Congressional scrutiny around the link between charities and terrorist organizations continues to grow. As first reported in the Washington Post on Jan. 14, Senate Finance Committee Chairman Charles Grassley (R-IA) and ranking member Sen. Max Baucus (D-MT) requested the Internal Revenue Service (IRS) to produce the confidential financial records and tax documents of several Muslim charities and Islamic philanthropic organizations. The Dec. 22, 2003 letter was sent in order to increase government oversight over groups that "finance terrorism and perpetuate violence."

Federal law protects the privacy of tax and financial information, but a special exception allows the chairs of the Senate Finance and House Ways and Means Committees access for oversight purposes.

This action comes on the heels of a Dec. 2003 General Accounting Office (GAO) report concerning the proliferation of alternative terrorist financing mechanisms, including the misuse of charities. The GAO report called for the Federal Bureau of Investigation (FBI), Treasury Department, and other relevant agencies to collect and analyze information, and for the IRS to establish procedures, in consultation with state charity officials, to share information about charities.

For two years, the federal government has investigated Muslim charities suspected of supporting groups classified as or alleged to be terrorist organizations. Muslim leaders are concerned that the freezing of over $136 million in assets and closing the operations of major organizations based in the U.S. has lead to a climate of misinformation and distrust regarding legitimate charity work undertaken by tax-exempt organizations that have followed the rules. More information on the similar chilling effect on legitimate charity activity is available in the September 2003 OMB Watch Executive Report.