Tax committee Republicans press for Treasury crackdown on nonprofits promoting fraud, 'anti-American' hate
As nonprofits draw increasing scrutiny over bilking taxpayers with fraudulent schemes and organizing divisive protests nationwide, House Ways and Means Committee Chairman Jason Smith and all 25 Republican members of the committee are pressing Treasury Secretary Scott Bessent to crack down on organizations that are "manipulating the Tax Code" to operate tax-free while promoting "anti-American and/or pro-terrorist ideals" and engaging in "significant fraud, waste, and abuse of taxpayer dollars."
The request marks one of the most aggressive congressional pushes in memory to revoke tax-exempt status, expand audits and rein in what lawmakers describe as systemic failures in policing the nonprofit sector.
In the letter, obtained by Fox News Digital, Smith and the Republican lawmakers wrote to Bessent, who is acting IRS commissioner, and Frank Bisignano, who is the CEO at the IRS, and warned of a growing pattern of tax-exempt organizations pursuing activity that falls outside legitimate charitable purposes.
Smith and the lawmakers said they were writing to "express concern" over "significant fraud, waste, and abuse of taxpayer dollars" and urged the IRS to "transition from the laissez-faire approach implemented under the Biden administration and utilize a more hands-on approach" when overseeing nonprofits.
COMER VOWS MINNESOTA FRAUD PROBE WILL EXPAND TO OTHER STATES AMID MOUNTING SCRUTINY
They cited the massive fraud scandal in Minnesota, in which officials at the nonprofit Feeding Our Future were prosecuted and convicted for stealing an estimated $250 million from federal social welfare programs intended to feed low-income children. The case has resulted in dozens of indictments and criminal convictions. Amid the widening scandal, Minnesota Gov. Tim Walz chose not to run for a third term.
Bessent announced last month that he was opening an investigation into allegations that some of the stolen funds may have been routed to regions of Somalia where they could have ended up benefiting Al-Shabaab, a U.S.-designated foreign terrorist organization.
The case, Smith and the lawmakers wrote, "calls into question the current safeguards in place to protect taxpayer dollars."
"It is unconscionable that the Biden Administration’s failure to hold the United States’s non-profit sector accountable has not only resulted in the theft of billions of American taxpayers’ hard-earned dollars, but the potential enrichment of foreign terrorist organizations overseas," Smith told Fox News Digital Tuesday. "As the Ways and Means Committee continues to investigate every corner of the tax-exempt sector to root out this waste, fraud, abuse and illegal activity, it is now abundantly clear the system is in desperate need of an overhaul."
"I applaud President Trump’s bold move to hold bad actors in the Minnesota Somali fraud scheme accountable and look forward to working with his Administration to ensure this rampant fraud is ended once and for all," Smith added.
Along with Smith, the other 25 Republican lawmakers from the Ways and Means Committee who signed the letter are: Reps. Jodey Arrington, Aaron Bean, Vern Buchanan, Mike Carey, Ron Estes, Randy Feenstra, Michelle Fischbach, Brian Fitzpatrick, Kevin Hern, Darin LaHood, Mike Kelly, David Kustoff, Max Miller, Nicole Malliotakis, Carol Miller, Blake Moore, Nathaniel Moran, Greg Murphy, Adrian Smith, Lloyd Smucker, David Schweikert, W. Gregory Steube, Claudia Tenney, Beth Van Duyne and Rudy Yakym.
The House Ways and Means Committee has referred 11 nonprofits to the Treasury Department for investigation and revocation of their tax-exempt benefits, citing allegations of antisemitism, illegal activity, terrorism ties and foreign influence. The organizations have denied wrongdoing.
They include The People's Forum, a New York-based nonprofit that has organized nationwide anti-ICE protests over the past two weeks with its related organization, the Party for Socialism and Liberation. The People’s Forum is under scrutiny for alleged ties to the Chinese Communist Party through its funding networks. Its primary donor has been Neville Roy Singham, an American-born tech entrepreneur living in Shanghai who has publicly embraced Marxism and promoted China's political and economic model.
The People's Forum has organized a national day of protests Tuesday with other organizations, including the Party for Socialism and Liberation, in their efforts to dismantle U.S. "imperialism."
In the letter, Smith and the Republican lawmakers said the committee is "actively investigating American non-profits operating as extensions of the Chinese Communist Party."
Earlier this month, Smith referred the Council on American-Islamic Relations-California for investigation and potential revocation of its tax-exempt status, alleging it may have "materially supported unlawful conduct, including endorsing and assisting disruptive and illegal campus encampments that led to hundreds of arrests across California." He also raised questions about the group’s "reported involvement in overtly political activity and protests that devolved into chaos, violence and law breaking" in "conduct that may violate longstanding restrictions on tax-exempt organizations."
Section 501(c) of the Internal Revenue Code was enacted as part of the Revenue Act of 1913 to encourage and formalize charitable, civic, labor and other public-interest activities by granting tax-exempt status to qualifying organizations, and today it contains 29 categories of tax-exempt entities, including 501(c)(3) charities, 501(c)(4) social-welfare groups, 501(c)(5) labor unions, 501(c)(6) trade associations and other specialized nonprofit organizations.
There are an estimated 1.8 million tax-exempt organizations in the United States, according to the IRS, with an estimated $1.4 trillion in annual revenues, making tougher oversight potentially far-reaching.
An organization applies for the special status, and, if they qualify, they are exempt from paying federal income taxes on money they receive that is related to their mission, such as donations, grants and program revenue. In addition, contributions made to these nonprofit organizations are also tax-deductible for donors, making the status especially valuable.
Last week, Bessent announced the launch of IRS audits of financial institutions that "facilitated the laundering of Minnesota funds," along with the creation of a task force focused on fraud and abuse involving 501(c)(3) tax-exempt status.
In their letter, Smith and Republican lawmakers urged Bessent to "use your authority at the IRS to hold tax-exempt organizations accountable" and to ensure that schemes like Feeding Our Future "cannot happen again."
Together, they said, the cases illustrate a systemic failure to police the nonprofit sector.
Nonprofit organizations drew particular scrutiny after they led anti-Israel protests following the Oct. 7, 2023, attack on Israel by Hamas terrorists. In late September 2024, Smith sent a letter to New York Attorney General Letitia James urging an investigation into The People’s Forum and the Westchester Peace Action Committee Foundation, known also as WESPAC, alleging they had "aided and abetted riots and unauthorized encampments across the country."
"This conduct is designed to sow chaos and discord in our society," Smith wrote, adding that it had "involved illegal activities."
The committee has also urged the revocation of the nonprofit status of Americans for Justice in Palestine Educational Foundation and American Muslims for Palestine, warning about "alarming conduct" by the two groups in their anti-Israel protests.
On July 24, 2024, Zaid Mohammed Mahdawi, 26, a leader of the Richmond chapter of American Muslims for Palestine, climbed atop a monument at Columbus Circle in front of Union Station and spray-painted an ominous message: "HAMAS IS COMIN'." He included the inverted red triangle, which is a symbol that Hamas terrorists use to designate enemy targets. The FBI arrested Mahdawi for destruction of government property, and he was sentenced to 10 days in prison. The ANSWER Coalition, which works closely with The People's Forum, obtained the permit for that day's protest, where a U.S. flag was also burnt.
Smith has also asked for the revocation of the tax status of the People Media Project, which publishes "The Palestine Chronicle," alleging the group may have been "circumventing its tax-exempt charitable purpose by supporting the terrorist organization, Hamas." The concern followed reporting that a contributor to the outlet allegedly participated in holding Israeli hostages in Gaza.
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He has also urged revocation of the nonprofit status of Jewish Voice for Peace, a co-organizer of many anti-Israel protests that have turned anti-semitic, and the Alliance for Global Justice, a 501(c)(3) that served as the fiscal sponsor for Samidoun, a group designated by the Treasury Department as a "sham charity" that allegedly raises funds for the Popular Front for the Liberation of Palestine, a U.S.-designated terrorist organization.
In November, former Georgia state Rep. Stacey Abrams shut down her nonprofit, the New Georgia Project, after the Way and Means Committee raised questions about the 501(c)(3) organization contributing funds to Abrams' 2018 gubernatorial race.