A sweeping federal tax bill unveiled on Monday as part of Republicans’ budget reconciliation plan includes a provision that would expand the executive branch’s ability to revoke tax exemptions from nonprofits accused of supporting terrorism, a push that was once broadly bipartisan but ran into strong Democratic opposition at the end of the previous Congress.

The legislation would allow the secretary of the Treasury to revoke the tax-exempt status of a nonprofit he deems to be providing support to terrorist groups. Existing federal law requires the issue to be adjudicated at trial before an organization loses its status, and has rarely been used.

The bipartisan supporters of the standalone bill had described the legislation as an effort to block funding for groups such as Hamas and Hezbollah, which had previously fundraised through U.S. groups including the now-shuttered Holy Land Foundation, some of the leaders of which now have prominent roles at other pro-Palestinian charities.

Critics of the effort, including Democrats and progressive groups, had argued that the legislation would grant President Donald Trump the unilateral authority to revoke nonprofits’ tax exemptions and said Trump would weaponize that power for purposes beyond those intended in the law.

Trump has already threatened to revoke Harvard University’s tax-exempt status and Democrats have accused him of weaponizing a range of federal powers against his perceived enemies, in some cases in the name of fighting antisemitism.

The bill divided Jewish community groups last year and it saw shrinking Democratic support over the course of the congressional session amid an aggressive campaign from the American Civil Liberties Union and progressive groups, some of which branded it a “nonprofit killer.” 

In April 2024, 179 Democrats voted for the bill, but in November, Democratic support shrank to just 52 members. A week later, Democratic support shrank further to just 15 supporters. Some pro-Israel Democrats who had initially supported the legislation cited growing outcry from their constituents for their reversals.

The tax package is also set to squeeze some of the nation’s top universities by increasing taxes on their investment income through their endowments, which some Republicans have supported as an effort to penalize them for antisemitic activity on their campuses and other ideological disputes.

It would increase the tax on colleges and universities with endowments over $2 million per student from 1.4% to 21%, the corporate tax rate.

In addition to those provisions, the legislation includes the Educational Choice for Children Act, backed by Orthodox Jewish groups and the Republican Jewish Coalition, which would create a new tax-credit program for people donating to scholarship funds, which could be used for a range of purposes including religious schooling.

It also includes a provision that seeks to relieve the tax burdens and penalties faced by those taken hostage or wrongfully detained abroad, who are sometimes met with crushing fees when they are released from captivity, for having failed to file their taxes during their confinement.

The Ways and Means Committee will meet to debate the bill on Tuesday.