House bill would affirm tax exemption is not federal ‘financial assistance’

CNA Staff, Apr 11, 2025 / 16:23 pm

A federal bill proposed this week would affirm that nonprofits and charities are not receiving federal “financial assistance” simply by being granted a tax-exempt status.

The Safeguarding Charity Act, introduced by Florida Rep. Greg Steube, would order that the term “federal financial assistance” in the U.S. code “shall not include any exemption from federal income tax.’’

The two-page bill would further direct that the government could not retroactively deem nonprofit groups as having received federal “assistance” prior to the bill’s passage.

Steube in a press release said the measure “is about protecting churches, religious schools, and charities from federal overreach.”

Oklahoma Sen. James Lankford introduced a companion bill in the U.S. Senate on Thursday. Lankford argued that tax-exempt organizations “should not live in fear of federal control every day because courts want to redefine the meaning of tax-exempt status.”

“We should be focused on enabling the work of these organizations — not burdening them with unnecessary and costly federal requirements,” he said.

The bill was previously introduced last year, though it ultimately stalled without passage.

Greg Baylor, a lawyer with the religious liberty law firm Alliance Defending Freedom, pointed to two recent district court rulings — Buettner-Hartsoe v. Baltimore Lutheran High School and E.H. v. Valley Christian Academy — that held that private schools were subject to federal Title IX regulations because of their tax-exempt status.

The U.S. Court of Appeals for the 4th Circuit ultimately overturned the ruling in the Lutheran school case. “Incorporating the plain meaning of that phrase, does tax-exempt status constitute accepting federal financial aid, help, or support? We think not,” the court ruled at the time.

ADF had last year filed a brief in support of the school, arguing that defining tax exemption as federal assistance would have “significant ramifications for private nonprofit institutions across the country.”

“If tax-exempt status itself constituted federal financial assistance, then churches, mosques, synagogues, temples, and other houses of worship across the country would automatically be swept into a host of new regulatory obligations because of their tax-exempt status, whether or not they request that status,” ADF said in its briefing.

Baylor pointed out that “no federal agency has ever attempted to force an organization to comply with a statute triggered by the receipt of federal financial assistance on the ground that it was tax exempt.”

Still, he said, if the “financial assistance” interpretation were widely embraced, “hundreds of thousands of tax-exempt organizations will be unexpectedly subject to burdensome federal statutes and regulations.”

These organizations would “incur substantial compliance costs and could potentially lose their tax-exempt status if they are found to have violated any of the relevant statutes,” he said.