Two members of the U.S. House of Representatives introduced a bipartisan bill to make sure that a nonprofit organization’s tax-exempt status cannot be legally classified as federal financial assistance.
The legislation, titled the Safeguarding America’s Nonprofits Act, was introduced by Rep. Greg Steube, R-Fla., and Rep. Suzan DelBene, D-Wash. If passed, the measure would amend Section 501 of the Internal Revenue Code to specify that federal income tax exemptions do not constitute federal aid for organizations classified under sections 501(c), 501(d), or 401(a).
The lawmakers said the proposal is designed to resolve legal questions surrounding whether tax exemptions carry the same regulatory requirements that apply when groups accept direct federal funding.
“Nonprofits across the country depend on their tax-exempt status to carry out their work. That status should never be treated as a form of government assistance,” Steube said. “The Safeguarding America’s Nonprofits Act puts a clear, permanent rule in statute so nonprofits do not have to worry about their tax exemption being reinterpreted as a government handout.”
The legislation comes in response to conflicting court decisions that lawmakers argue have created uncertainty for charities, philanthropies, community-based organizations, and religious institutions across the country.
“Nonprofits across the country rely on clear, consistent federal rules to continue serving their communities effectively. In recent years, conflicting court decisions have created uncertainty by suggesting that nonprofits could be subject to regulations that Congress never intended for them,” DelBene said. “This bipartisan legislation would clarify that an organization’s tax-exempt status is not federal financial assistance. It would protect charities, philanthropies, community-based organizations, and religious institutions from unnecessary regulations so they can stay focused on delivering critical services.”
There are roughly 2 million nonprofit groups operating in the United States. Many operate without direct government subsidies to avoid additional administrative requirements, relying instead on independent funding.
Advocates argue that maintaining a clear distinction between tax exemption and federal aid protects community organizations from overreach.
“Nonprofit organizations are the heart of our communities. They play an essential role in supporting families and hardworking Americans, advancing research, educating students, and providing countless other public benefits, often stepping in where government and business can’t or shouldn’t,” said Tommy Goodwin and Mary Wheatley, co-chairs of the Community Impact Coalition. “Their strength lies in their independence. The Safeguarding America’s Nonprofits Act protects tax-exempt organizations independent from the federal government from unnecessary and burdensome risks of litigation or bureaucratic overreach.”
The measure has also drawn support from professional associations that set industry standards and provide workforce training without relying on public funding.
“Associations are among the most trusted institutions in American life,” said Michelle Mason, president and CEO of the American Society of Association Executives. “They set the standards that keep products safe and professions credible, train and credential the workforce, and convene the people who solve problems no single company or agency can solve alone. That work depends on their independence. The Safeguarding America’s Nonprofits Act makes clear what has always been true: tax exemption is not federal financial assistance, and it should never become a lever for government control over organizations that accept no federal dollars.”
Landowner and forestry advocates similarly highlighted the need to shield rural-focused groups from unnecessary compliance burdens.
“Representing family forestry businesses across Rural America, the Forest Landowners Association understands firsthand the important role nonprofit organizations play in strengthening communities and advancing the interests of the people and industries they serve,” said Scott Jones, CEO of the Forest Landowners Association. “Tax-exempt status is not a government grant or subsidy, and it should not be treated as federal financial assistance. The Safeguarding America’s Nonprofits Act provides important clarity and protects organizations like FLA from unnecessary regulatory burdens that could hinder our ability to carry out our missions.”
Leaders of community management organizations echoed the call for regulatory clarity to ensure their programs continue without disruption.
“Nonprofit organizations like CAI play an essential role in providing important resources to support the integrity and strength of America’s communities,” said Dawn M. Bauman, CEO of the Community Associations Institute. “This legislation helps ensure CAI can continue to prioritize our members and provide the education, advocacy, and resources they need to support thriving community associations.”
The bill has earned endorsements from a broad coalition of national groups, including Career Education Colleges and Universities, the National Scleroderma Foundation, Women in Trucking, the Florida Association of Free and Charitable Clinics, the Handcrafted Soap & Cosmetic Guild, the Household and Commercial Products Association, the American Rental Association, and the National Emergency Number Association.
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