With so many significant policy developments affecting nonprofits this year, we begin today’s policy update with information about a free public policy webinar that the Center is hosting next week. We share information about several resources to help your nonprofit engage in nonpartisan voter education and voter registration activities in preparation for this fall’s election, including a great new fact sheet on the three constitutional amendments on the ballot. And we provide details on a proposed rule that would dramatically reshape the 2030 U.S. Census, two new bills in Congress that could provide legal protection for nonprofits, and a new DHHS toolkit on upcoming Medicaid changes that nonprofits can share with their communities to help ensure that North Carolinians understand new requirements and don’t lose their health coverage.
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Join a Free Nonprofit Policy Update Webinar on Sept. 17
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The Center is offering a free nonprofit public policy webinar on Thursday, September 17 to provide the latest information about several public policy issues that are important to charitable nonprofits and the people and communities they serve, including: |
- Recent changes and challenges to federal grant rules, processes, and administration;
- Highlights of key provisions in the state budget and other recent state legislation affecting nonprofits;
- A preview of possible state legislation of interest to nonprofits in the remainder of 2026 and 2027;
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Whether nonprofit diversity, equity, and inclusion programs and policies are now “illegal discrimination”;
- Implications of the One Big Beautiful Bill Act (the major tax and spending bill that Congress passed in 2025) for nonprofits and the people they serve; and
- Information about state constitutional amendments on the ballot this fall, and what nonprofits can do about them.
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Attendees will have opportunities to ask questions and share their insights about policy and legislative priorities and issues.
The Center is presenting this webinar in partnership with the Dan River Nonprofit Network, which serves nonprofits in Person County (as well as nonprofits in the Dan River region of Virginia). Register today!
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Learn About Impact of Three Constitutional Amendments on 2026 Ballot in North Carolina |
With the 2026 election coming up in November, the Center is offering some concrete (and simple) ways that your nonprofit can provide clear and accurate (and, of course, nonpartisan) information about the election to your staff, volunteers, and community in the coming weeks.
Today’s Tip: Learn what the three constitutional amendments on the ballot would mean for your nonprofit and the people and communities that you serve. The three amendments would: |
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Require all voters to provide photo ID when voting;
- Cap the state income tax rate at 3.5%; and
- Limit the ability of local governments to set property tax rates in the future.
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You Can Vote has published a great one-page educational fact sheet about the three amendments that translates the ballot language into plain English, clearly explaining what the amendments would mean for various different types of North Carolinians (and for the nonprofits that serve them). We definitely recommend taking a couple of minutes to read this educational fact sheet and to share it with your staff, volunteers, and communities.
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September 15 is National Voter Registration Day |
Next Tuesday, September 15 is National Voter Registration Day. One easy way for your nonprofit to promote National Voter Registration Day is to encourage your staff, volunteers, and people in your community to check their voter registration on the NC State Board of Elections (NCSBE) Voter Search tool to confirm that you are registered at your current address. If you are not currently registered or if your address is not current, you still have time to register to vote or update your registration through the voter registration deadline of Friday, October 9 or during the early voting period (October 15-31).
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New Proposed Rule Would Make Significant Changes to 2030 U.S. Census |
This morning, the U.S. Census Bureau published a proposed rule on the Federal Register that would make two fundamental changes to the 2030 U.S. Census and future decennial censuses: |
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It would change the criteria that are used for counting residents of states for the purpose of the apportionment of U.S. House of Representatives districts among states. Specifically, the proposed rule would exclude many non-citizens from the count in this apportionment, despite language in the U.S. Constitution that provides that the decennial census is an enumeration of “persons” living in each state rather than U.S. citizens living in each state. The Census Bureau’s explanation of the proposed rule strongly hints that the change in residence criteria would require the 2030 U.S. Census to include a question about the citizenship status of U.S. residents.
- It would prohibit the decennial census from including questions about race, ethnicity, and sexual orientation. Every decennial census since 1790 has asked about race and ethnicity of U.S. residents, but the decennial census has never sought information about sexual orientation.
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The proposed changes to the Census could have significant impacts for North Carolina nonprofits. Among other things, these changes could: |
Create significant challenges in getting a complete and accurate count of communities with significant immigrant populations; Reduce North Carolina’s representation in Congress; Jeopardize significant federal funding for North Carolina by reducing the number of people counted; and
Eliminate important demographic data that many nonprofits use in assessing how and where to provide services.
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U.S. Department of Education Files Appeal of Case Vacating PSLF Eligibility Rule |
Last week, the U.S. Department of Education filed an appeal to a June court ruling that vacated the Department’s final rule on nonprofits’ eligibility to be employers in the Public Service Loan Forgiveness (PSLF) program. The trial court had vacated the rule because it found that the Department of Education exceeded its statutory authority in issuing the rule.
Under PSLF, student loan borrowers who work in public service jobs – including positions with 501(c)(3) nonprofits – for 10 years while paying off their student loans are eligible to have the remainder of their federal student loans forgiven. PSLF has enabled many young professionals to afford careers in the nonprofit sector.
The final rule would exclude employers – potentially including some 501(c)(3) nonprofits – from being eligible employers for PSLF if they are engaged in “substantial illegal purposes.” The final regulations define “substantial illegal purposes” to include: |
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Aiding or abetting violations of federal immigration laws;
- Supporting terrorism;
- Engaging in chemical or surgical castration or mutilation of children;
- Engaging in child trafficking;
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Engaging in a pattern of aiding and abetting illegal discrimination in violation of federal anti-discrimination laws (which could potentially be construed broadly to cover programs and employment practices that provide preferences based on race or proxies for race); and
- Engaging in a pattern of violating certain state laws, including trespassing, disorderly conduct, public nuisance, vandalism, or obstruction of highways.
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Under the final rule, which was scheduled to take effect July 1, the Secretary of Education would have the authority to determine “by a preponderance of the evidence” that an otherwise eligible nonprofit has engaged in activities that have a substantial illegal purpose with only minimal due process for the nonprofit. The final rule also would require that nonprofits certify in their application to be a PSLF-eligible employer that they do not participate in activities that have a substantial illegal purpose, which could effectively make many nonprofits ineligible employers for PSLF purposes even if they are not actually engaged in “substantial illegal purposes.”
The bottom line is that, for now at least, the final rule is not in effect, although that could change if the Department of Education is successful in its appeal in the coming months. For more information about the final rule, the Center’s concerns about it, and its potential impact on nonprofits, check out the Center’s analysis of the final rule.
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Reminder: Proposed IRS Rule Would Jeopardize 501(c)(3) Status of Nonprofit Schools with Race-Based Programs and Policies |
Last Friday, the Internal Revenue Service published a proposed rule on the Federal Register that would allow the IRS to revoke the 501(c)(3) status of any nonprofit private school that “discriminates on the basis of race, color, or national or ethnic origin in administration of its educational, admissions, scholarship, athletic, or other policies, based on the fundamental public policy of the United States against such practices.” The IRS explanation of the proposed rule specifies that it “would further define race-based action for the purpose of ameliorating societal discrimination as a form of discrimination” (translation of the phrase from legalese to English: nonprofit schools with diversity, equity, and inclusion (DEI) policies and practices would lose their 501(c)(3) status if the rule is finalized).
The IRS anticipates publishing a final rule in the first five months of 2027 and that the rule would take effect for taxable years beginning after May 31, 2027. The IRS is accepting public comments on the proposed rule through November 3.
Based on our initial analysis of the proposed rule, the Center shares the following observations about its details and implications for nonprofit schools and other 501(c)(3) organizations: |
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The proposed rule would only apply to nonprofit K-12 schools and higher education institutions. It would not apply to early childhood education nonprofits, and it would not jeopardize the tax-exempt status of other 501(c)(3) nonprofits that provide services based on race, color, or national or ethnic origin of program recipients or that have DEI programs or practices in place. However, the Center is concerned that, if this rule becomes final, it could set a precedent that would enable the IRS to extend its application to other 501(c)(3) nonprofits, ultimately leading to a policy that DEI policies and practices are forbidden for 501(c)(3) nonprofits.
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The text of the new proposed nondiscrimination requirement for nonprofit schools is: “A private school is not operated exclusively for exempt purposes if it adopts, maintains, or enforces any policy or practice that discriminates on the basis of race, color, or national or ethnic origin in the administration of any educational policy, admissions policy, scholarship or loan program, athletic program, or other school-administered or school-supported program. For purposes of this section, discrimination on the basis of race, color, or national or ethnic origin includes any discrimination on the basis of race, color, or national or ethnic origin for any purpose.” The two italicized phrases in the last sentence of the proposed definition (which we italicize here but are not italicized in the text of the proposed rule) are the parts that would jeopardize the 501(c)(3) status of schools with DEI practices or policies in place.
- The IRS explanation of the proposed rule specifies that the rule would not prohibit nonprofit private K-12 schools or higher education institutions from having religious affiliations or from using religion as a factor in admissions or awarding financial aid.
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The proposed rule avoids using the phrase “diversity, equity, and inclusion” and the “DEI” acronym. However, the IRS explanation of the rule makes clear that a wide range of programs and policies at nonprofit schools that would typically be classified as “DEI” could lead to the revocation of schools’ 501(c)(3) status.
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In the IRS explanation of the proposed rule, the concept of a “fundamental public policy against racial discrimination” comes from the 1983 U.S. Supreme Court ruling in Bob Jones University v. United States where the Court found that the IRS could revoke a nonprofit private college’s tax-exemption under Section 501(c)(3) because its policy of denying admission to individuals in interracial relationships violated a “fundamental public policy” of eradicating racism in education. In the majority opinion in the Bob Jones decision, then-Chief Justice Warren Burger emphasized that the “fundamental public policy” of eradicating racism in education was established by three decades of federal court cases and executive actions and was not merely based on recent legal or societal changes. In proposing to extend the fundamental public policy doctrine to prohibit nonprofit schools from having DEI policies and practices, however, the IRS does not cite decades of court rulings and executive actions but rather relies primarily on very recent legal developments, including the 2023 Supreme Court ruling in Students for Fair Admission v. Harvard (holding that the affirmative action admission policies of Harvard and UNC-Chapel Hill violated the Equal Protection Clause of the 14th Amendment and Title VI of the Civil Rights Act of 1964) and two anti-DEI executive orders (EO 14173 and EO 14280) that President Trump issued in 2025.
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The proposed rule limits its nondiscrimination provisions to express use of race, color, or national or ethnic origin and would not prohibit nonprofit educational institutions from using other criteria – such as income and geography – in determining students’ eligibility for scholarships and loans, even if these other criteria may correlate closely to the students’ race. This is a narrower interpretation of anti-DEI policy than other guidance from the Trump Administration, most notably the July 2025 memo from the U.S. Department of Justice explaining that antidiscrimination provisions for nonprofits with federal grants prohibit these nonprofits not only from explicit use of race, but also from using proxies for race – including factors like geography and income – in providing programs and services.
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New U.S. House Bill Would Protect Nonprofits from Litigation under Various Federal Laws |
Two weeks ago, a bill known as the Safeguarding Charity Act was filed in the U.S. House of Representatives (H.R. 10148). The bill would expressly provide that federal tax exemption is not “federal financial assistance” for purpose of coverage under other federal laws and rules. The bills come in response to a 2024 court case that alleged that a nonprofit school violated Title IX of the Education Amendments Act of 1972, which prohibits sex-based discrimination in schools that receive “federal financial assistance.” Even though the school receives no federal funding, the trial court ruled that it was subject to Title IX because its “501(c)(3) status [is] a form of Congressional subsidy and the equivalent of a cash grant.”
Historically, the tax benefits that 501(c)(3) nonprofits receive through the Internal Revenue Code – namely exemption from federal income tax and the ability to receive tax-deductible contributions – have not been considered to be “federal financial assistance.” That means tax-exempt nonprofits are generally not subject to many federal laws and regulations (other than tax laws) that apply to governmental entities or organizations receiving direct federal funding. If a federal court were to rule that federal tax-exemption constitutes “federal financial assistance” that makes the school subject to Title IX, it could mean that a variety of other existing or future federal laws and regulations applicable to entities receiving “federal financial assistance” could be applicable to any 501(c)(3) nonprofit. The Safeguarding Charity Act would prevent courts from making such rulings in the future.
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New U.S. House Bill Would Limit “Weaponization” of IRS Against Certain Nonprofits |
Last week, two members of the U.S. House of Representatives announced that they have filed the Protecting the Rights Of Organizations Fairly (PROOF) Act of 2026 (H.R. 10258), which is “to guarantee that the IRS cannot strip a nonprofit of its tax-exempt status without evidence and without a fair process.” The legislation would require the IRS to provide notice to a nonprofit before launching an examination of its 501(c)(3) status, including the (legal) reason for the investigation, and would provide nonprofits with due process rights during the IRS examination process. The full text of the bill is now available.
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DHHS Provides Toolkit on Upcoming Medicaid Changes |
Many nonprofits provide services to people who receive their healthcare through Medicaid. The One Big Beautiful Bill Act that Congress passed last year made several significant changes to Medicaid that create additional compliance burdens for Medicaid recipients and that limit Medicaid eligibility. The NC General Assembly passed legislation earlier this year to conform with these new federal requirements and to add additional compliance requirements for Medicaid recipients. Among other things, these new federal and state rules will mean that:
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- Many non-citizens will lose Medicaid coverage beginning on October 1;
- Most Medicaid recipients will need to meet new work or community engagement requirements starting on January 1, 2027; and
- Starting in 2027, most Medicaid recipients will need to renew their eligibility every six months instead of once a year.
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The NC Department of Health and Human Services (DHHS) has created a toolkit with print, video, and social media materials in both English and Spanish to explain these changes to the people they serve. The Center encourages nonprofits to share these materials with your communities and the people you serve to help prevent North Carolinians from losing Medicaid coverage because of non-compliance with these tricky new requirements.
As Governor Josh Stein said in a press release last week: “Medicaid expansion provides lifesaving coverage for approximately 740,000 of our neighbors in North Carolina. These cruel federal cuts to health care will harm our people, rural hospitals, and the entire health care system. Knowledge is power so I appreciate our partners helping us spread the word so that eligible North Carolinians know what’s next and what steps to take to protect their health care.”
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Get Free Resources on Nonpartisan Voter Engagement for Nonprofits |
With mail-in absentee voting for this fall’s election starting this month, now is a great time for your nonprofit to plan for nonpartisan voter engagement. To help with your planning, the Center encourages nonprofits to check out You Can Vote’s extremely helpful free resources on voting and elections (available in both English and Spanish). The You Can Vote resources include a succinct voter guide card, fact sheets with information about offices on the ballot, why these elected officials matter on issues of importance to nonprofits, and voting rights for various populations served by nonprofits. It is absolutely worth 15 minutes of your time to peruse these great resources and share the ones that are most relevant for your nonprofit’s work and mission.
To learn more about nonpartisan voter engagement in this fall’s election, check out the recordings of two recent webinars from the Center: |
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