The FENCE Act (S. 497) would tighten the eligibility rules for 501(c)(3) tax-exempt status by adding a new disqualification tied to organizations that provide financial aid or other material support to people who are unlawfully present in the United States. If enacted, an exempt organization could lose its 501(c)(3) status if it engages in a pattern or practice of aiding individuals the organization knows or reasonably should know are unlawfully present. The bill also clarifies that organizations are not required to verify immigration status or to obtain citizenship proof, and it preserves religious organizations’ freedom to act according to their beliefs. The effective date is immediate upon enactment. In short, the bill aims to deter charitable groups from assisting undocumented individuals by tying such activities to eligibility for federal tax-exempt status.
Key Points
- 1Adds a new disqualifying condition to 501(c)(3) eligibility: an organization that engages in a pattern or practice of providing financial assistance, benefits, services, or other material support to individuals the group knows or reasonably should know are unlawfully present in the United States would lose 501(c)(3) status.
- 2Applies to all 501(c)(3) organizations described in Code section 501(c), including corporations, community chests, funds, and foundations, through newly added subparagraph (D) in that section.
- 3Clarifies that the new rule does not require proof of citizenship or verification of immigration status to be presented, and it does not compel religious organizations to act in violation of their religious beliefs.
- 4Effective date: the amendments take effect on the date of enactment, meaning the new rule would apply as soon as the bill becomes law.
- 5Scope and enforcement: the change would be enforced via the IRS (as the agency that oversees 501(c)(3) status) and could result in revocation or denial of tax-exempt status for affected organizations.