Stop Think Tank Tax Exempt Status Fraud

119th CONGRESS 1st Session H.R. ___ To prevent abuse of tax-exempt status by organizations that engage in substantial lobbying activities while claiming to conduct educational research, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the "Stop Think Tank Tax Exempt Status Fraud Act of 2025". SECTION 2. FINDINGS. Congress finds the following: (1) Tax-exempt status under section 501(c)(3) of the Internal Revenue Code of 1986 provides significant benefits to organizations, including exemption from federal income tax and the ability to receive tax-deductible contributions from donors. (2) These benefits constitute a substantial subsidy from American taxpayers, who effectively bear the cost of foregone tax revenue. (3) Organizations claiming tax-exempt status as educational or research institutions must be organized and operated exclusively for exempt purposes, and no substantial part of their activities may constitute attempts to influence legislation. (4) Certain organizations claiming to be research institutions or "think tanks" have abused their tax-exempt status by devoting substantial resources to lobbying activities while characterizing such activities as educational research or policy analysis. (5) This abuse allows wealthy donors to receive tax deductions for contributions that primarily fund lobbying activities, effectively requiring other taxpayers to subsidize private political agendas. (6) The current "substantial part" test for measuring lobbying activity is vague and difficult to enforce, allowing organizations to engage in significant lobbying while maintaining the appearance of compliance. (7) Enhanced enforcement mechanisms, clearer standards, and increased transparency are necessary to prevent abuse of tax-exempt status and protect the integrity of the tax system. SECTION 3. DEFINITIONS. For purposes of this Act: (1) RESEARCH ORGANIZATION.--The term "research organization" means any organization exempt from taxation under section 501(c)(3) of the Internal Revenue Code of 1986 that-- (A) describes itself as a research institution, think tank, policy center, policy institute, or similar designation in any public materials, fundraising solicitations, or communications with the Internal Revenue Service; or (B) reports that 25 percent or more of its exempt purpose expenditures are devoted to research, policy analysis, or similar activities. (2) LOBBYING ACTIVITIES.--The term "lobbying activities" has the meaning given such term in section 4911(d) of the Internal Revenue Code of 1986, and includes-- (A) any attempt to influence legislation through communication with members or employees of a legislative body or with government officials who participate in the formulation of legislation; (B) any attempt to influence legislation through attempts to affect the opinions of the general public or any segment thereof; and (C) advocacy communications that refer to specific legislation and reflect a view on such legislation, even if characterized as "research," "analysis," or "education" by the organization. SECTION 4. STRICTER LOBBYING LIMITATIONS FOR RESEARCH ORGANIZATIONS. (a) In General.--Section 501(c)(3) of the Internal Revenue Code of 1986 is amended by inserting after "educational purposes" the following: "(including research organizations as defined in section 501(c)(3)(A))". (b) Special Rules for Research Organizations.--Section 501 of such Code is amended by adding at the end the following new subsection: "(s) Special Limitations on Lobbying by Research Organizations.-- "(1) IN GENERAL.--Notwithstanding any other provision of this section, an organization shall not be treated as organized and operated exclusively for purposes described in subsection (c)(3) if-- "(A) such organization is a research organization (as defined in paragraph (4)), and "(B) more than 10 percent of the organization's total expenditures for the taxable year constitute lobbying expenditures (as defined in section 4911(c)(1)). "(2) AGGREGATION OF EXPENDITURES.--For purposes of paragraph (1), lobbying expenditures shall include-- "(A) all expenditures for direct lobbying communications and grass roots lobbying communications (as defined in section 4911), "(B) expenditures for research, reports, policy papers, or similar materials that are subsequently used in lobbying communications, allocated on a reasonable basis, "(C) expenditures for communications that, while not explicitly advocating for specific legislation, are made in coordination with or at the request of legislators or legislative staff, and "(D) expenditures for any communications that are made within 90 days before or after the introduction of specific legislation and that address the subject matter of such legislation. "(3) NO ELECTION UNDER SUBSECTION (h).--A research organization may not make an election under subsection (h) to be governed by the expenditure test of section 4911. "(4) RESEARCH ORGANIZATION DEFINED.--For purposes of this subsection, the term 'research organization' means any organization described in subsection (c)(3) that-- "(A) describes itself as a research institution, think tank, policy center, policy institute, or similar designation in any-- "(i) application for recognition of exemption under this section, "(ii) annual information return filed under section 6033, "(iii) public materials, including websites, publications, or promotional materials, or "(iv) fundraising solicitations; or "(B) reports that 25 percent or more of its exempt purpose expenditures are devoted to research, policy analysis, or similar activities. "(5) REBUTTABLE PRESUMPTION.--There shall be a rebuttable presumption that any communication by a research organization that refers to specific legislation or legislative proposals constitutes a lobbying expenditure unless the organization demonstrates that-- "(A) the communication constitutes nonpartisan analysis, study, or research that presents a full and fair exposition of the pertinent facts to enable the audience to form an independent opinion or conclusion, "(B) the communication does not directly encourage recipients to take action with respect to legislation, and "(C) the communication is made available to the general public and not targeted primarily at legislators or legislative staff.". SECTION 5. ENHANCED ENFORCEMENT AND REPORTING REQUIREMENTS. (a) Detailed Lobbying Disclosure.--Section 6033(b) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph: "(21) DETAILED LOBBYING INFORMATION FOR RESEARCH ORGANIZATIONS.--In the case of a research organization (as defined in section 501(s)(4)), the following information: "(A) A detailed description of all lobbying activities conducted during the taxable year, including-- "(i) the specific legislation or legislative proposals addressed, "(ii) the amounts expended on each lobbying activity, "(iii) the names and titles of all legislators and legislative staff contacted, "(iv) copies of or links to all reports, policy papers, testimony, or other materials used in lobbying activities, and "(v) the names of all employees and contractors who engaged in lobbying activities and the percentage of their time devoted to such activities. "(B) A certification, signed under penalty of perjury by the organization's principal officer, that the organization has not engaged in lobbying expenditures exceeding the limitations under section 501(s)(1). "(C) A detailed accounting of the methodology used to distinguish between educational activities and lobbying activities, including any allocation of expenditures for materials or activities that serve both purposes. "(D) The names and addresses of all contributors who contributed $5,000 or more during the taxable year, and a statement indicating whether any such contributor is a legislator, government official, registered lobbyist, or entity controlled by any such person.". (b) Public Disclosure.--Section 6104(d) of such Code is amended-- (1) by redesignating paragraph (4) as paragraph (5), and (2) by inserting after paragraph (3) the following new paragraph: "(4) SPECIAL RULE FOR RESEARCH ORGANIZATIONS.--In the case of a research organization (as defined in section 501(s)(4)), the information required to be disclosed under paragraph (1) shall include all information reported under section 6033(b)(21), and such information shall be made publicly available on the Internet in a searchable format within 30 days of filing.". (c) Mandatory Review.--Section 7611 of such Code is amended by adding at the end the following new subsection: "(f) Mandatory Review of Research Organizations.-- "(1) IN GENERAL.--The Secretary shall conduct a compliance review of each research organization (as defined in section 501(s)(4)) not less than once every 5 years. "(2) SCOPE OF REVIEW.--Each compliance review under paragraph (1) shall include an examination of-- "(A) whether the organization's lobbying expenditures exceed the limitations under section 501(s)(1), "(B) whether the organization has properly allocated expenditures between educational activities and lobbying activities, "(C) whether the organization has accurately reported all lobbying activities as required under section 6033(b)(21), and "(D) whether the organization's activities are consistent with its claimed exempt purpose. "(3) REPORT TO CONGRESS.--Not later than March 31 of each year, the Secretary shall submit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a report on compliance reviews conducted under this subsection during the preceding calendar year, including-- "(A) the number of research organizations reviewed, "(B) the number of organizations found to be in violation of section 501(s)(1), "(C) the enforcement actions taken, and "(D) recommendations for legislative changes to improve compliance.". SECTION 6. INCREASED PENALTIES FOR VIOLATIONS. (a) Excise Tax on Excess Lobbying Expenditures.--Section 4911(a) of the Internal Revenue Code of 1986 is amended by adding at the end the following: "In the case of a research organization (as defined in section 501(s)(4)), the tax imposed by this subsection shall be 50 percent (rather than 25 percent) of the amount of excess lobbying expenditures for the taxable year.". (b) Penalty for Failure to Report.--Section 6652(c)(1)(A) of such Code is amended-- (1) by striking "$20" and inserting "$100", and (2) by adding at the end the following new clause: "(iii) SPECIAL RULE FOR RESEARCH ORGANIZATIONS.--In the case of a research organization (as defined in section 501(s)(4)) that fails to file a return required under section 6033(a) or fails to include the information required under section 6033(b)(21), the penalty under clause (i) shall be $500 for each day during which such failure continues (with the same maximum as provided in clause (i)), and the penalty under clause (ii) shall be $1,000 for each day during which such failure continues (with the same maximum as provided in clause (ii)).". (c) Penalty on Organization Managers.--Section 4911 of such Code is amended by adding at the end the following new subsection: "(g) Tax on Organization Managers of Research Organizations.-- "(1) IN GENERAL.--In the case of a research organization (as defined in section 501(s)(4)), if an excise tax is imposed by subsection (a) on the excess lobbying expenditures of such organization for any taxable year, there is hereby imposed a tax equal to 10 percent of the amount of such excess lobbying expenditures, unless such manager's agreement to such expenditures was not willful and was due to reasonable cause. "(2) ORGANIZATION MANAGER DEFINED.--For purposes of this subsection, the term 'organization manager' means, with respect to any research organization, any officer, director, or trustee of such organization, or any individual having powers or responsibilities similar to those of officers, directors, or trustees of the organization. "(3) JOINT AND SEVERAL LIABILITY.--If more than one person is liable under paragraph (1) with respect to any excess lobbying expenditures, all such persons shall be jointly and severally liable under such paragraph.". SECTION 7. PROHIBITION ON DONOR-ADVISED FUNDS FOR RESEARCH ORGANIZATIONS ENGAGED IN LOBBYING. (a) In General.--Section 4966 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection: "(e) Prohibition on Distributions to Research Organizations.-- "(1) IN GENERAL.--A sponsoring organization shall not make any distribution from a donor-advised fund to any research organization (as defined in section 501(s)(4)). "(2) EXCEPTION.--Paragraph (1) shall not apply if the research organization certifies, under penalty of perjury, that it has not engaged in any lobbying activities during the preceding 3 taxable years and will not engage in any lobbying activities during the taxable year in which the distribution is received. "(3) PENALTY.--If a sponsoring organization makes a distribution in violation of paragraph (1), there is hereby imposed on such sponsoring organization a tax equal to 125 percent of the amount of such distribution.". SECTION 8. AUTHORIZATION OF APPROPRIATIONS. There are authorized to be appropriated to the Internal Revenue Service such sums as may be necessary to carry out the compliance review program established under section 7611(f) of the Internal Revenue Code of 1986, as added by section 5(c) of this Act, including amounts for-- (1) hiring additional examination personnel with expertise in analyzing lobbying activities of research organizations; (2) developing and maintaining a publicly accessible database of research organization lobbying activities; and (3) conducting audits and investigations of research organizations suspected of violating the limitations under section 501(s) of the Internal Revenue Code of 1986, as added by section 4 of this Act. SECTION 9. EFFECTIVE DATE. (a) In General.--Except as provided in subsection (b), the amendments made by this Act shall apply to taxable years beginning after December 31, 2025. (b) Reporting Requirements.--The amendments made by section 5 shall apply to returns filed for taxable years beginning after December 31, 2025. (c) Transition Rule.--In the case of any organization that is a research organization (as defined in section 501(s)(4) of the Internal Revenue Code of 1986, as added by this Act) on the date of the enactment of this Act, such organization shall have 180 days from such date to come into compliance with the requirements of section 501(s) of such Code, as added by this Act. ``` ---