Treasury Secretary Scott Bessent said tax-exempt organizations that abuse nonprofit status could face criminal liability, forfeiture of assets and scrutiny of directors and trustees.
By yourNEWS Media Newsroom
Treasury Secretary Scott Bessent warned Friday night that nonprofit organizations engaged in fraud, violence, improper political activity, foreign collusion or terrorism could face penalties extending beyond the loss of tax-exempt status, including criminal prosecution and asset forfeiture.
Bessent made the comments during an interview on Just the News, No Noise, saying the Treasury Department is examining whether some tax-exempt groups have abused privileges granted under federal law.
“Nonprofit status is a privilege,” Bessent said. “It is a privilege, the right to be exempt from paying taxes, being able to take donations that are tax-deductible, and have private citizens apply that against their taxes.”
“We believe that there are many organizations who are violating this privilege,” he added.
Bessent’s warning follows an executive order signed by President Donald Trump last fall directing federal agencies to increase oversight of tax-exempt organizations. The nonprofit sector has expanded in size and scope, now accounting for more than 10% of U.S. economic activity.
The FBI and IRS recently formed a first-of-its-kind task force to investigate misconduct in the nonprofit sector. The Justice Department also charged the Southern Poverty Law Center with fraudulently collecting donations by claiming to fight extremism and hate while paying hate groups.
Other allegations involving leftist nonprofits have drawn federal attention, including claims of engagement with U.S. adversaries such as China and Cuba, fraud in government welfare programs, obstruction of law enforcement agencies such as ICE, and activity linked to violence, antisemitism or unrest.
Vice President J.D. Vance has been assigned to oversee a federal fraud project that is heavily focused on nonprofit misconduct. In the House, Rep. Brandon Gill, R-Texas, was recently named to lead a task force investigating illegal conduct and abuses involving nonprofits.
Gill said one congressional focus is nonprofit organizations that receive billions of dollars in federal grants and then use the funds for political activity or civil agitation.
“If you’re a non-governmental organization and your primary source of funds is the government, I think that that should raise some pretty serious red flags, but we’re looking at any institution that is abusing our laws, in this case our tax laws, in order to facilitate whether it’s left-wing agitation or to undermine the social fabric of the United States,” Gill said.
Bessent said Treasury’s own inquiry is examining “whether some of these organizations are taking advantage of the system, whether they should have their status revoked, and whether the directors and trustees should be held accountable.”
The Treasury secretary said enforcement would not necessarily stop at revoking nonprofit status. He said federal officials will examine whether assets should be seized and whether trustees or directors approved grants that supported unlawful or harmful activity.
“We are going to hold these nonprofit trustees and directors accountable,” Bessent said. “They need to know their grantees, and if you are giving money, you can’t just give the money away and then wipe your hands of it. That there’s something called these fiscal authorities, and they pretend that they’re not linked. We are going to investigate those, and it is going to go right up to the directors, and they can be held criminally liable.”
Bessent said the department is reviewing a range of organizations, including donor-advised funds and nonprofits that may have links to foreign enemies or terrorist activity. Treasury recently punished 19 nonprofits tied to alleged foreign terrorism in what was described as a historic action.
“If you are designated as an FTO, a foreign terrorist organization, that would result in automatic loss of nonprofit status, and again freezing of forfeiture of the assets,” Bessent said. “And we want to track the individuals, because it seems like there are a lot of concentric circles here, that we seem to see the same names again and the same donors. So we are trying to track that quite a bit.”
Bessent said the administration intends to protect free speech rights, including those of organizations whose views it opposes. But he said federal scrutiny increases when groups move beyond speech into violence or illegal activity.
“We support free speech, and that’s obviously a right that everyone believes in. But when you step over that line, when you are condoning violence, when you are condoning illegal activities, that’s when you are taking away other people’s rights,” he said. “And that’s how we are thinking about it. We are getting lots of inbound in terms of both complaints and prospective investigations into these organizations, and many of them have operated with impunity.”
“So, again, we want to respect free speech, but we also don’t want to have the government supporting organizations that suppress free speech,” Bessent added.
The Treasury secretary also said his department is examining whether some 501(c)(3) nonprofit organizations are transferring tax-free donations to affiliated 501(c)(4) groups that can engage in election-related activity.
“I have had the IRS leadership prepare for me a list of the large 501(c)3s that also have (c)4s attached, and we are reviewing how the money moves back and forth between those entities, and whether they have… have gone over the line,” Bessent said.
The warnings signal a broader federal effort to scrutinize tax-exempt organizations, grant recipients and affiliated political entities. Bessent said the administration’s position is that nonprofit status carries legal obligations, and organizations that violate those obligations could face consequences for both the institutions and the people who oversee them.
Original article
Comments