Rather than packing their suitcases or loading up on sunscreen, some members of Congress prepared for their summer vacations this week by working on changes to nonprofit tax laws. Today’s policy update shares details on four bills passed by a House committee on Wednesday that could affect charitable nonprofits. We seek your feedback on the ways the proposed OMB rules for federal grants would affect your nonprofit and on the impact of Medicaid Expansion on your nonprofit and the people you serve. And we provide updated information on nonprofit appropriations in the new state budget, details on two new proposed employment rules that could affect nonprofits, and potential legislative priorities when the NC General Assembly reconvenes in the next couple of weeks.
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| U.S. House Ways and Means Committee Approves Four Bills Affecting Nonprofits |
On Wednesday, the U.S. House of Representatives Ways and Means Committee approved four bills that would affect charitable nonprofits in a variety of ways: |
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The Fiscal Sponsor Transparency Act of 2026 (H.R. 9721) would require nonprofits that serve as fiscal sponsors to report significant information about each fiscally sponsored project on their Forms 990 and would create new tax penalties when nonprofit fiscal sponsors do not “exercise discretion and control over the use of funds”, without clearly defining what constitutes “discretion and control.” These changes could discourage nonprofits from becoming fiscal sponsors.
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The Foreign Funding Transparency Act (H.R. 9772) would require 501(c) organizations to report on their Forms 990 the aggregate amount of contributions they received from foreign nationals each year, along with information about the nationality of its donors. The bill would mean that nonprofits would need to track the nationality of all of their donors, even donors who made small contributions.
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The Stopping Foreign Influence in Elections Act of 2026 (H.R. 9771) would prohibit 501(c) organizations from making contributions to “political entities” – including political committees and 501(c)(4) social welfare organizations – for two years after receiving funding from any foreign national. The bill could prevent charitable nonprofits that receive international funding from working with 501(c)(4) organizations.
- The Fair Treatment of Religious Organizations Act of 2026 (H.R. 9722) would prevent legal challenges to the tax-exempt status of religious 501(c)(3) nonprofits based on the organization’s religious beliefs or practices concerning marriage, sexuality, or gender identity.
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The House Ways and Means passed all four bills in party-line votes. It is unclear when (or whether) the full House will consider any or all of these bills. |
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Let Us Know: How Would Proposed Changes to Federal Grant Rules Affect Your Nonprofit
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Last week, the Center submitted public comments on the U.S. Office of Management and Budget’s (OMB) proposed changes to the OMB Uniform Guidance, the rules that govern federal grants to nonprofits. The Center’s public comments were informed by the feedback we received from North Carolina nonprofits about the potential impacts of the proposed changes to the federal grant rules. Thank you if you shared your input!
Overall, OMB received 496,805 public comments from organizations and individuals on the proposed changes to the federal grant rules. OMB must now review those comments before publishing its final rule, which could incorporate some of the feedback from these public comments. OMB is expected to release a final rule later this summer or early this fall with an intent to have it take effect on October 1.
Among other things, the OMB proposal would modify federal grant rules to: |
- Establish a new pre-issuance review of grant applications by political appointees;
- Require federal grant programs and grant applicants to be aligned with the policies and priorities of the President;
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Create a preference for grant applicants with lower indirect cost rates;
- Significantly expand the ability of federal agencies to terminate and/or suspend federal grants, including those that are deemed contrary to “the national interest” without an opportunity for nonprofits to contest or appeal their grant terminations or suspensions;
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Eliminate fixed-amount grant awards, which could create more red tape and payment delays for nonprofits;
- Expand the current prohibition on the use of federal grant awards for lobbying activities to also prohibit federal grants from being used for voter registration, state regulatory advocacy, and public messaging activities; and
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Require nonprofits to receive prior approval from federal agencies to use grant funds to attend conferences and other training programs.
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Because the final OMB rule is likely to be similar to the proposal, the Center is still seeking feedback from nonprofits with federal grants about the ways that the proposal could impact their operations, programs, and services. If you haven’t already done so, let us know how the proposed new federal grant rules would affect your nonprofit.
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New State Budget Includes About $600 Million in New Funding for Nonprofits |
Two weeks ago, Governor Josh Stein signed the state budget (S.257) into law. The state budget provides funding for a wide variety of state programs for FY2025-27, which began on July 1, 2025. As is often the case, the state budget includes many appropriations and directed grants to specific nonprofits. The Center has compiled an updated chart of nonprofit appropriations in the budget. By the Center’s count, the budget includes about $659.4 million in new, mostly one-time, funding for about 490 nonprofits, including:
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- $24.26 million in funding for education nonprofits;
- $163.7 million in funding for health and human services nonprofits (excluding those in some of the categories listed below);
- $16.81 million for arts, cultural, museum, and science nonprofits;
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$20.72 million for food security nonprofits;
- $250,000 for affordable housing nonprofits;
- $14.8 million for SmartStarts;
- $248.3 million for nonprofit hospitals;
- $4.8 million for YMCAs;
- $7.6 million for Boys and Girls Clubs;
- $11.56 million for pregnancy care nonprofits;
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$14.66 million for parks and trail programs, many of which are done by nonprofits; and
- $131.94 million for 275 various other nonprofits (a few of which may actually fit into one of the above categories).
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The Center provides this information for several reasons: |
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To ensure that nonprofits know if they received direct funding in the state budget. In the past, we have heard from organizations that did not learn that they had received an appropriation until many months after the state budget was enacted;
- To help identify the individual nonprofits and types of nonprofits that appear to be priorities for the state legislators who worked on developing the budget; and
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To provide transparency about legislative appropriations to nonprofits since these are spread throughout the 1,350 pages of budget documents.
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Share Your Stories about How Medicaid Expansion Benefits Your Nonprofit |
Just a few years ago North Carolina expanded Medicaid, bringing healthcare coverage to more than 700,000 people at no cost to the state. Now, as Medicaid rules and funding are changing, nonprofits must demonstrate how Medicaid Expansion is helping working adults across our communities (people between the ages of 18-64 without significant health conditions).
The Center is proud to be part of the Keeping NC Medicaid Strong coalition, which recently launched a storytelling campaign highlighting the real-world impact of Medicaid Expansion, including beneficiaries, caregivers, employers, and community leaders across North Carolina. The Center encourages your nonprofit to complete this short storytelling form to highlight the difference Medicaid Expansion has made in your life, what it has meant to your organization and the people you serve. Thank you in advance for sharing your stories. Your input can help the coalition make the case for preserving Medicaid Expansion in North Carolina.
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Nonprofits Can Advocate For or Against Constitutional Amendments |
The NC General Assembly has placed three state constitutional amendments on the November 2026 ballot: |
- An amendment that would lower the constitutional cap on state income tax rates from 7% to 3.5%. The Center is opposed to this constitutional amendment because it would be harmful to nonprofits by limiting state revenue options.
- 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. North Carolina currently has a voter ID statute, so the amendment would have little practical impact on elections.
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Each amendment would be added to the state constitution if a majority of voters approve it in this fall’s election.
In addition, legislators are still considering several other state constitutional amendments, including: |
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A Senate-passed 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-passed 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 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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NC General Assembly Likely to Return to Raleigh in Coming Weeks |
After passing the state budget and many other bills three weeks ago, the NC House of Representatives and NC Senate passed a temporary adjournment resolution (H.J.R. 1244) that will enable the General Assembly to return to Raleigh on Monday, July 27 to continue the 2026 short session. The Senate is expected to have voting sessions next week, and the House is expected to return to Raleigh the following week. During the upcoming portion of the legislative session, lawmakers could take up several bills that could affect nonprofits, including:
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Final vote(s) on legislation (S.675) addressing challenges nonprofits have in accessing charitable donations that are made through bequests from IRAs (the House unanimously approved this bill three weeks ago);
- Revisions to the new state budget and technical changes to other legislation that was recently signed into law;
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A possible override of Governor Stein’s veto of a bill (H.B. 437) that would establish a drug-free zone within 100 feet of any facility (including a nonprofit) that receives government funding to provide housing or temporary shelter for people experiencing homelessness and that would prohibit local governments from allowing “unauthorized camping or sleeping” and instead would allow local governments to set up temporary locations for camping or sleeping by people experiencing homelessness;
- A possible Senate override of Governor Stein’s veto of a bill (H.B. 171) that would eliminate diversity, equity, and inclusion (DEI) programs and practices in state government (the House voted to override this bill last month);
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Changes to property tax laws, including possible Senate consideration of a House-passed bill (H.B. 1042) that would require either government financing or 100% nonprofit ownership for the nonprofit affordable housing property tax exemption;
- Election law changes; and
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Additional state constitutional amendments for inclusion on this fall’s ballot (see the previous item for more details)
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EEOC Proposes Eliminating Race and Sex Reporting Requirements
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Yesterday, the U.S. Equal Employment Opportunity Commission (EEOC) published a Notice of Proposed Rulemaking (NPMR) on the Federal Register for a rule that would eliminate various annual race and sex reporting requirements under Title VII of the Civil Rights Act of 1964. Title VII, which prohibits employment discrimination based on several factors, including race and sex, applies to nonprofits with 15 or more employees. EEOC is proposing to eliminate the requirement that employers covered by Title VII must file an annual report with the EEOC summarizing aggregate data on their employees’ race and sex. The proposed elimination of these reporting requirements is consistent with EEOC’s recent efforts to eliminate race and sex-based diversity, equity, and inclusion (DEI) policies and practices in employers covered by Title VII.
Throughout much of its newly-released enforcement plan, EEOC has emphasized its efforts to eliminate race and sex-based diversity, equity, and inclusion (DEI) policies and practices in employers covered by Title VII through: (1) education and outreach; (2) voluntary resolution by employers; and (3) litigation against employers that EEOC believes have engaged in impermissible DEI-related race or sex discrimination. The proposal is open for public comments through August 24.
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DOL Proposes Rule to Enable Employers to Provide More Health Plan Disclosures Electronically |
Yesterday, the U.S. Department of Labor published a proposed rule on the Federal Register that would expand the ability of group health plans covered by the Employee Retirement Income Security Act of 1974 (ERISA) – including many health plans offered by nonprofits – to provide a variety of ERISA-required disclosures to their employees electronically instead of in paper form. A 2002 rule already enables group health plans covered by ERISA to provide disclosures electronically to employees who opt in to electronic disclosures and to employees who receive these notices through employer-provided electronic information system. The proposed rule would expand the electronic disclosure option to almost all employees, but would still enable employees to request paper versions of any ERISA disclosures. DOL’s notice indicates that it anticipates that the rule would save employers time and printing costs. The proposed rule is open for public comments through September 21.
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