With both Congress and the NC General Assembly on vacation throughout most of August, the next few policy updates should be light on legislative developments. Today’s policy update provides details about a U.S. Senate vote last weekend (before the Senate started its August recess) that could delay the implementation of changes to federal grant rules. We also provide information on Governor Stein’s action on several bills that state legislators recently passed and on a new proposed federal rule that could affect banks’ grants to nonprofits. With the 2026 general election coming up soon, we also remind you about two free webinars on nonprofit election engagement and about ways that nonprofits can engage on the three constitutional amendments on the ballot this fall.
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U.S. Senate Approves Continuing Resolution that Would Delay Major Changes to Federal Grant Rules
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Last Saturday, the U.S. Senate approved a continuing resolution that would provide temporary funding for the federal government from October 1 through December 11. With both the Senate and the U.S. House of Representatives out of session until next month, it is unlikely that there will be time for Congress to pass a full budget bill before the start of the next federal fiscal year on October 1. The Senate passed the continuing resolution by a 90-6 margin.
Notably, the Senate continuing resolution includes a provision (Section 157) that would prevent the U.S. Office of Management and Budget (OMB) from issuing a final rule making changes to the OMB Uniform Guidance, the rules that govern federal grants to nonprofits, until December 11. This spring, OMB had issued proposed changes to the OMB Uniform Guidance, and it had planned to issue a final rule early next month with an October 1 implementation date. The Center submitted public comments on the proposed rule, highlighting its potential impacts (most of them negative) on North Carolina nonprofits. Among other things, the OMB proposal would modify federal grant rules to:
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- 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;
- Create a preference for grant applicants with lower indirect cost rates;
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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;
- Eliminate fixed-amount grant awards, which could create more red tape and payment delays for nonprofits;
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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
- Require nonprofits to receive prior approval from federal agencies to use grant funds to attend conferences and other training programs.
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The House approved a different continuing resolution to provide temporary funding for the federal government last month. The House version would not prevent OMB from issuing a final rule on federal grants next month. Once members of Congress return to Washington next month, the House and Senate will need to agree on a compromise continuing resolution to prevent a shutdown of the federal government. |
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New Proposed Rule Could Change Banks’ Investment in Nonprofits |
On Wednesday, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) published a proposed rule on the Federal Register to make changes to the rules related to the Community Reinvestment Act (CRA). CRA is a federal law that provides incentives for banks to make a variety of investments in their communities, including support for affordable housing, financing and support for small businesses and farms, and support for services that benefit low- or moderate-income individuals and families. Banks often make grants to nonprofits to fulfill some of their CRA responsibilities.
The proposed rule would make several changes to CRA regulations that could lead banks to reduce their grant-making to some nonprofits, including: |
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Changing the asset thresholds for CRA requirements, which would mean that fewer banks would make CRA grants;
- Limiting what CRA grants can cover to make it more difficult for banks to provide general operating grants to nonprofits or to provide grants to nonprofits that are not engaged in specific community development projects or programs; and
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Requiring that CRA grants from large banks (with $10 billion or more in assets) have a 15% limit on indirect costs.
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Governor Stein Signs State Budget Adjustments into Law |
On Tuesday, Governor Josh Stein signed into law two bills (H.B. 268 and H.B. 562) making a variety of adjustments to the state budget for FY 2025-27 (S.257). Two parts of the budget adjustment bills could impact nonprofits:
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The bills makes changes to several of the directed grants to nonprofits in the original budget. The Center has updated its chart of nonprofit appropriations in the state budget to reflect these changes (plus a few corrections that you have shared with us). The Center now estimates that the budget includes about $655.98 million in direct grants to nonprofits.
- The NC General Assembly has provided full funding for the NC Secretary of State’s implementation of the new annual reporting requirement for nonprofit corporations in 2027. This should enable the Secretary of State to have sufficient capacity to provide notice to nonprofits about the new requirements, to develop an online filing system, and to manage nonprofits’ filings. Nonprofits’ first annual reports will be due in November 2027.
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New Regulatory Reform Law Makes Changes to Administrative and Healthcare Laws |
On Tuesday, Governor Stein also signed into law this year’s regulatory reform bill (S.445), which makes 52 changes to a wide variety of state laws. Two provisions of the bill could have implications for nonprofits: |
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A provision that codifies the NC Supreme Court ‘s ruling in the 2025 Mitchell v. UNC Board of Governors decision, which gives state courts broad authority to implement their own judgment in interpreting state regulations rather than deferring to the expertise of state agencies. The Mitchell decision is essentially the state equivalent of the U.S. Supreme Court’s 2024 ruling in Loper Bright v. Raimondi, which significantly limited the rulemaking authority of federal agencies. This provision takes effect immediately.
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A provision that will enable employers, including nonprofits, to offer voluntary portable benefits plans for their independent contractors. Essentially, this would enable nonprofits and businesses to choose to voluntarily contribute funds into their independent contractors’ health, retirement, or life insurance benefits while ensuring that these contributions do not cause the contractors to be treated as employees for the purposes of a variety of labor laws. This new law takes effect on January 1, 20217.
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Join Two Free Webinars on Nonpartisan Voter Engagement for Nonprofits |
With mail-in absentee voting for this fall’s election starting next month, now is a great time for your nonprofit to plan for nonpartisan voter engagement. To help with your planning, the Center is offering two free webinars this month: |
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You Can Vote Resources for Nonprofits (August 20 from 10-11 a.m.). You Can Vote will share resources for nonprofits on nonpartisan voter registration, voter education activities, and on becoming a 2026 Voting Rights Champion.
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(Almost) Everything Your Nonprofit Needs to Know About the 2026 Election (August 28 from 10-11:30 a.m.). Learn about what 501(c)(3) nonprofits can and can’t do in an election year, ways nonprofit staff, board members, and volunteers can (legally) engage in campaigns, and common questions (and possibly some answers!) about tricky election-year situations for nonprofits. With three state constitutional amendments on the ballot this fall, we'll include a refresher about ways nonprofits can legally engage in ballot initiative advocacy. We'll also discuss recent changes to state election laws that might affect nonprofits and the people you serve, and tips to protect your nonprofit's reputation and avoid legal trouble when partnering with other organizations in an election year.
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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: |
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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 opposed to this constitutional amendment because it would be harmful to nonprofits by limiting state revenue options. The NC Budget and Tax Center has a helpful fact sheet explaining the potential harm of the tax cap constitutional amendment.
- 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.
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 three constitutional amendments on the ballot this fall, nonprofits may want to consider whether it makes sense to take a position on these ballot measures. To learn more about ballot measure advocacy, we encourage you to join the August 28 webinar described in the previous item.
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FinCEN Formally Ends Corporate Transparency Act Filing Requirements |
On Wednesday, the Financial Crimes Enforcement Network (FinCEN) issued a final rule formally ending a requirement that business corporations file annual reports in accordance with provisions of the Corporate Transparency Act (CTA), a federal law that took effect in 2024. Under CTA, most tax-exempt nonprofits would have been exempt from filing annual reports, although some newly-formed nonprofits and organizations whose tax-exempt status had lapsed would have been subject to FinCEN reporting requirements. Because of ongoing litigation challenging parts of CTA, FinCEN had already delayed the implementation of the reporting requirements, which now will not take effect at all.
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