Congressional Bill Would Protect Tax-Exempt Status of Charities

It would reaffirm that the status is not equivalent to financial assistance from the government.

Congressional representatives are seeking to protect the freedom of tax-exempt charitable groups by filing the Safeguarding Charity Act. The bill would reaffirm that a tax-exempt status is not financial assistance, making a group subject to federal regulations.

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Rep. Greg Steube (R-FL) and Sen. James Lankford (R-OK) have authored bills clarifying that “‘Federal financial assistance,’ or any other term referring to assistance provided by the Federal Government, shall not include any exemption from Federal income tax.’’

According to Philanthropy Roundtable, accepting federal financial assistance triggers compliance with many federal rules and regulations. If a charity doesn’t comply with these regulations, their tax-exempt status may be jeopardized.

In recent years, some district courts have ruled that a private school’s tax-exempt status is federal financial assistance, thus making the schools subject to federal laws like Title IX. However, in 2024, the U.S. Court of Appeals for the Fourth Circuit reversed that finding in one of the cases, distinguishing a tax exempt status from money being granted to students attending the school.

Steube wants to prevent further court rulings that jeopardize charities. “Radical judges do not have the authority to twist federal law and force religious institutions to choose between their convictions and compliance,” he said in a press release.

“The Safeguarding Charity Act reaffirms that tax-exempt status does not mean an organization is receiving federal financial assistance. This bill is about protecting churches, religious schools, and charities from federal overreach,” he said.

Lankford’s legislative goal is to clarify that a tax-exempt status is not federal assistance, so that charitable organizations don’t “live in fear of federal control every day because courts want to redefine the meaning of tax-exempt status.”

Groups like Alliance Defending Freedom (ADF), Family Research Council, Citygate Network, Association of Christian Schools International (ACSI), and Ethics and Religious Liberty Commission are supporting the bill.

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The ACSI, an accreditation group for Christian schools, supports the bill. Christian schools have faced litigation based on their tax-exempt status. “This legislation is critical to set the record straight: an organization’s non-profit status is not the receipt of federal financial assistance. It never has been. It is not now. Politically motivated lawsuits based on this false premise must stop, or else all non-profits will be at risk,” said George Tryfiates, ACSI vice president for public policy.

“Charities and other nonprofits provide invaluable services to their communities. In part to recognize their critical work, nonprofits are tax-exempt so that they can devote scarce resources to serving those in need,” Greg Baylor, senior counsel for ADF, said of the bill.

“ADF commends Sen. Lankford and Rep. Steube for introducing the Safeguarding Charity Act to protect nonprofits from these financially crushing burdens so that nonprofits can continue to serve their communities free from unfair and unexpected government overreach.”

ERLC President Brent Leatherwood supports the bill because “[r]ecent court decisions have wrongly conflated these two ideas, endangering vital religious liberty protections and subjecting churches and faith-based nonprofits to harmful, undue federal regulations.”

Similar legislation was introduced by former Sen. Marco Rubio and Steube in 2024. The bill was referred to committees in both houses, but it never received a vote.

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