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Proposed Legislation Threatens a Backslide on U.S. Democracy

A new House bill purports to counter terror financing, but it reads a lot like the ‘foreign agent’ laws used to quash dissent in Russia and Hungary

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Proposed Legislation Threatens a Backslide on U.S. Democracy
Donald Trump on election night in West Palm Beach, Florida. (Chip Somodevilla/Getty Images)

On Nov. 21, the U.S. House of Representatives passed something called the Stop Terror-Financing and Tax Penalties on American Hostages Act (HR 9495). On the surface, the bill, introduced by House Republicans in the wake of Gaza protests on college campuses, looked like standard pro-Israel fare, albeit with a perfectly reasonable aim: preventing nonprofits — which includes many universities — from funding designated terrorist organizations like Hamas and Hezbollah. It seemed like a good idea, including to many Democrats who initially said they would vote for it.

But as more details emerged about the language drafted, the bill started to raise red flags. According to the American Civil Liberties Union (ACLU) and the nonprofit community at large, the bill’s language is something of a wolf in sheep’s clothing. It echoes the “foreign agent” laws that are the cornerstone of repression in Russia under Putin and, more recently, Hungary under Orban, among other authoritarian regimes.

To date, 354 organizations have signed onto a letter sent by the ACLU to House Minority Leader Hakeem Jeffries expressing “deep concerns about the bill’s potential to grant the executive branch extraordinary power to investigate, harass, and effectively dismantle any nonprofit organization — including news outlets, universities, and civil liberties organizations like ours — by stripping them of their tax-exempt status based on a unilateral accusation of wrongdoing.”

A plethora of Jewish organizations that normally don’t oppose anything pro-Israel also spoke out against the bill, encouraging people to call their members of Congress and ask them to vote “no.” The 55 Jewish organizations, including multiple synagogues, say in their open letter:

Rather than enhancing the country’s safety, the bill threatens to politicize decisions that should be made neutrally and deliberatively. … No individual, including a Treasury Secretary, should be given nearly unfettered power to remove an organization’s tax-exempt status. … We urge you to seek solutions that make the nation safer, instead of advancing those that threaten constitutional rights.

What this letter also correctly points out is that there is already a law in place that makes it a crime to provide material support to terrorists. Title 18, Section 2339 of the U.S. Code “makes it unlawful, within the United States, or for any person who is subject to the jurisdiction of the United States, to knowingly provide material support to a foreign terrorist organization that has been designated by the Secretary of State.” Furthermore, Section 501(p) of the Internal Revenue Code “provides for the automatic suspension of the tax-exempt status of an organization upon designation or identification by the federal government of the organization as a terrorist organization.” 

Thus, the law is not actually necessary for its claimed purpose of “stopping terror.” Rather, it appears to serve the same purpose as the foreign agent laws of Russia and Hungary: to allow the government unprecedented power to target and silence dissidents, journalists or organizations without offering recourse.

Like many bills, HR 9495 packages multiple components together. It begins innocently by eliminating tax penalties for the (highly unlikely) situation wherein an American is held hostage abroad, is unable to submit their taxes on time and is found liable for late fees. But then Section 4 of the bill gives unilateral power to the secretary of the treasury (presumably Trump nominee Scott Bessent) to investigate any nonprofit organization under the guise of “funding terrorist organizations” and unilaterally strip it of its 501(c)(3) status. Bessent is not required to provide exculpatory evidence, and the requirement for inculpatory evidence is extremely limited. The nonprofit would be sent “a description of such material support or resources to the extent consistent with national security and law enforcement interests.” As has been widely demonstrated in American history, “national security and law enforcement interests” could be stretched to encompass just about anything, and those interests have historically been tactically utilized to infringe on civil liberties. For example, the Patriot Act, whose full name — “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism” — hauntingly mirrors HR 9495, expanded the ability of the U.S. government to wiretap American citizens, gain information about people from internet providers without a search warrant and more — all under the guise of “intercepting and obstructing terrorism.” McCarthyism, which propelled a witch hunt of some 40,000 Americans, used the term “un-American” to warrant its overreach and targeting of government opponents. Upon taking office, the Trump administration could hypothetically abuse its power by deeming certain groups terrorist organizations, as he threatened to do with Antifa in 2020. Were that to happen, any nonprofit that had supported those newly designated terrorist entities since 2021 could be targeted, not just those that supposedly supported terrorist organizations already on America’s list. 

If an organization wants to appeal, the treasury secretary who made the original designation decides whether the appeal moves up to the Internal Revenue Service or the Department of Justice, eliminating impartiality.

As the treasury secretary is a political appointee, he can easily shut down the appeal, eliminating any neutral decision-maker from its consideration. That would violate fundamental principles of fairness and justice. And even though the accused nonprofit is permitted 90 days to dispute a pending terrorist designation, many nonprofits are already pressed for resources. Combing through records and providing a sophisticated legal defense takes time, lawyers and money from organizations that are already stretched thin. For a small nonprofit, the financial and legal burdens of fighting such a designation could lead to organizational collapse before the appeal is even resolved. But a lack of impartiality from the reviewing political appointee and nebulous definitions of what “terrorist supporting” means suggest that the effort and resources put into mounting a defense would likely be in vain anyway. 

Additionally, even if it were sent up to the next level, the designation would have already been applied to the organization, which would terminate its tax-exempt status. This would eliminate tax deductions that donors receive for making charitable donations to the organization, which would dramatically reduce the organization’s ability to fundraise. The label also holds immense stigma and could deter not only donors but banks and other partners from associating with it, essentially delivering a death knell to the nonprofit. No one wants to be seen as interacting with any terrorist-associated organization. This is why the bill has colloquially become known as the “nonprofit killer” bill.

Because the proposed bill gives so much power to a presidential appointee, it can in theory target a range of organizations with the “terrorist supporting” label as a form of harassment. This includes reproductive rights organizations such as Planned Parenthood, investigative media organizations like ProPublica and humanitarian aid organizations providing help to Gaza — all already in the crosshairs of the Trump administration for political or ideological reasons. Given Vice President-elect JD Vance’s decrying of “left-wing universities,” the bill would also present a path for the U.S. government to target universities with allegations of “terrorism.”

The Commission on Security and Cooperation in Europe (also known as the U.S. Helsinki Commission), an independent body of the U.S. government created over 45 years ago to monitor and promote human rights and democracy around the world, recently held a briefing on how the model of the foreign agents law is spreading globally as a tool to quell dissent. “Authoritarian regimes use the designation of foreign agent to stigmatize and discredit organizations and individuals and to give the government the right to involve itself not only in an organization’s finances, but sometimes also in its activities,” the commission said in a public report. “These laws usually involve onerous reporting requirements and noncompliance can result in steep fines, closure of an organization, or jail.”

In America’s case, the designation is “terrorist supporting,” instead of “foreign agent,” but both serve the same purpose.

A case in point is Hungary’s foreign agents law, which, in December 2023, turned into something even more repressive: the establishment of a “Sovereignty Protection Office.” This oversight board, headed by Orban’s former speechwriter Tamas Lanczi, is tasked with collecting citizen data, monitoring financial transactions and targeting independent media outlets. Lanczi, while editor-in-chief of Figyelo, a right-wing propaganda magazine that Orban weaponized in his consolidation of power, famously published a list of 200 “Soros mercenaries” (a reference to the Hungarian-American billionaire George Soros), which included investigative journalists, academics, activists — anyone critical of the Orban government. His agenda is to dissolve opposition by making baseless claims against any organization that dares to criticize the Orban government, and he is now doing that as head of the so-called Sovereignty Protection Office.

The European Union has now referred the Hungarian case to the European Court of Justice, alleging that the law establishing the office violates basic EU principles.

Tamas Bodoky, editor-in-chief of the Hungarian media outlet Atlatszo, said to the International Press Institute:

I have gotten used to harassment in the past ten years. However, the recent developments — a state institution doing fake investigations — is harassment on a whole new level. The goal is to intimidate journalists and to shut off potential revenue sources by disconcerting supporters. As far as the government is concerned, independent media is part of the political opposition, thus a political opponent. It smears the media critical of the government, and the Sovereignty Protection Office is nothing but a Hungarian state institution doing political propaganda on the taxpayers’ dime.

The Biden administration also issued a statement condemning the latest move by the Hungarian government to curb free speech. “The Hungarian government’s attempt to harass, intimidate, and punish independent organizations runs counter to the principles of democratic governance rooted in the rule of law. This law places no limit on this entity’s ability to target the human rights and fundamental freedoms of its own citizens and puts at risk any country, business entity, or individual that chooses to engage with them,” the statement said.

But Trump has openly praised Orban as “an exceptional leader.” “There’s nobody that’s better, smarter or a better leader than Viktor Orban,” Trump enthused.

And Vance, who declared universities as “the enemy,” has publicly said that “the closest that conservatives have ever gotten to successfully dealing with left-wing domination of universities is Viktor Orban’s approach in Hungary.”

In addition, Kevin Roberts, the CEO of the Heritage Foundation — the architect of Project 2025 — is on record commenting, “Modern Hungary is not just a model for conservative statecraft, but the model.”

Hungary’s descent into darkness did not happen overnight, but rather in incremental steps that resemble the workings of the Trump administration. A pivotal step in Orban’s consolidation of power was suppressing — or criminalizing — opposition civil society and academic institutions. This is also a hallmark of democratic backsliding. He borrowed a move from Putin’s chessboard, passing a foreign agents law similar to Russia’s. This law required nongovernmental organizations receiving foreign funding to identify themselves and, more ominously, afforded the government free reign to shut them down with little evidence. The Central European University (CEU) was famously funded by Soros, who was painted by government propaganda as a duplicitous expansionist American. The highway billboards coming from the airport in Budapest still bear “Stop Soros!” slogans.

CEU had to go. The university was functionally banned from Budapest in 2018, depriving Hungarian students of a world-class education in their own country. In 2019, it relocated the majority of its operations to Vienna. The “Stop Soros” laws also went after asylum-seekers and organizations that aided them. The government continued its assault on anything resembling progressive ideas and revoked accreditation from all gender studies programs — another target of the rising far right in the U.S.

By 2019, Orban’s government controlled 80% of state media. Over half a million people, mostly under the age of 40, have left Hungary over the last decade, creating an ongoing brain drain in the country.

In 2022, Putin also expanded Russia’s foreign agents law beyond targeting organizations to include individuals, levying fines and jail sentences on anyone perceived as critical of him. Today, anyone expressing dissent online in Russia will most likely endure a humiliating disclaimer on their social media posts indicating that their opinion is that of a foreign agent. They become de facto personae non gratae in their own country, no longer allowed to run for office, organize public events or even teach.

These extreme measures began in earnest in 2012, when Putin first enacted a foreign agents law to quell opposition voices. The act at that time established nebulous criteria, decreeing that any organization receiving foreign funding could be investigated and shut down — in much the same way that the proposed U.S. bill aims to do now.

Since the Russian law was introduced, hundreds of civic organizations and activists — working on issues ranging from human rights to environmental protection — have summarily been labeled as foreign agents. Many of them were forced to shut down to avoid the stigma or because they could not afford the heavy fines for failing to comply with the law’s reporting demands. One shuttered organization was Memorial, a 2022 Nobel Peace Prize winner, and the oldest human rights advocacy organization in the country.

Many women’s rights NGOs were also forced to close at a time when women desperately needed the support they provided. Of all femicides caused by domestic violence globally, 10% happen in Russia. In 2017, a legal amendment sailed through the Russian parliament decriminalizing “moderate” domestic violence (i.e. bruises or bleeding but no broken bones, provided it only happened once a year) — lessening a culprit’s sentence from two years to only 15 days.

Back in the U.S., the outcry from the nonprofit community over the proposed draconian law, HR 9495, already shifted the votes of almost 100 Democratic U.S. representatives. But the bill still passed the House. And this year, under a Trump administration, the bill will likely come to the floor again and potentially pass both the House and Senate under a Republican majority. 

As the American political scientist Karrie Koesel writes in her 2014 book “Religion and Authoritarianism: Cooperation, Conflict, and the Consequences”:

The important thing to remember is that democratic backsliding is a process, and that it is incremental. … It could be legislation that targets journalists or undermines the free speech of opposition groups. … Over time, however, democratic erosion builds until we arrive at a non-democratic system where the rules of the game have changed.

If the U.S. succumbs to the slow but steady democratic backsliding for which the Trump administration and his GOP accomplices are currently pushing, no one can say we did not see it coming.

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