America’s charitable sector is one of our nation’s greatest strengths. Every day, millions of Americans voluntarily give their time, talent and treasure to solve problems, strengthen communities and help their neighbors. That tradition rests on a simple but profound principle: while philanthropy serves the public good, it remains fundamentally private.
That distinction matters.
Public money requires transparency. Private money is private.
The charitable deduction does not transform a private gift into public property. A nonprofit’s tax-exempt status does not make it an arm of the government. Americans do not surrender their First Amendment rights simply because they choose to support a church, food bank, veterans’ organization or local charity. As Philanthropy Roundtable has long argued, civil society is strongest when citizens are free to build and support the institutions of their choice. That principle was tested during the July 22 House Ways and Means Committee markup.
The committee considered three bills intended to address concerns about foreign influence and abuse of charitable organizations. The issue is not whether bad actors should be stopped, but how. Terrorists should not exploit charities. Foreign adversaries should not influence American institutions. Criminals should not use nonprofits to launder money or evade the law.
But none of those activities is legal today, and the committee cited only a few examples to justify legislation affecting more than 1.5 million charities. Federal law already prohibits material support for terrorism. It already prohibits foreign nationals from making contributions in connection with American elections. It already prohibits money laundering, tax fraud and sanctions violations. The very examples cited throughout the committee’s discussion were uncovered using authorities that already exist.
The question before Congress, then, is not whether bad actors should be stopped. They should.
The question is whether the right response is to expand federal oversight of every legitimate charity in America.
The answer is no.
Two of the bills considered this week would require nonprofits to know the identity of every donor, eliminating the age-old tradition of anonymous gifts. These bills also create new reporting obligations and expose charitable organizations to significant compliance costs and penalties. Those burdens would not fall on terrorists or sophisticated foreign influence operations. They would fall on legitimate nonprofits, volunteers and donors.
Consider how charitable giving actually works.
Every holiday season, Americans anonymously place cash into Salvation Army red kettles. Families round up purchases at the grocery store to support local charities. Churches receive cash offerings in the collection plate. Community organizations collect small-dollar gifts from neighbors who simply want to help without recognition.
These are not loopholes.
They are longstanding traditions of American generosity. Yet H.R. 9772 and H.R. 9771 would require charities to know the nationality of every donor. Committee members themselves acknowledged the practical implications of requiring organizations to collect this previously uncollected information, even for contributions as small as a quarter tossed into a fountain.
That should give Congress pause. Another concerning bill that passed out of committee was H.R. 9721, which impacts fiscal sponsorships. Fiscal sponsorship has long allowed experienced nonprofits to provide financial oversight, administrative support and legal compliance for charitable projects that are too small or too new to operate independently. It helps launch new charities respond quickly to disasters and bring resources to rural communities that often lack the capacity to establish standalone nonprofit organizations.
But broad new reporting mandates, vague statutory standards and significant penalties hanging over every single volunteer board member and small town nonprofit leader are not a substitute for targeted enforcement. They risk making it harder for legitimate community organizations to serve the very people who depend on them.
One theme emerged repeatedly during the committee’s discussion. It was suggested that because charitable giving receives favorable treatment under the tax code, taxpayers are entitled to greater transparency into private philanthropy.
That is a dangerous premise.
If accepted, there is no limiting principle. Every tax deduction, exemption or charitable incentive could become justification for expanding government oversight of private giving. Over time, the distinction between private philanthropy and public programs begins to disappear.
America has wisely rejected that approach.
Our charitable sector exists precisely because citizens are free to organize independently of government, support causes they believe in and address community needs through voluntary action. That independence has made American civil society the envy of the world.
Congress should be careful not to weaken it.
Lawmakers should absolutely pursue terrorists, foreign agents, tax cheats and anyone else who exploits charitable organizations for illegal purposes. Existing law gives the government substantial authority to do exactly that.
What Congress should not do is respond to a handful of alleged bad actors by imposing sweeping new burdens on more than 1.5 million charities and the millions of Americans who support them.
Protecting civil society requires protecting the freedom that makes it possible.
That means enforcing the law against those who break it while preserving the privacy, independence and voluntary spirit that have always defined American philanthropy.
