A group of Republican lawmakers who don’t want U.S. taxpayers to subsidize Chinese investments plan to reintroduce legislation that would force universities and nonprofits to divest themselves from China or lose tax exempt status.
Plans for the legislation were announced in a news release issued by the House Select Committee on the Chinese Communist Party (CCP), chaired by U.S. House Rep. Mike Gallagher (R-Wisconsin) on Tuesday. Gallagher is joining Sen. Josh Hawley (R-Missouri) and committee members Rep. John Moolenaar (R-Michigan), Rep. Rob Wittman (R-Virginia) and Rep. Darin LaHood (R-Illinois) to support the Dump Investments in Troublesome Communist Holdings Act (DITCH Act).
“American taxpayers should not be forced to subsidize investments that benefit the Chinese Communist Party,” said Chairman Gallagher. “Universities, non-profits, public pension funds, and other institutions that want preferential tax treatment must choose: are they committed to their professed values or to financing a genocidal communist regime?”
This bill would force non-profits, university endowments, public pension plans and other tax-exempt entity to divest from Chinese companies or lose their tax-exempt status, according to the news release, which linked to a FoxNews story published the same day.
Gallagher initially introduced the Ditch Act, House Resolution 9385, into the House in December. A companion bill in the Senate, Senate Bill 5178, was introduced into that chamber by Hawley.
Gallagher’s concern centers around support for the People’s Liberation Army and the CCP’s technology-driven authoritarian regime while U.S. universities and non-profits reportedly have invested in Chinese companies such as Hikvision, ZTE and China Mobile, according to Fox News.
The legislation outlines that Chinese entities encompass corporations incorporated or operating in China, possessing over 10 percent of stock ownership (by vote or value) from a combination of Chinese entities, or being under direct or indirect ownership by a Chinese entity, which may involve derivative instruments or contractual arrangements. However, the Treasury Secretary retains the authority to provide a waiver under specific circumstances, particularly when a non-profit organization possesses Chinese assets but poses a minimal national security risk. The waiver process entails multiple stages, with one step being the requirement for the Treasury Secretary to issue a report within 360 days, according to a press release.
“Universities, foundations, and other entities are exempt from federal income tax for their work promoting the public good in the United States,” Hawley said in the committee’s news release. “Investing in China does the opposite: it advances the economic ambitions and military modernization efforts of the Chinese Communist Party while selling out American workers and values. These tax-exempt entities must stop investing in China or lose their tax-exempt status.”
“The Chinese Communist Party is the threat of our lifetime, and we must do everything we can to counter Beijing’s malicious agenda,” Wittman said in the news release. “American universities, foundations, and other tax-exempt entities should not receive preferential treatment if they choose to finance a genocidal communist regime. I’m proud to join my colleagues in introducing this critical piece of legislation to ensure we prioritize American interests over profiting off the Chinese market.”
