Republican Senator from Arkansas Tom Cotton announced on his X account that he is introducing legislation that would target the financing mechanism of far-left terrorist organizations. The Fiscal Sponsorship Transparency Act would eliminate tax loopholes exploited by the organizations, dealing a major blow to their funding.
The Palestinian Youth Movement and other radical groups have exploited loopholes in our tax code to their advantage.
My bill would put a stop to this absurd practice. https://t.co/8MSZIAmKzP
— Tom Cotton (@SenTomCotton) July 23, 2026
In the lower house, Congressman Lloyd Smucker, a Republican representing Pennsylvania’s 11th district, introduced companion legislation. Current U.S. law allows charities to collect tax-deductible donations and transfer those funds to different organizations even if they are not classified as charities.
Under Cotton and Smucker’s proposed legislation, charities would be forced to report on these types of arrangements. A large tax would be imposed on organizations that pass funds to other groups without any oversight.
Senator Cotton released a statement: “Far-left terrorist organizations shouldn’t be able to manipulate our tax code for their advantage.” He explained that his legislation “would require public disclosure of these activities, tax the charities that don’t control where their money is spent, and end tax write-offs for donors who bankroll these unchecked arrangements.”
Cotton named the anti-Israel ‘Palestinian’ Youth Movement as an example for one of the organizations exploiting the loophole. PYM has organized many of the radical leftist and Islamist anti-Israel protests that followed October 7th. The pro-terror group, that operates mostly in the United States and Canada, has close ties to the Popular Front for the Liberation of ‘Palestine’ (PFLP), designated as a terrorist organizations by multiple countries including Israel, the United States, Canada, the European Union, and Japan.