This morning, the U.S. Office of Management and Budget formally published its much-anticipated proposal to rewrite the rules for nonprofits that receive federal grants. This morning’s policy update focuses on the Center’s analysis of the major changes in this proposed rule. We also share information about ways that nonprofits can engage on the three (and perhaps more) state constitutional amendments on the ballot this fall. |
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| OMB Proposes Major Changes to Federal Grant Rules
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This morning, the U.S. Office of Management and Budget (OMB) published on the Federal Register its proposed changes to the OMB Uniform Guidance, the rules that govern federal grants to nonprofits. OMB is proposing to change the name of the document from the Uniform Guidance to the Uniform Grants Regulation (UGR).
Notably, the proposed UGR maintains three important provisions from the 2024 revision of the OMB Uniform Guidance for which the Center and our nonprofit partners have advocated: |
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Ensuring that nonprofits may receive a de minimis indirect cost rate of 15% of their modified total direct costs on their federal grants;
- Setting the threshold for a single audit at $1 million in federal grants received; and
- Ensuring that federal agencies’ notices of funding opportunities (NOFOs) are clearly worded.
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The proposed rule would make several other significant changes to federal grant requirements. These would include: |
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Expressly providing that federal grant funds must not be used for: (a) diversity, equity, and inclusion (DEI) or diversity, equity, inclusion, and accessibility (DEIA) policies, principles, or practices; (b) gender ideology (meaning “theories or ideologies that deny the biological reality of sex or the sex binary in humans, or endorse or advocate for the notion that sex is a chosen or mutable characteristic); and (c) “the so-called ‘transition’ of a child under 19 years of age from one sex to another.” The proposed rule includes a lengthy justification for the legality of this new provision, presumably anticipating that it will be challenged in court.
- Ensuring that federal grants do not discriminate against (or in favor of) faith-based nonprofits.
- Providing that federal grants may not be used to promote or support “disparate impact liability.”
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Encouraging federal agencies to award multi-year grants instead of requiring nonprofits to reapply for federal grants every year. This change could create greater certainty or cost savings for many nonprofits.
- Requiring federal grantees and sub-grantees to provide assurances that none of their employees worked for a federal granting agency in the previous two years.
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Allowing federal agencies to consider the risk level of grantees based on their “history of questionable practices” which includes plagiarism, use of discredited studies, and engaging in activities that violate federal civil rights or religious liberty laws (presumably including the activities mentioned in the first bullet point above).
- Limiting the ability of federal agencies to require additional audits on nonprofit grantees.
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Increasing the authority of federal agencies to terminate or temporarily suspend federal grants for violations of the OMB UGR.
- Discouraging federal agencies from using cost-reimbursement contracts since these contracts reduce incentives for federal grantees to control their costs.
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Providing more leeway on how grantees establish their internal controls while also expressly requiring grantees to use the federal E-Verify system and to have cybersecurity measures in place to protect confidential business information.
- Limiting the ability of nonprofits to use federal grant funds for fundraising activities or to attend conferences unless these activities are approved by the federal granting agency.
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Expanding the prohibition on the use of federal grant funds for lobbying activities to restrict the use of federal grants for nonpartisan voter registration activities and for public messaging on public policy issues.
- Limiting the use of federal funds for membership in country clubs or in organizations whose primary purposes are Iobbying.
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OMB plans to publish a final version of the UGR this summer or early fall so that it will take effect on October 1, 2026 (the first day of the new federal fiscal year). The proposed UGR changes are open to public comment through July 13, 2026. If your nonprofit would like to submit comments, you can do so through the Federal Register.
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Nonprofits Can Advocate For or Against Constitutional Amendments |
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| The NC General Assembly has placed three state constitutional amendments on the November 2026 ballot: |
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An amendment that would lower the constitutional cap on state income tax rates from 7% to 3.5%. The Center is concerned that this constitutional amendment would be harmful to nonprofits.
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An amendment that would require the NC General Assembly to establish limits on how much counties and municipalities may increase property tax levies. If the constitutional amendment were to pass, legislators would then work on the details of these levy limits next year.
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An amendment that would require all voters to provide photo ID when voting. Currently, North Carolina’s voter ID law only applies to in-person voting, not voting by mail.
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Each amendment would be added to the state constitution if a majority of voters approves it in this fall’s election. In addition, legislators are still considering several other state constitutional amendments, including: |
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A Senate bill (S.1082) that would add a “right to work” to the state constitution, prohibiting requirements that workers join labor unions or labor organizations.
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A Senate bill (S.1081) that would protect the right to engage in farming and forestry in the state constitution.
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A House bill (H.B. 443) that would amend the state constitution to add a provision that if the Governor has to fill a vacancy in a Council of State position, the Governor must appoint someone from the same political party as the person who vacated the position.
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A House bill (H.B. 144) that would amend the state constitution to make the members of the NC Board of Education elected rather than appointed by the Governor.
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As the Center has explained in a blog post, charitable nonprofits can take positions on state constitutional amendments and other ballot measures. Efforts by 501(c)(3) nonprofits to advocate for citizens to vote for or against constitutional amendments is treated as direct lobbying for federal tax purposes, which is a legal activity for charitable organizations. With at least three (and quite possibly more) constitutional amendments on the ballot this fall, nonprofits may want to consider whether it makes sense to take a position on these ballot measures. This summer, the Center plans to provide more information (most likely webinars and written guidance) on ways that nonprofits can engage on constitutional amendments.
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New! Legal Compliance Checklist for NC Nonprofits
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This comprehensive checklist outlines the rules and laws that apply to nonprofits’ governance, finances, advocacy, human resources, and fundraising – plus what’s changed and actions your organization may need to take. The 2026 edition has been reformatted to make it easier to navigate and expanded with updates on nonprofit corporate governance, federal tax laws, employment laws, federal and state grant requirements, intellectual property laws, and more.
Center members can access the checklist anytime as part of member benefits. Non-members can purchase the checklist for $50 (discounts for Center sustainers and associates). Access includes any updates throughout the year. | |
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Join Nonprofit Policy Conversation in High Point Next Month |
The Center has hosted a series of Nonprofit Policy Conversations this spring. Registration is open for the next scheduled policy conversation on Monday, June 15 from 10 a.m.-12 noon at Centennial Station Arts Center in High Point. The June 15 policy conversation is being presented in collaboration with Guilford Nonprofit Consortium, HandsOn NWNC, One Sector, One Voice Triad, and High Point Arts Council (register now).
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