On July 22, 2026, the House Ways and Means Committee marked up and advanced four bills designed to expand oversight of foreign funding received by tax-exempt organizations, establish new extensive reporting mandates and a “penalty” excise tax, eliminate regulatory ambiguity, and clarify how religious beliefs and practices are treated for purposes of tax-exempt qualification.
If enacted, these measures would significantly alter annual disclosure rules for nonprofit entities, fiscal sponsors, and political committees. All four bills passed the committee on party-line votes, and Democratic opposition could make enactment difficult in 2026. Nevertheless, the legislation reflects broader bipartisan interest in reforming the tax-exempt sector, and tax-exempt entities should expect increased scrutiny of many of the issues covered by the bills.
This alert summarizes the key reporting requirements, compliance obligations, and effective dates proposed in each of the four bills.
Foreign Funding Transparency Act (H.R. 9772)
This bill directly targets foreign financial influence by adding disclosure requirements to annual filings for organizations described under IRC Section 501(c). It would require tax-exempt organizations with gross receipts of at least $200,000, or assets of at least $500,000, in the preceding tax year to report:
- The aggregate amount of contributions received from foreign nationals; and
- The aggregate amount of contributions received from foreign nationals from a foreign country of concern (e.g., China, Iran, North Korea, Russia).
For individual donations, the relevant countries include each country of which the individual is a citizen. For other contributions, the foreign country is the country under whose laws the donor was created or organized. The exempt organization may rely on the donor’s representations about nationality unless the organization knows or should have known the representation is false.
The bill is proposed to be effective for taxable years beginning one year after date of enactment.
Fiscal Sponsorship Transparency Act of 2026 (H.R. 9721)
This bill would require 501(c) tax-exempt charitable organizations to provide detailed public reporting on “fiscal sponsorship arrangements.” A fiscal sponsorship arrangement generally involves a tax-exempt organization extending its legal and tax-exempt status to a person, allowing that person to solicit tax-deductible donations without separately incorporating, applying for tax-exempt status, or filing its own Form 990.
The rules would apply to arrangements between a tax-exempt organization and another person when the organization retains discretion and control over the amounts to ensure they further an exempt purpose. The arrangement would also need to fulfill one of two conditions: (i) the organization receives consideration to administer the funds; or (ii) it publicly solicits, receives and administers the funds under an arrangement that either party can terminate. The required reporting would include:
- Separate accounting ledgers, assets, and liabilities for each sponsored project;
- Detailed descriptions of the underlying activities and objectives of the sponsored project; and
- Identity of the key managers leading the project and any foreign funding tied specifically to that project.
The legislation would also impose an excise tax on fiscal sponsorships and other arrangements in which a tax-exempt organization fails to exercise discretion and control over the use of funds, defined as an “improper conduit arrangement.”
The excise tax would apply to any arrangement in which a tax-exempt organization solicits or receives contributions for transfer to a specifically identified non-exempt person, but does not exercise control or discretion over the funds. The excise tax would be imposed on both the organization and its management, meaning the individuals who made the transfer with knowledge that the arrangement was an improper conduit arrangement. In that case, the excise tax on the fiscal sponsor would be 20% of the amount improperly transferred and the tax on organization managers would be 5%. If the transfer is not corrected within a specified period, a second tier excise tax would apply: 100% on the organization and 50% on management.
The bill is proposed to apply to taxable years beginning after December 31, 2027.
Stopping Foreign Influence in Elections Act of 2026 (H.R. 9771)
This bill would prevent foreign nationals from directing money through tax-exempt organizations to influence U.S. political activity.
The bill would impose a 100% “penalty tax” on “disqualified political committee contributions,” with the tax increasing to 200% after a second disqualified contribution. Additional penalties would apply, and the organization could face suspension of its tax-exempt status after a third disqualified contribution. The bill defines a disqualified political committee contribution as any contribution to a political entity by an organization that received a contribution from a foreign national within the preceding two years.
The bill would apply to contributions made one year after enactment.
Fair Treatment of Religious Organizations Act of 2026 (H.R. 9722)
IRC Section 501 provides tax-exempt status for various nonprofit organizations, including educational institutions, churches, religious organizations, and other types of charitable organizations. The Internal Revenue Service and the courts have considered public policy principles when evaluating eligibility for tax-exempt status in certain circumstances.
The bill would add a new subsection to Section 501, entitled Determination of Religious Purpose, which would provide the following clarifications:
- A religious belief or religious practice concerning marriage, sexuality, or gender identity would not be treated as inconsistent with law or public policy for purposes of determining qualification under Section 501; and
- A belief may still be considered a religious belief even if it is not compelled by or not considered central to a particular religion.
If enacted, these measures would apply to taxable years beginning after December 31, 2025.
Next Steps for Your Organization
While the bills must still pass the full House and Senate before becoming law, they reflect broader congressional interest in increased transparency, donor-source reporting, and governance controls in the tax-exempt sector. Although enactment remains uncertain, organizations that rely on foreign contributions, fiscal sponsorship arrangements, or politically connected giving structures may wish to assess whether their current donor due diligence, documentation, and governance processes could support the obligations contemplated by the proposals.
BDO will continue to monitor these developments and provide updates as the bills move through the legislative process.
