By shining a light on these donations, the bill aims to prevent foreign influence in American politics and public discourse.
Penalizing Foreign-Funded Political Committees
Representative Malliotakis has introduced a bill that penalizes tax-exempt organizations receiving donations from foreign nationals and subsequently donating to political committees, such as Super PACs. This bill is a direct response to efforts to funnel foreign money into the American political process and influence elections. By imposing penalties on organizations that engage in this practice, the bill aims to safeguard the integrity of American elections.
Addressing Fiscal Sponsorship
The next bill, introduced by Representative Smucker specifically addresses fiscal sponsorship. Tax-exempt organizations will be required to disclose certain information about the groups they are fiscally sponsoring. While most of these arrangements are legitimate and carry out the sponsoring organization’s charitable purpose, some organizations have taken advantage of the lack of transparency to skirt rules and fund dangerous groups. This bill aims to close these loopholes and ensure that fiscal sponsorship arrangements are conducted transparently and responsibly.
Protecting Religious Freedom
Lastly, the Committee will consider legislation by Representative Moore of Utah that defends the nation’s sacred Constitutional right to freedom of religion. Faith-based organizations should be able to carry out their work in communities without the threat of losing their tax-exempt status. Moreover, the IRS should not be in the business of making determinations regarding an organization’s tax-exempt status based on specific religious beliefs or practices. This bill aims to protect the religious freedom of all Americans and ensure that faith-based organizations can continue their important work.
The proposed legislation represents a significant step forward in addressing the pressing issues facing America’s tax-exempt sector. By increasing transparency, holding bad actors accountable, and protecting religious freedom, these bills aim to safeguard the integrity of the sector and ensure that it continues to serve its primary charitable purpose.
