Because Congress and the White House remain unable to reach an agreement on appropriations legislation for the current federal fiscal year, parts of the federal government began to shut down last week. Congress and the White House have made no progress this week to end the government shutdown. 

Three weeks ago, the U.S. House of Representatives approved a “clean” continuing resolution (H.R. 5371) that would extend federal funding through November 21. The bill needs 60 votes to pass the Senate. The Senate has rejected the bill seven times in the past two weeks. Most Senate Democrats oppose the temporary spending bill for two reasons:

1. Without congressional action, the enhanced premium tax credits on their Affordable Care Act (ACA) Marketplace health plans are scheduled to end after this year. Translation: The cost of ACA Marketplace health coverage will increase significantly for many North Carolinians in 2026, including for many people who are clients of nonprofits and employees of nonprofits that do not offer employer-provided health coverage. Some congressional leaders have indicated that Congress could consider extending the enhanced tax credits in December. Democrats have expressed concerns that this will be too late since open enrollment for ACA Marketplace plans opens on November 1.
2. President Trump has twice this year used rescissions to cancel billions of dollars of congressionally-approved funding. Democrats want future appropriations legislation to include assurances that President Trump will not have the authority to rescind other funding approved by Congress.

A prolonged government shutdown could lead to lapses in service for many people served by nonprofits and for delayed or cancelled payments to nonprofits that provide services through federal grants and contracts. Among other things:

• Last week, various federal agencies released their contingency plans for the government shutdown.
• The NC Department of Health and Human Services (DHHS) announced this week that, despite the government shutdown, North Carolinians will continue to receive federal food assistance – including support from the Supplemental Nutrition Assistance Program (SNAP) and the Special Supplemental Nutrition Program for Women, Infants and Children (WIC) program –through the end of October. 
• For nonprofits with federal grants or contracts, the National Council of Nonprofits has a helpful resource on what nonprofits should do to prepare for a federal government shutdown.

Let us know if your nonprofit has been affected by the federal government shutdown and/or if you anticipate that a prolonged shutdown could affect your nonprofit or the people you serve. 

Last week, a federal court in the District of Columbia ruled that the Internal Revenue Service (IRS) guidance on what constitutes impermissible partisal political activities by 501(c)(4) social welfare organizations is unconstitutionally vague. The case stems from the IRS’s denial of a nonprofit’s application for tax exemption as a 501(c)(4) organization. Unlike 501(c)(3) nonprofits, which are prohibited from engaging in any partisan political activities, 501(c)(4)s can engage in some partisan political acitivies as long as partisan politics are not their primary activities. 

Since 2016, Congress has prohibited the IRS from issuing formal guidance defining what is permissible partisan political intervention for 501(c)(4) organizations.  The court noted that this congressional prohibition means that the IRS cannot issue regulations or a revenue ruling to provide more clarity on what constitutes “political activities” and what is meant by “primary activities” of 501(c)(4) social welfare organizations. Consequently, the court has asked both parties to recommend a framework for defining these terms, and it is possible that the court could then establish standards for what is permissible partisan political engagement for 501(c)(4)s. These definitions also could affect how partisan political engagment is defined for 501(c)(3) nonprofits.

While the IRS cannot issue guidance on partisan political activities of 501(c)(4) organizations, it can – and will – issue guidance about partisan political engagement by 501(c)(3) nonprofits. As part of 2025-2026 Priority Guidance Plan , which was released last week, the IRS has indicated that it plans to issue “guidance on the statutory provision in §501(c)(3) against participation or intervention in political campaigns (the “Johnson Amendment”)” by June 30, 2026. The IRS last released formal guidance on the nonpartisanship provision in 2007 (Revenue Ruling 2007-41). It is possible that its forthcoming guidance on nonpartisanship by 501(c)(3)s could: 

1. 1. formalize the assertion from the IRS’s pending consent agreement that the nonpartisanship provision has a narrow exemption for communications from churches and other houses of worship to their congregations “through [their] customary channels of communication on matters of faith in connection with religious services”; and/or  
   2. assert that the nonpartisanship provision limits the ability of 501(c)(3)s to engage in nonpartisan voter registration, voter education, or get-out-the vote activities.