By Nancy Ortmeyer Kuhn
Section 501(p) of the Internal Revenue Code, which came into being, on November 11, 2003, suspends the tax-exempt status of “terrorist organizations.”
If the government blocks its assets, the organization’s name then appears on the “Specially Designated Nationals (SDN) List” identifying it as a terrorist organization.
The organization has the right to file an administrative form with the Office of Foreign Assets Control (OFAC), attempting to reclaim the seized assets.
After the organization is on the SDN list or designated by Executive Order, the IRS has the authority to indefinitely suspend the organization’s tax-exempt status.
According to the statute, the rights of the organization at that point to administrative or judicial review are extinguished.
There is no right to a review of the IRS’ actions, or to any continued administrative or judicial review of the designation of the organization as a terrorist organization.
I applaud the government for taking steps to shut down terrorist organizations. There is evidence that limited funding to charities has been diverted to fund terrorism.
However, I am concerned that the federal government has been given excessive authority by Congress and the president to address the problem, and there is no meaningful review of these governmental actions.
The danger, of course, is that international philanthropy will become so difficult that legitimate charities will withdraw support for the essential humanitarian aid that currently relieves the suffering of people in third world countries.
If this international aid is removed, the effect will likely be increased terrorism due to the increased hopelessness of the people affected.
Another concern relates to the government’s definition of terrorism, and what constitutes the support of terrorist activities.
Is humanitarian aid to the extended families of suicide bombers, for example, providing aid in support of terrorism?
The government’s answer is ‘yes.’
If a charity sends money overseas for international humanitarian relief and, without the charity’s knowledge, the funds are diverted to support terrorism, then is the U.S. charity supporting terrorism?
Again, the answer may be ‘yes,’ but what is more alarming is that the charity will not have meaningful legal rights to prove that lack of knowledge.
Clearly, terrorist organizations masquerading as charities must be shut down.
I am concerned that legitimate, well-meaning charities will be caught in this dragnet with few rights and no recourse after the IRS suspends the charity’s exempt status.
Therefore, charities engaged in international philanthropy need to be aware of these provisions and need to take steps now to protect their interests.
Nancy Ortmeyer Kuhn is a partner in the Washington, D.C., law firm of Powell, Goldstein, Frazer & Murphy.