SPONSOR Act
- Bill Number
- H.R. 7799
- Origin Chamber
- House
- Congress
- 119th Congress, Session 2
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2026-03-04: Referred to the House Committee on Ways and Means.
- Last Updated
- 2026-03-31T21:25:51Z
AI-Generated Summary
Purpose
The SPONSOR Act aims to hold tax-exempt organizations accountable for how funds they manage as fiscal sponsors are used, particularly in cases involving illegal or harmful activities. It seeks to prevent 501(c)(3) nonprofits from indirectly supporting terrorism, violence against constitutional rights, or disruptions to commerce through sponsored projects, while ensuring donors' tax benefits do not shield such misuse.
Key Provisions
- Liability for Fiscal Sponsors: Adds a new subsection (s) to Section 501 of the Internal Revenue Code (IRC). If a 501(c)(3) organization (a tax-exempt nonprofit, like charities or educational groups) spends funds on a fiscal sponsorship and allows or claims tax deductions under IRC Section 170 for donor contributions to that sponsorship, the organization becomes liable for any related criminal or civil penalties.
- Definition of Covered Activities: Liability applies to three main types of actions funded through the sponsorship:
- Aiding, abetting, or conspiring in international terrorism by a group designated as a foreign terrorist organization under U.S. immigration law (8 U.S.C. § 1189).
- Using force, threats of force, or physical obstruction to intentionally injure, intimidate (placing someone in reasonable fear of bodily harm), or interfere with a person's lawful exercise of constitutional rights.
- Using force, credible threats, or physical blockages to intentionally stop the lawful movement of goods in interstate or intrastate commerce (e.g., blocking supply chains).
- Fiscal Sponsorship Defined: This is an arrangement where a 501(c)(3) receives and controls funds for a non-tax-exempt project or group, ensuring the money aligns with the sponsor's exempt purposes.
- Presumption of Responsibility: Courts or regulators will assume the sponsoring organization is responsible for ensuring sponsored funds comply with all laws, rules, and tax requirements.
- Available Defenses: Organizations can avoid or reduce liability by proving they exercised due diligence and reasonable oversight over the funds.
Significant Changes to Existing Law
- Introduces direct criminal and civil liability for 501(c)(3) organizations tied to the misuse of sponsored funds, which was not explicitly outlined before. Previously, fiscal sponsors had discretion over funds but faced limited direct accountability for sponsored activities unless they directly participated.
- Ties tax deduction eligibility (under IRC Section 170) to this liability, potentially making nonprofits more cautious about claiming deductions for sponsorship-related donations.
- Creates a presumption of responsibility, shifting the burden to the organization to demonstrate compliance, rather than requiring proof of direct involvement.
Potential Impacts
- On Government Agencies: The IRS may see increased enforcement duties to monitor fiscal sponsorships and tax deductions, potentially leading to more audits of nonprofits. Agencies like the Department of Justice could pursue more cases against organizations for covered activities, streamlining prosecutions.
- On Citizens: Donors to sponsored projects might face scrutiny if deductions are challenged, but the law protects legitimate deductions if oversight is proper. Individuals or groups exercising rights (e.g., protests) could benefit from stronger deterrents against interference, though nonprofits sponsoring activism may limit support to avoid risks.
- On International Relations: By linking liability to U.S.-designated foreign terrorist groups, it reinforces anti-terrorism policies, potentially straining relations with countries hosting such groups if U.S. nonprofits are implicated in cross-border funding.
Main Stakeholders Affected
- 501(c)(3) Nonprofits: Primary targets, as they must now rigorously oversee sponsored funds or risk losing tax-exempt status and facing penalties.
- Sponsored Projects and Groups: Non-tax-exempt entities (e.g., grassroots initiatives, startups, or activist groups) relying on fiscal sponsorships may find it harder to secure funding, as sponsors become more selective.
- Donors: Individuals or entities contributing to sponsorships, who benefit from tax deductions but could indirectly contribute to liability if funds are misused.
- Government Entities: IRS for tax oversight; law enforcement (e.g., FBI, DOJ) for investigating covered activities.
- Broader Public: Affected by reduced funding for potentially risky but lawful activities, or enhanced protections against terrorism and disruptions.
Notable Legal, Constitutional, or Political Implications
- Legal Implications: Expands nonprofit liability under tax law to include indirect actions via sponsorships, potentially leading to more litigation over what constitutes "due diligence." The presumption of responsibility could make it easier for prosecutors to hold organizations accountable but raises questions about proving intent in complex funding chains.
- Constitutional Implications: By targeting interference with "constitutional rights," it aligns with protections under the First Amendment (free speech, assembly) and commerce clause, but could indirectly chill nonprofits' support for controversial protests or advocacy if they fear liability for participant actions. Defenses for oversight help mitigate overreach.
- Political Implications: The bill's focus on "subversive operations and riots" suggests an intent to address domestic unrest (e.g., protests blocking roads) and terrorism funding, which may spark debates on balancing nonprofit freedom with public safety. It could influence how Congress views fiscal sponsorships in politically charged areas like activism or international aid.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Rep. Moran, Nathaniel [R-TX-1]
Recent Actions
- 2026-03-04: Referred to the House Committee on Ways and Means.
- 2026-03-04: Introduced in House
- 2026-03-04: Introduced in House
Bill Versions
- Stop Proxy Organizations Nurturing Subversive Operations and Riots Act — issued 2026-03-04 — PDF (4 pages)