Safeguarding Charity Act

Bill Summary: Safeguarding Charity Act (S 1428)

Overview

The Safeguarding Charity Act is a targeted legislative proposal designed to clarify the definition of "Federal financial assistance" as it applies to tax-exempt organizations. The primary purpose of the bill is to ensure that the act of being exempt from federal income tax is not legally classified as receiving government funding or assistance.

Key Provisions

The bill proposes a specific amendment to Chapter 1 of Title 1 of the United States Code to establish a new legal standard:

• Redefining "Federal Financial Assistance": For any federal law, rule, or regulation, the term "Federal financial assistance" (or any similar term referring to government aid) will not include exemptions from Federal income tax, unless a law explicitly states otherwise.
• Applicable Entities: This clarification specifically applies to:
  • Organizations described in section 501(c) or 501(d) of the Internal Revenue Code (typically non-profits, charities, and religious organizations).
  • Organizations described in section 401(a) (typically employee retirement plans and pension funds).
• Non-Retroactivity: The bill includes a "rule of construction" stating that this change does not imply that tax exemptions were considered government assistance prior to the date the Act becomes law.

Who is Affected?

The bill primarily impacts non-profit organizations, charitable institutions, and retirement funds.

By decoupling tax-exempt status from the definition of "financial assistance," the bill aims to protect these organizations from regulations that trigger automatically when an entity receives federal funds. Many federal grants or programs come with restrictive "strings attached" (such as specific reporting requirements or prohibitions on certain activities) if the recipient is deemed to be receiving federal financial assistance.

Purpose and Impact

The substantive intent of this bill is likely to prevent the government from using a non-profit's tax-exempt status as a lever to impose federal regulations or mandates on those organizations.

If a non-profit is categorized as receiving "federal assistance" simply because it does not pay income tax, it may be subject to administrative burdens or policy restrictions that it would not otherwise face. This bill creates a legal shield, asserting that a tax exemption is not a subsidy or a grant, but rather a lack of a tax obligation.

Procedural Status

• Introduced: April 10, 2025
• Current Status: Referred to the Committee on Finance.
• Sponsors: Introduced in the Senate with support from Senators Josh Hawley, Mike Lee, James Lankford, Ted Budd, and Eric Schmitt.