President Donald Trump is quietly weighing an untested power to personally single out groups for punishment, according to a new report.
Trump officials have spent months preparing an executive order that would declare certain nonprofits to have terrorist ties, a designation that would immediately strip their tax-exempt status and could leave them financially crippled, The Wall Street Journal reported Friday. The order has not been finalized, and people familiar with the deliberations told The Journal that Trump may ultimately decide against signing it.
The plan hinges on Section 501(p) of the tax code, a provision that has never been tested in this way. It gives the president authority to label organizations as engaging in or supporting terrorism through an executive order, which would automatically suspend their tax exemptions without the lengthy audits, formal notice and court access the IRS normally provides. Once a group is designated, donations to it would no longer be deductible and it would owe taxes on its net income while it fights the label in court, where some of the government's evidence could be kept classified.
The Journal reported that it remains unclear how many organizations, or which ones, the Trump administration has in mind. Officials have consulted IRS experts and combed through nonprofits' bank records to help decide which groups to target, according to the report. During interagency meetings late last year, White House deputy chief of staff Stephen Miller pressed officials on why more had not been done to investigate nonprofits he believed were linked to groups like antifa, a meeting participant told the outlet.
Carolyn Schenck, a former IRS official now with the law firm Caplin & Drysdale, warned that the FBI, IRS and Treasury Department are increasingly linking their enforcement efforts.
"None of these tools is new. What is new and potentially very consequential is putting them together around the same organizations and the same conduct," Schenck told The Journal.
Kevin Frankel, a former New York assistant attorney general, argued that the provision's real reach lies closer to home.
"Its distinct value is reaching organizations outside the foreign-terrorism and sanctions systems, which in practice means domestic groups," Frankel explained.
A White House official dismissed any talk of a potential order as speculative, according to the report. The Treasury Department and IRS did not respond to The Journal's requests for comment.