Voting season is ramping up, and so are concerns about the upcoming election. In 2020, claims of widespread fraud revolving largely around the use of voting machines culminated in a violent incursion on the U.S. Capitol. Lawsuits challenging the integrity of that election have failed to prove the merit of such claims, and a defamation suit filed by Dominion Voting Systems resulted in a $787 million out-of-court settlement. Fast forward to 2024, and a spate of bills recently passed by the House Ways and Means Committee has shifted the election spotlight onto the nonprofit sector, specifically its role in supporting election administration and its ties to foreign donors and organizations. While these bills are seemingly aimed at increasing transparency and ensuring fair elections, if they are passed into law, they may affect the work of many well-intentioned nonprofits.
A post on the Committee’s website in mid-May stated that,
Yesterday, the Ways and Means Committee advanced legislation to protect election integrity and prohibit foreign money from being funneled through tax-exempt organizations to influence U.S. politics. The Committee’s investigation into whether Section 501 of the U.S. tax code is being abused has uncovered loopholes which allow foreign nationals to inject money into the American political system. These foreign sourced donations can be key resources for organizations in the American political system that play a large role both in campaigns and policy debates in the United States.
Below is a discussion of four related bills passed by the Committee.
Election Administration in the U.S.
The most debated of the recently passed bills focused on the role of nonprofits in local elections. The End Zuckerbucks Act (H.R. 8291), which passed the Committee with a 23-17 vote, prohibits U.S. nonprofit organizations from providing funding, either directly or indirectly, to state or local governments for election administration. It bars “below-cost services, scholarships, subsidies, or direct, in-kind, or indirect funding to official election organizations.”
The bill’s authors state that in 2020, Mark Zuckerberg funneled $300 million in donations through two nonprofits and a foundation to state and local election offices, suggesting that these donations were partisan in nature as many of the counties receiving grants were those later won by President Biden. However, an investigation by the Federal Election Commission (PDF) in 2022 found that Zuckerberg’s contributions had not violated federal law and were not likely politically motivated. Despite this finding, the bill’s authors claim that “Third-party funding of America’s elections by wealthy donors who may be ideologically driven takes advantage of the tax code in an inappropriate way, and undermines public confidence in the election process.”
Other Representatives pointed to the inadequacy of and inequities in funding for election administration as causes for concern with regard to the bill. Representative Gwen Moore mentioned that during the 2020 election, the number of polling stations in Milwaukee, a city with a substantial Black population, dropped from 182 to five.
In fact, research has shown that, since a 2013 Supreme Court ruling (Shelby County vs. Holder) which weakened the Voting Rights Act of 1965, racial disparities in voter turnout have grown. Between 2010 and 2022, the gap between White and Black voter turnout grew to 16 percentage points (up 8%), while the gap between White Americans and Latino voters jumped to 22 percentage points (up 4%). As many Black and Latino voters have historically favored liberal-leaning candidates, this creates a situation in which any nonprofit’s efforts to boost voter turnout among disenfranchised populations could be framed as politically motivated.
And while some states have tried to counter these trends by making it easier to vote, many others have moved forcefully in the opposite direction. The Brennan Center for Justice noted that, for the 2024 election, “Voters in 28 states will face restrictions that weren’t in place in the last presidential election.” Among others, newly enacted state laws include shortening the time to request an absentee ballot, criminalizing certain types of assistance to absentee voters, increasing requirements for voter registration organizations, and compelling naturalized citizens to undergo a verification process that could lead them to wrongly lose their voter registration.
Thus, the End Zuckerbucks Act comes at a time when voting rights are already in peril and would likely constrain the work of nonprofits working to remedy this situation.
Donor Transparency
Two other bills recently passed by the House Ways and Means Committee seek to change regulations around nonprofits’ receipt of donations originating in the U.S. and abroad.
The first of these, the No Foreign Election Interference Act (H.R. 8314), would impose fines on organizations that make “disqualified political committee contributions,” which is defined as contributions from U.S. organizations that have received donations from foreign nationals within the last eight years. Repeated offenses could result in the revocation of the organization’s 501(c)(3) status. This bill will move forward with almost unanimous support.
The second one, The American Donor Privacy and Foreign Funding Transparency Act (H.R. 8293), aims to provide more transparency about donations received from foreign donors, while enhancing identity protection for donors based in the U.S.
This bill, which passed the Committee in a 26-13 vote and is backed by Americans for Prosperity, the Indiana Philanthropy Alliance, and the Philanthropy Roundtable, would require nonprofits receiving donations from abroad to disclose aggregate donations and group them by country of citizenship or principal place of business, effectively requiring nonprofits to collect data on donor citizenship. The Council on Foundations has pointed out that these new requirements would place an undue burden on nonprofits and risk a loss of trust among their donors and communities. If there were indeed an erosion of donor trust, this could lead to reduced fundraising revenue for nonprofits, especially those working internationally, who depend on donations from abroad.
Simultaneously, bill H.R. 8293 seeks to bolster privacy protections for donations originating in the U.S. by raising the maximum penalty for publicly disclosing the identity of donors to 501(c) or 501(a) organizations to up to $250,000, or up to five years imprisonment.
Support for Foreign Organizations
Finally, bill H.R. 8290, the Foreign Grant Reporting Act, which passed unanimously, seeks to impose disclosure requirements for 501(c)(3) nonprofits making grants to organizations and entities based outside the United States. It would require U.S. nonprofits to disclose the names and addresses of foreign grantees, as well as the grant amounts, on their annual 990 tax returns. Another requirement of the bill is that nonprofits disclose indirect contributions, or sub-grantees.
The Council on Foundations expressed concern that “these additional disclosure requirements could create significant risks for grant recipients, particularly for organizations doing work in sensitive areas” and that “the definition of indirect contributions is very broad and could be difficult to administer.”
With regard to the former, there are many U.S. nonprofits who provide support to organizations working in politically sensitive areas in their home countries. Revealing the identities of these grantees could put them at significant risk, as they are often subject to acts of violence, including murder, for speaking out on controversial issues. One famous case is that of Berta Cáceres, a Honduran environmental activist murdered for her work in opposition to the construction of a dam. Around the world, such acts of violence are becoming increasingly commonplace, affecting journalists, human rights activists, land and environmental defenders, and LGBTQI+ individuals. Being required to disclose the names and addresses of grantees may force some nonprofits to stop awarding grants to organizations working in these areas.
These five bills have only just made it through the committee phase. In order to proceed to the Senate, they still need to be brought to the House floor and approved. Their fate remains unclear. What does seem clear is that these bills signal a ramping up of noise around the integrity of the upcoming election, with the alarm being sounded around the work of nonprofits. Up next, the House will debate bills seeking to curb voting among noncitizens (already illegal, though non-citizens can vote in some local elections). Speaking at a news conference recently, Speaker Mike Johnson said, “There is currently an unprecedented and a clear and present danger to the integrity of our election system—and that is the threat of noncitizens and illegal aliens voting in our elections.” A report by the Brennan Center on this topic, based on interviews with election administrators for the 2016 election, came to the following conclusion: “Noncitizen voting in the 2016 election was exceedingly rare…”