Key Points

• Bipartisan bill would protect nonprofit tax-exempt status from being classified as federal financial assistance. H.R. 10148, the Safeguarding America's Nonprofits Act, would amend the Internal Revenue Code to establish that a federal tax exemption is not “federal financial assistance,” shielding charities, social welfare organizations, trade associations and other exempt entities from compliance burdens designed for direct government-funding recipients.
• Nonprofit leaders should assess whether current compliance obligations rest on the unsettled theory that tax exemption equals federal support. Conflicting court decisions have created legal uncertainty by suggesting that maintaining tax-exempt status alone could trigger regulatory compliance obligations Congress originally intended for organizations receiving federal grants or contracts.
• The bill offers clarity but does not limit IRS enforcement authority or prevent future congressional carve-backs. While the legislation would codify a durable statutory rule against regulatory overreach, it preserves the IRS’s power to revoke exemptions on substantive grounds and includes a savings clause allowing Congress to override the protection in future statutes.

Bipartisan legislation that would amend Section 501 of the Internal Revenue Code to clarify that a nonprofit’s federal tax-exempt status does not constitute “federal financial assistance” was recently introduced in the U.S. House of Representatives.

The bill responds to conflicting court decisions and growing political uncertainty around whether a federal tax exemption can be treated as a form of federal tax assistance, subjecting nonprofits to regulatory requirements typically reserved for entities that receive government funding.

Tax-exempt organizations should understand what H.R. 10148, the Safeguarding America’s Nonprofits Act, would do and not do, and what steps they should consider taking while it remains pending.

Overview of the Bill

Introduced on Aug. 24, 2026 by Representatives Greg Steube (R-FL) and Suzan DelBene (D-WA), the Safeguarding America’s Nonprofits Act is a short, targeted measure. It adds a new subsection to I.R.C. § 501 providing that the term “federal financial assistance” shall not include a federal tax exemption unless another federal statute explicitly provides otherwise. The bill covers organizations described under Sections 501(c), 501(d) and 401(a), encompassing charities, social welfare organizations, trade associations and qualified retirement trusts.

The bill has been endorsed by a broad coalition that includes the American Society of Association Executives, the Community Impact Coalition, Community Associations Institute and numerous other exempt organizations.

Why This Matters for Tax-Exempt Organizations

The question of whether a federal tax exemption amounts to the receipt of federal government support has gained urgency. Recent court decisions have created legal uncertainty for tax-exempt organizations by suggesting that such organizations could, merely by maintaining their tax-exempt status, be subject to regulatory oversight Congress intended only for recipients of direct federal funding. In some cases, complying with these regulations could place tax-exempt organizations at odds with their missions.

This uncertainty creates risk across the political spectrum. In the past, administrations have scrutinized conservative religious and faith-based organizations by expanding the interpretation of nondiscrimination conditions that could apply if tax exemption were treated as a federal subsidy. On the other hand, recent political discourse has seen threats to revoke the tax-exempt status of universities, advocacy groups and progressive-leaning charities over policy disagreements. There is a growing need to provide consistency to nonprofits in the face of shifting political tides.

What Are the Prospects for Passage?

The bill was referred to the House Committee on Ways and Means when introduced and has not moved. As of this writing, it has two co-sponsors (its bipartisan co-leads), no committee hearing has been scheduled, and no companion bill has been introduced in the Senate.

Several factors weigh in the bill’s favor. Its bipartisan framing and the breadth of its nonprofit coalition support give it political appeal. However, Congress faces a crowded legislative calendar and the bill has yet to accumulate the cosponsorship numbers or committee traction that suggest it could soon be headed to the floor for a vote. Tax-exempt organizations should also make note of a related bill, the PROOF Act (H.R. 10258), introduced by Reps. Lloyd Doggett (D-TX) and Terri Sewell (D-AL). This proposal would require due process protections before IRS revocation of tax-exempt status, and complement the Safeguarding America’s Nonprofits Act legislation if both advance.

Strengths and Weaknesses

Strengths. The bill’s primary virtue is clarity. By codifying the distinction between tax exemption and federal financial assistance in the Internal Revenue Code, it would provide a durable statutory rule that future administrations could not easily circumvent through executive action or regulatory reinterpretation.

Weaknesses and gaps. The bill is narrow by design, and several significant risks remain unaddressed:

• IRS enforcement authority. The bill does not limit the IRS’s authority to revoke or deny tax-exempt status on substantive grounds, such as the illegality doctrine, the public policy doctrine (Bob Jones University v. United States) or political campaign intervention under the Johnson Amendment. Nonprofits concerned that their activities could be challenged on these grounds may find limited additional procedural protections in this bill.
• The “unless explicitly provided otherwise” qualifier. The bill includes a savings clause that permits Congress to override the rule in future legislation, meaning the protection could be carved back on a statute-by-statute basis without repealing the bill itself.
• Executive action not addressed. The bill would not prevent executive orders or administrative actions that target nonprofits on grounds other than their receipt of “federal financial assistance,” such as claims of illegal activity, support for terrorism or violations of public policy.

What Should Nonprofits Do Now?

• Monitor legislative progress. Track the bill’s movement through the Ways and Means Committee and watch for a Senate companion. Passage in both chambers is required for enactment.
• Assess your exposure. Nonprofits that do not receive direct federal grants or contracts should evaluate whether any of their current compliance obligations are premised on the theory that tax exemption constitutes federal financial assistance.
• Engage your associations. Many national trade and professional associations have already endorsed the bill. Consider coordinating with your industry group to support or comment on the legislation.
• Review governance practices. Regardless of this bill’s outcome, maintaining rigorous governance, transparency and compliance with existing tax-exempt requirements remains the best defense against enforcement risk.
• Watch the PROOF Act. The complementary PROOF Act (H.R. 10258) could provide important procedural protections against IRS revocation actions. Together, these bills may signal a broader congressional interest in safeguarding nonprofit independence.

For more information on this and other issues affecting nonprofits, contact the author Jacqueline Motyl at jmotyl@foxrothschild.com.

This information is intended to inform firm clients and friends about legal developments, including the decisions of courts and administrative bodies. Nothing in this alert should be construed as legal advice or a legal opinion. Readers should not act upon the information contained in this alert without seeking the advice of legal counsel. Views expressed are those of the authors and not necessarily this law firm or its clients.