Trump's 'big, beautiful bill' clears key committee, hurting foundations

U.S. President Donald Trump’s self-described “big, beautiful bill” made its way through a key congressional tax-writing committee on Wednesday, advancing a 389-page plan that would increase taxes on private foundations, place a 5% tax on remittances for non-U.S. citizens, and allow the government to revoke the tax-exempt status of organizations it says support terrorists. The changes are part of a sweeping budget package that’s making its way across Capitol Hill, one that would also slash billions of dollars for Medicaid and food stamps to help pay for trillions in tax and spending cuts. While the bulk of the bill is concentrated on domestic tax issues touching health care, family support, and energy, a collection of other provisions are embedded within its pages — many of which impact the philanthropic sector. There are several committees and pieces of legislation that will ultimately make up Trump’s bill. But after a marathon 17-plus hours of debate, lawmakers on the House Ways and Means Committee retained the provisions focused on non-profits and foundations, with their portion of the bill passing along party lines. The House Budget Committee will now be charged with stringing all that legislation together and presenting it to the full House of Representatives for a vote. “Ultimately, this tax will hurt those who can least afford it: the people and places that rely on charitable support to weather today’s challenges and prepare for tomorrow,” said Kathleen Enright, the president and chief executive officer of the Council on Foundations, in a statement released Monday. “That’s because aggressively taxing charitable foundations doesn’t just restrict today’s giving — it also reduces the resources available to support local organizations through future crises.” Republican lawmakers see the bill quite differently. Rep. Jason Smith, a Republican from Missouri and the chair of the House’s Committee on Ways and Means, said that “hardworking Americans like waitresses, mechanics, nurses, and farmers” would be “the winners” of the bill if it were to be passed. The legislation contains many of Trump’s campaign promises, from pulling taxes on tips to expanding a child tax credit for some families. But in a new analysis from the Urban Institute/Brookings Institution’s Tax Policy Center, the cuts seem to mostly benefit the country’s wealthiest, with the lowest-paid Americans receiving tax cuts of $120 — 0.6% of their post-tax income — while the highest earners would see cuts of more than $100,000, or nearly 5% of their post-tax income. It would also pour money into finishing Trump’s border wall, provide an enhanced tax deduction for senior citizens, and create savings accounts for newborns, the latter of which would be coined the “money account for growth and advancement,” or “MAGA account.” To pay for it, the bill would raise the country’s debt limit by $4 trillion, rescind tax credits for clean energy, and strip Medicaid coverage from millions of Americans. “When lawmakers harm nonprofits, they threaten the very fabric that holds our communities together.” --— Diane Yentel, CEO, National Council of Nonprofits “This legislation pours gasoline on the fire that’s already burning,” said Rep. Richard Neal, a Democrat from Massachusetts, speaking at Tuesday’s Ways and Means hearing. There are still several steps before the bill is finalized, as all the pieces of legislation must now be rolled into the full package. After that, the combined legislation needs to be passed in the House before sliding over to the Senate, which is preparing its own version of the package. And if passed in that chamber, the two bills would then need to be reconciled before going to the president’s desk. House Speaker Mike Johnson has set a goal of passing the package out of the House before May 26, with a final product expected in early July. If that happens, the bill will have huge implications for foundations, a group of donors that have become ever more critical after Trump’s cull of U.S. foreign aid. ‘Robbing charity to fund government’ Four months after the Trump administration dissolved U.S. foreign aid, some foundations have surged their philanthropic spending — and many have hoped that maybe, philanthropy could at least partially fill the gap left by the U.S. government. But after the draft legislation was released on Monday, foundations and the networks representing them went into overdrive. Philanthropy Roundtable, a nonprofit that advises conservative philanthropists, said the proposal was “robbing charity to fund government.” The National Council on Nonprofits, a network of charitable organizations, urged nonprofits to ask their Republican representatives to oppose the bill. “Congress is moving fast,” wrote Paul Daugherty, the head of Exponent Philanthropy, in an alert to the network’s members on Tuesday. “Your voice is urgently needed.” During Tuesday’s hearing, lawmakers focused on the domestic implications of the bill — but across the philanthropic sector, there was a vastly different set of concerns. First, there was the tiered taxation system. The bill would only maintain the current tax rate on investment income — 1.39% — for foundations with assets below $50 million. Those with assets between $50 million and $250 million would pay 2.78%, while those with assets between $250 million and $5 billion would pay 5%. And the largest foundations — those with assets above $5 billion — would be taxed at 10%. “The proposed tax hike on foundations would reduce the resources available for effective charitable groups advancing liberty, opportunity and personal responsibility,” said Christie Herrera, the head of the Philanthropy Roundtable, in a statement released Tuesday. “This is devastating for charitable giving and the millions of Americans who rely on it — and who will be hit the hardest.” A ‘five-alarm fire’ There’s also a clause in the bill that extends beyond philanthropies: the revocation of tax-exempt status for nonprofits allegedly supporting terrorism. While doing so is already prohibited by law, critics say that the new legislation would allow the secretary of the Treasury to unilaterally designate nonprofits as “terrorist supporting organizations” with little due process. “This provision opens the door for partisan abuse by a politicized IRS [Internal Revenue Service] when, under U.S. law, the IRS is supposed to operate independently from political pressure,” Enright told Devex. “This provision would require designated organizations to prove their innocence, which is certainly the wrong way around. Even if the secretary’s decision were successfully reversed, the organization would face irreparable damage.” The bill would also implicate organizations that might have unknowingly supported a terrorist organization through distant connections. For example, if a fiscal sponsor of an organization supports another group that then supports a terrorist organization, the first group could have its tax-exempt status stripped. It’s a revival of an earlier bill introduced last fall, which passed in the House but not in the Senate. At the time, the Stop Terror-Financing and Tax Penalties on American Hostages Act was blasted by human rights groups and nonprofits, with more than 350 organizations stating their “deep concerns” with the bill in a letter to House Speaker Johnson. Once that language was reintroduced in draft legislation on Monday, nonprofits had the same reaction — with Fight for the Future, a nonprofit advocacy group, calling the provision a “five-alarm fire for nonprofits nationwide.” “Any organization with goals that do not line up with MAGA [Make America Great Again] can be destroyed with a wink from Trump to the Treasury,” said Lia Holland, the campaigns and communications director at Fight for the Future, in a statement. “This is a first amendment issue — no President should have the right to destroy nonprofits for no reason.” The bill would also raise taxes on remittances — a flow of money that’s long outstripped foreign aid — forcing non-U.S. citizens to pay a new 5% tax on money sent overseas. It would boost taxes on university endowments from 1.4% to as high as 21%. And it would require corporations to contribute at least 1% of their pre-tax profits to qualify for a charitable tax deduction. Today, the average corporate grantmaker donates 0.92% of its pre-tax profit, according to the Chief Executives for Corporate Purpose network. The 1% floor may discourage companies from contributing to philanthropic causes altogether, Enright explained. “When lawmakers harm nonprofits, they threaten the very fabric that holds our communities together,” said Diane Yentel, CEO of the National Council of Nonprofits, in a statement. “They undermine the hard work of mission-driven individuals dedicated to making our neighborhoods stronger and more resilient.” Now that the bill has passed the Ways and Means Committee, the bill will be combined with other legislation and sent to the floor of the House for a vote as early as next week.