Legislators recently introduced a bill to clarify that tax exemption is not a form of federal financial assistance. Concerned by court rulings suggesting otherwise, Sen. James Lankford (R-Okla.) and Rep. Greg Steube (R-Fla.), sponsors of the Safeguarding Charity Act, aim to protect churches and nonprofits from new regulatory burdens simply for holding exempt status.  

“Radical judges do not have the authority to twist federal law and force religious institutions to choose between their convictions and compliance,” said Steube, a member of the U.S. House Ways and Means Committee.  

“This bill is about protecting churches, religious schools, and charities from federal overreach,” he added. 

Notably, federal district courts in California and Maryland ruled in 2022 that the 501(c)(3) status of two religious schools made them recipients of federal financial assistance, which in turn subjected them to Title IX education regulations. Last year, a panel of judges on the U.S. Court of Appeals for the Fourth Circuit unanimously rebuffed that error, explaining that exempt status “is the withholding of a tax burden, rather than the affirmative grant of funds.” However, similar arguments could return in future litigation.  

That is unacceptable for the sponsors of the Safeguarding Charity Act. Lankford, in particular, stated, “Tax-exempt organizations should not live in fear of federal control every day because courts want to redefine the meaning of tax-exempt status.” 

Lankford, a member of the U.S. Senate Finance Committee, declared that exempt status “should not be used as political leverage” and added, “We should be focused on enabling the work of these organizations—not burdening them with unnecessary and costly federal requirements.” 

ECFA supports the Safeguarding Charity Act and will continue to monitor this matter in Congress and the courts.