Arkansas Senator Tom Cotton recently introduced proposed legislation known as the “Nonprofit Governance Integrity Act” in the U.S. Senate. This federal bill, if passed, would prohibit many tax-exempt organizations from allowing citizens or nationals of certain countries to serve on their boards of directors, in an effort to limit foreign influence over organizations engaged in lobbying and advocacy.
Specifically, the legislation restricts organizations exempt under Internal Revenue Code sections 501(c)(3), (c)(4), and (c)(6) from having any member of their governing body be a citizen or national of China, Russia, Iran, North Korea, or Cuba. The proposed legislation exempts churches and conventions or associations of churches. Senator Cotton argues that tax exempt
organizations who benefit from the US tax code should be free from “malign foreign influence.”
If enacted, tax-exempt organizations would face significant compliance obligations. Boards would need to implement nationality screening as part of their director selection process and, in some cases, may need to remove existing directors to maintain tax-exempt status.
Additionally, the bill fails to specify any considerations for those holding dual citizenship or give any consideration to residency or immigration status which may make enforcement difficult for the IRS.
For organizations with an international mission focus, this could mean losing key voices that bring knowledge and understanding to sensitive cultural issues and the ability to navigate the complexities of multicultural operations.
Currently, the IRS does not collect information on board members’ nationalities. If enacted, this legislation would require new reporting mechanisms and creation of new privacy policies for handling sensitive citizenship data.
The bill is currently awaiting review in the Senate Finance Committee. If you would like to track the progress of this bill, you can do so here.
Unsure whether this legislation could affect your organization? At the Church Law Center, we can help you assess the impact and ensure continued compliance.
