From the National Council of Nonprofits:
Congress Delays OMB Proposed Regulation on Federal Grantmaking
The House and Senate voted with broad, bipartisan support to enact a Continuing Resolution (CR) to keep the federal government open and funded through December 11. The CR, which was signed into law by President Trump last week, includes bipartisan legislative language to temporarily delay implementation of a proposed regulation from the U.S. Office of Management and Budget (OMB) to overhaul federal grantmaking.
Thanks to the effective advocacy of nonprofits nationwide, policymakers across the aisle supported a delay to the proposed regulation. This delay is an important victory for nonprofits and other stakeholders who raised concerns about how the proposed regulation would politicize federal grantmaking and make it more difficult to administer federal grants.
However, there is still a lot of work ahead to permanently block the regulation that would create significant financial risk and instability for federal grantees, including nonprofits. The proposal attempts to grant unprecedented discretion to any administration to withhold, suspend, or terminate grants, or change terms and conditions mid-performance. The proposal would also allow an administration to determine federal awards based on partisan ideology, rather than objective criteria, community needs, and congressional intent. Economists warn the proposal could harm credit ratings for states and local governments because the federal government would no longer be a stable partner.
SCOTUS Permits Executive Order Limiting Mail-In Voting, Case and New Preliminary Injunction Continue
With the mid-term elections rapidly approaching, the U.S. Supreme Court issued an emergency ruling blocking a lower court’s injunction of an Executive Order on mail-in voting from March. The Executive Order directs: (1) the U.S. Department of Homeland Security to compile lists of U.S. citizens who are eligible to vote in each state; (2) the Attorney General to prioritize the investigation and prosecution of state and local officials who issue ballots to ineligible voters; and (3) the U.S. Postal Service to establish uniform standards for mail-in ballots via rulemaking. In blocking the preliminary injunction, the Supreme Court argued that the plaintiff states lacked standing to sue because the Executive Order had not yet led to a final rule and thus could not have caused concrete harm. Two days after the ruling, plaintiffs refiled their case, noting that the final rule had been published.
Days after the ruling, plaintiffs refiled their case, noting that the final rule had been published. Last week, the Massachusetts District Court issued a preliminary injunction to prevent the Postal Service from implementing key sections of the Executive Order. The Administration appealed the injunction to the U.S. Supreme Court, asking for the Rule to be implemented. As of the time of this publication, the Supreme Court had not decided on the appeal.
Treasury, IRS Weighing Plan for Politically Motivated Actions Against Nonprofits
The U.S. Department of the Treasury and Internal Revenue Service (IRS) are considering a draft plan to politically target foundations and other nonprofits the Trump Administration disfavors by revoking their tax-exempt status or imposing significant fines. Under the draft proposal, the administration would launch “a sweeping audit” of organizations the administration claims are operating with a “substantial illegal purpose,” which would allow the IRS to revoke the organizations’ tax exemption or impose fines. Among those organizations reportedly targeted by Treasury and IRS are Open Society Foundations, Southern Poverty Law Center, Council on American-Islamic Relations, and Private Equity Stakeholder Group, and the labor union Service Employees International Union (SEIU).
In response, several members of Congress sent letters to Treasury Secretary Bessent and IRS CEO Bisignano requesting information about the plans and directing the agencies to preserve all records. As NCN has previously stated, it is an egregious abuse of power for any administration – whether Republican or Democrat – to threaten to use the immense powers of the IRS to target nonprofits it disfavors.
Free, National Webinar: Public Policy Doctrine Proposed Regulations
Wednesday, September 9 at 2:00pm Eastern
Join the Council on Foundations, Independent Sector, National Council of Nonprofits, United Philanthropy Forum, and external counsel to discuss newly proposed regulations addressing racial nondiscrimination requirements for private schools. The proposed regulation states that a private school cannot qualify as tax-exempt under section 501(c)(3) if it discriminates on the basis of race, color, or national or ethnic origin in the administration of any educational policy, admissions policy, scholarship or loan program, athletic program, or other school-administered program. Please note this webinar will NOT be recorded. Post-event resources will be shared with all registrants. Register here.
The proposed regulation seeks to extend the “fundamental public policy doctrine,” as outlined by the U.S. Supreme Court in Bob Jones University v. United States, in which the court upheld the revocation of the university’s tax-exempt status because the university’s racially discriminatory admissions practices violated a “fundamental national public policy.” The regulation is expected to go into effect after May 31, 2027 after a 60-day public comment period.
Administration Appeals Court Decision in NCN PSLF Lawsuit
The federal government filed an appeal challenging a district court decision to vacate a U.S. Department of Education’s final rule related to the Public Service Loan Forgiveness (PSLF) program. PSLF helps ensure that talented individuals can afford to choose and remain in careers in public service without being burdened by long-term federal student debt. The rule, if implemented, would have allowed the Education Secretary to disqualify certain nonprofit employers from participating in PSLF based on their mission, harming nonprofit workers and the communities that rely on nonprofits’ work. The case now goes to the Circuit Court for review.