As Congress advances its latest reconciliation bill, lawmakers are debating a set of tax provisions that could quietly dismantle one of America’s most trusted and effective sectors: philanthropy. 

Tucked inside the House proposal passed by the Ways and Means Committee last week were two deeply problematic measures — a sharply tiered excise tax on private foundation investment income and a provision allowing the federal government to revoke a nonprofit’s tax-exempt status based on vague or unverified allegations, without judicial review. 

These changes are not just budget maneuvers. They are a direct threat to the charitable organizations that millions of Americans have established with their hard-earned dollars to provide food, shelter, education and health care to members of their community. 

The excise tax hike would raise the current 1.39 percent flat rate on foundation investment earnings to as high as 10 percent, depending on asset size. While that may seem minor in legislative terms, the impact on communities would be profound. In my home state of Indiana, the increase is projected to divert more than $2 billion over the next 10 years away from local grantmaking and into the federal treasury. 

That’s $2 billion less for early learning programs, disaster response efforts, services for veterans and rural mental health initiatives — all funded currently by private foundations that step in where public resources fall short.

This isn’t just a hit to large institutions. Family foundations, community foundations and small business donors across the country would be penalized for stewarding long-term resources in ways that maximize sustained community benefit. The message it sends is clear: philanthropy is no longer a partner, but a revenue source for federal priorities.

Equally troubling is a provision that would grant new authority to the secretary of the Treasury to revoke a nonprofit’s tax-exempt status without due process. We strongly support national security and existing laws prohibiting support for terrorism, but nonprofits are already subject to robust federal oversight. They should not be singled out as a sector for unjust treatment by the government. 

This language would allow revocation without judicial review or a neutral third-party process. For a sector built on public trust, such unchecked authority is not only unnecessary — it’s risky. It would open the door to the shifting winds of politics, misapplication and have a chilling effect on legitimate charitable work. In maneuvers Monday, this provision was removed from the bill, yet insiders say it may return. 

Philanthropy is not a substitute for government, but it is a vital partner. Across the country, foundations help expand broadband access, build housing solutions, strengthen the education pipeline and foster entrepreneurism. They do this not with public dollars, but with privately contributed resources from donors who believe in strengthening their communities. 

Critically, foundations are already held to high standards. They must meet strict annual payout requirements, report their activities publicly and undergo ongoing scrutiny by the IRS. The idea that foundations are under-regulated or unaccountable is simply false. 

This bill creates a dangerous precedent: funding the budget by siphoning dollars away from charitable giving. Congress must not include the excise tax increase or the tax-exempt status provision in the reconciliation bill as it advances it through the process. 

These proposals are not symbolic. They will affect the ability of food to reach families, job training to reach workers and crisis response to reach communities. 

Philanthropy doesn’t need a favor. But it does deserve a fair framework that recognizes its role in a healthy, pluralistic society. Taxing it into submission is not a path to public good — it’s an abandonment of it.

Claudia Cummings is president and CEO of Indiana Philanthropy Alliance.