Nonprofit Governance Integrity Act
The Nonprofit Governance Integrity Act would add a new provision to the Internal Revenue Code that prohibits any member of the board (or similar governing body) of certain tax-exempt organizations from being a citizen or national of a “covered nation.” If such a board member exists, the organization would not be treated as tax-exempt for that taxable year. The restriction applies to most 501(c)(3) organizations (but excludes churches and certain church-related groups) as well as all 501(c)(4) and 501(c)(6) organizations. The term “covered nation” is defined by a cross-reference to a separate provision in the code. The new rule would take effect for taxable years beginning after enactment. In plain terms, the bill aims to prevent foreign nationals from serving on the boards of many tax-exempt nonprofits, with potential immediate loss of tax-exempt status for the year in which a covered-national board member serves.
Key Points
- 1New provision added: Section 501(s) prohibits any board member who is a citizen or national of a covered nation from serving on certain tax-exempt organizations; if such a member serves, the organization is not treated as tax-exempt for that tax year.
- 2Organizations covered: The prohibition applies to (A) 501(c)(3) organizations (excluding churches and convention/association of churches), (B) 501(c)(4) organizations, and (C) 501(c)(6) organizations.
- 3Definition reference: “Covered nation” is defined in section 7701(a)(51)(I)(ii) of the Internal Revenue Code, meaning the list is not enumerated in the bill itself and could change over time.
- 4Effective date: The amendment applies to taxable years beginning after enactment, making this prospective.
- 5Exclusions and scope: Churches (and conventions/associations of churches) are excluded from the 501(c)(3) portion of the new rule, though they could still be affected if organized under 501(c)(4) or (6). The prohibition is keyed to board composition, not to other roles within the organization.