With heat and hockey (Go Canes!) descending on North Carolina this week, state legislators continued to consider bills with implications for charitable nonprofits. This week’s policy update seeks your input on the impact that the proposed revisions to the OMB Uniform Guidance may have on your nonprofit. We also share information about three bills that advanced in the NC Senate this week that could affect some nonprofits. And we seek your input on challenges your organization has had accessing bequests made from IRAs.
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Let Us Know: How Would Proposed Changes to OMB Uniform Guidance Affect Your Nonprofit? |
Two weeks ago, 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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Requiring political appointees to perform a “pre-issuance review” of many grant awards to ensure that grants are being used for purposes consistent with Administration priorities.
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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 second bullet point above).
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Limiting the ability of federal agencies to require additional audits on nonprofit grantees.
- Increasing the authority of federal agencies to terminate or temporarily suspend federal grants for violations of the OMB UGR.
- Eliminating the use of fixed amount grant awards.
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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.
- 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. If your nonprofit would like to submit comments, you can do so through the Federal Register. Venable law firm has a helpful summary of the major proposed revisions to the OMB Uniform Guidance and how they could impact nonprofits with federal grants.
The Center is planning to submit public comments on the proposal next month. Let us know if your nonprofit has federal grants or subawards and there are provisions that would be particularly harmful or beneficial for your organization. |
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Lawmakers Continue Work on State Budget |
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Leaders from the NC Senate and NC House of Representatives are continuing to work on the details of a state budget for FY2025-27, which began on July 1, 2025. North Carolina is currently the only state in the country without a state budget in place. Last month, House and Senate leaders announced that they had agreed to compromises on three of the biggest differences between their chambers’ budget proposals – pay increases for state employees and public school teachers; future changes to state income tax rates; and funding for a new children’s hospital in the Triangle.
The potential tax rate changes in the budget could impact future state funding for grants and contracts with nonprofits and for a variety of state programs and services that are important for people served by nonprofits. This year, North Carolina’s current individual income tax rate is 3.99% (down from 4.25% in 2025). Under the budget agreement, the individual income tax rate would drop to 3.49% next year, to 3.24% in 2030, and to 2.99% in 2033. Eventually, the rate could go as low as 2.49%, depending on total state revenue. The budget agreement also would keep in place the scheduled phase-out of the corporate income tax, which is currently set at 2% and is scheduled to go down to 1% in 2028 and be eliminated in 2030. As part of the budget deal, legislators are planning to place constitutional amendments on the November 2026 ballot to prevent future increases in income tax rates or property tax assessments (see the next two items for more details about these proposed constitutional amendments).
As part of the budget deal, legislators have placed constitutional amendments on the November 2026 ballot to prevent future increases in income tax rates or property tax assessments. |
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Let Us Know: Has Your Nonprofit Experienced Challenges Accessing Bequests from IRAs? |
Several nonprofits have told the Center that they have experienced a variety of challenges accessing charitable donations that are made through bequests from individual retirement accounts (IRAs). Examples of these challenges, which typically result from policies of some financial institutions that hold IRAs, include: |
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Forced Account Creation. Instead of simply closing the IRA and issuing a check, some institutions require nonprofits to open an “Inherited IRA account” and become new customers of the financial institution.
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Invasive Personal Data Requirements. To open these accounts, nonprofits are often asked to provide personal information about an officer, including Social Security number, home address, and driver’s license—exposing staff to identity theft and data breaches, despite already providing proof of their tax-exempt status as an organization.
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Unnecessary Delays and Denials. If a nonprofit declines to provide this personal data, the institution may refuse to distribute the donation—contradicting the donor’s intent.
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The Center continues to have conversations with state lawmakers about potential legislation to address these issues and ensure that nonprofits can access contributions made through bequests from IRAs without unnecessary burdens or delays. Let us know if your nonprofit has received bequests from IRAs and has experienced these or other similar issues.
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NC Senate Committees Approve Bill to Establish Drug-Free Homeless Service Zones |
This week, two NC Senate committees approved a bill (H.B. 437) that would establish a drug-free zone within 100 feet of any facility (including a nonprofit) that provides housing, temporary shelter, or services to people experiencing homelessness. The bill would create a criminal penalty for nonprofits that operate facilities to support people who are experiencing homelessness if they intentionally allow the manufacture, sale, or distribution of illegal drugs at their facilities (with a limited exception for small quantities of marijuana). If the bill becomes law, nonprofits that primarily serve people experiencing homelessness also would be required to post at least one permanent sign at their facilities identifying them as drug-free zones. The House approved the bill last year, and the full Senate could vote on it next week.
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NC Senate Committee Removes House-Approved Provision that Would Expand GovOps Authority over Nonprofits with State Funding |
Last week, the NC House of Representatives approved a bill (H.B. 1126) that could expand the authority of the Joint Legislative Oversight Commission on Governmental Operations (GovOps) to investigate nonprofits with state funding. The GovOps provision was included as an amendment to a bill that otherwise was making changes requested by the State Treasurer. On Wednesday, a NC Senate committee removed the GovOps provision from the bill.
As background, in 2023, the state legislature greatly expanded the authority of GovOps to investigate nonprofits with state funding and to compel these nonprofits to provide GovOps with documents and to testify at GovOpsmeetings. The provision in the House-passed version of the bill would specify that GovOps can has access to any information or data of nonprofits with state funding. GovOps already has authority to access “any document or system of record” of these nonprofits. It also enables GovOps to compel contractors, subcontractors, vendors, grantees, attorneys, and other representatives of state-funded nonprofits to testify before GovOps. Currently, GovOps can compel officers and employees of state-funded nonprofits to testify.
A separate provision of the bill would add nonprofit religious schools and charter schools to the types of entities that are eligible for public financing for certain capital projects. Currently, other nonprofit schools are eligible for this type of financing. Two more Senate committees would need to approve the bill before the full Senate votes on it. |
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NC Senate Committee Approves Bill to Limit Executive Compensation at Nonprofit Hospitals |
Yesterday, the NC Senate Health Committee approved a bill (S.978) that would create new penalties for nonprofit hospitals whose chief executive officers have compensation greater than 400 times the minimum compensation of employees at their hospital. This would effectively create a state standard for executive compensation at nonprofit hospitals that is different from the standard that is applicable for all 501(c)(3) nonprofits in federal tax law. Potentially, this could create a precedent of the state penalizing nonprofits based on executive compensation.
The original version of the bill also would have expanded the authority of the State Auditor, Attorney General, and State Treasurer to review and regulate mergers and consolidations of hospitals, including nonprofit hospitals. This provision was removed from the bill this week. Two more Senate committees would need to approve the bill before the full Senate votes on it. |
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New! Legal Compliance Checklist for NC Nonprofits |
Compliance matters, especially right now as nonprofits face increasing scrutiny. That’s one of the reasons the Center compiles and shares the annual Legal Compliance Checklist for North Carolina Nonprofits – and a new 2026 edition is available.
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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Nonprofit Policy Conversation in High Point on June 15 |
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. Next week’s 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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