Controversial bill passes in the House with Panetta's support, empowering Treasury Department to crack down on nonprofits.

The U.S. House of Representatives voted on Thursday, Nov. 21 to pass a controversial bill with provisions empowering the U.S. Treasury Secretary to take action to revoke the tax-exempt status of nonprofits that are believed to be providing material support to designated terrorist organizations. 

While an earlier version of the bill started out with widespread bipartisan support when it first came up for a vote on the House floor last spring, opposition has been mounting from dozens of civil society organizations and nonprofits, alarmed that it would give the Treasury too much power to effectively shut down nonprofits. 

Support from Democrats has steadily waned each time the bill came up for a vote. U.S. Rep. Adam Schiff, who is a senator-elect, voted no on Thursday. 

"As Donald Trump continues to make it clear that he intends to weaponize every lever of the federal government to go after his detractors, I have grown more concerned that the discretion it gives an administration to punish its critics could be abused and further empower the incoming administration’s worst impulses," Schiff wrote in a statement about his vote. "For that reason, I voted no."

U.S. Rep. Zoe Lofgren, D-San Jose, already voted no earlier in November, after a yes vote last spring. 

"The bill risks undermining civil liberties, reducing transparency, and diverting resources away from more effective counterterrorism strategies," Lofgren says by email. "We must be cautious not to overreach with legislation that, though well-intentioned, could lead to unintended consequences that weaken both national security and individual rights."

One Democrat who has maintained support is U.S. Rep. Jimmy Panetta, D-Carmel Valley, who also serves on the Ways and Means Committee, which marked up and voted on a much earlier version of this bill about a year ago. 

Panetta issued a lengthy statement explaining his vote. "The incoming Administration will test our political fortitude,” he said. “That is exactly why I ensure that our policies are secure with guardrails and appeals, as I did in HR 9495. Moreover, as I have proven in the past, I will continue to fight against any abuse of power through our system of checks and balances that is secure, strong, and steadfast.”

HR 9495 passed on a 219-184 vote on Thursday, with just 15 Democrats voting yes, compared to 183 voting no. Republican representatives cast 204 yes votes compared to one nay. 

Representatives of dozens of organizations signed a letter to House leadership urging them to vote no on the bill. "The executive branch could use this authority to target its political opponents and use the fear of crippling legal fees, the stigma of the designation, and donors fleeing controversy to stifle dissent and chill speech and advocacy," the ACLU and dozens of partnering signatories wrote. "And while the broadest applications of this authority may not ultimately hold up in court, the potential reputational and financial cost of fending off an investigation and litigating a wrongful designation could functionally mean the end of a targeted nonprofit before it ever has its day in court."

The origin of the legislation came from hearings about antisemitism and pro-Palestinian campus protests following Hamas' devastating Oct. 7 attack on Israel. According to a report by the Jewish Telegraphic Agency, more than 55 Jewish groups also joined together to oppose the bill—notable exceptions were the Anti-Defamation League, which asked for stronger due process measures to be incorporated, and AIPAC.

Other groups including Hadassah, the National Council of Jewish Women and the Jewish Council for Public Affairs signed a letter urging lawmakers to reconsider, and think about the chilling effect on free speech.

"No individual, including a Treasury secretary, should be given nearly unfettered power to remove an organization’s tax-exempt status,” they wrote. “We urge you to seek solutions that make the nation safer, instead of advancing those that threaten constitutional rights.”