Today’s policy update begins with information about two free webinars next week on the proposed changes to the U.S. Census and on nonpartisan election activities for nonprofits. We share a summary of four recent proposed rules that could affect nonprofits’ tax-exemption, funding, and data. And we provide information about another attempt by the Trump Administration to politicize federal grants and a new lawsuit challenging federal rules on Medicaid work and community engagement requirements.
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Join a Free Online Briefing on Proposed Changes to U.S. Census |
The U.S. Census Bureau has proposed significant changes to how the 2030 Census could be conducted (see the third item in today’s policy update for more details), and the public has until October 13, 2026 to weigh in. To help ensure that North Carolina nonprofits understand the proposed changes and have a chance to provide their input, the Center and the NC Counts Coalition are offering a free briefing, Protect Our Count: North Carolina’s Call to Action on Proposed Changes to the 2030 Census, on Monday, September 28 from 12:30-2:00 p.m.
During this briefing, we’ll unpack the U.S. Census Bureau’s proposed rule changes and potential implications for North Carolina. We’ll explore how these changes could influence federal funding for local services, political representation, and the overall accuracy of our community data. We’ll hear from experts and community leaders who will help us understand both the proposals themselves and their potential implications for communities across North Carolina. Most importantly, we’ll talk about what we can do while the public comment period is still open.
The first hour will include a formal briefing and community perspectives immediately followed by a 30-minute action session for anyone who wants to ask questions, get help preparing a public comment, or learn how to use available resources to engage their organization, community, or network.
Get informed. Take action. Make your voice COUNT. Register today. |
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Join a Free Webinar on Nonpartisan Voter Engagement |
With the 2026 election coming up soon, the Center will be 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: Make sure you are aware what nonpartisan election activities are permissible for 501(c)(3) nonprofits and how you can incorporate these into your nonprofit’s work. The National Council of Nonprofits and Nonprofit VOTE are hosting a free webinar on Thursday, October 1 from 2-3 p.m. to help nonprofits prepare for this fall’s election. The webinar will provide a roadmap on activities nonprofits can pursue to support civic engagement while remaining nonpartisan. Register here.
If you can’t make next week’s webinar – or if you want to learn more – check out the recordings from two Center webinars on nonpartisan voter engagement from last month: |
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Reminder: Several Proposed Federal Rules Could Affect Charitable Nonprofits
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Over the past month, several federal agencies have proposed changes to federal regulations that could have significant implications for nonprofits and the people and communities they serve. Four major proposed rules with implications for nonprofits are: |
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Loss of tax-exemption for nonprofit schools that use race as a factor in various policies. A proposed rule from the Internal Revenue Service 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). While the proposed rule would only apply to nonprofit K-12 schools and nonprofit private colleges and universities, it could create a precedent that could lead to future challenges to the tax-exempt status of other 501(c)(3) nonprofits with race-based policies, programs, or services. For more, see the Center’s analysis of the proposed rule. The proposed rule is open for public comments through November 3. The IRS has scheduled a public hearing on the proposed rule on December 2 at 10 a.m.
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Major changes to the 2030 U.S. Census. A proposed rule from the U.S. Census Bureau would change the criteria for counting residents for the apportionment of congressional districts by excluding many non-citizens from the count. The proposed rule also 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. These changes to the census could jeopardize federal funding and congressional representation for North Carolina and could eliminate an important data source that nonprofits use in determining how and where to provide programs and services. For more, see the NC Counts Coalition summary of the proposed rule. The proposed rule is open for public comments through October 13.
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Changes to rules for bank investment in community-based nonprofits. A proposed rule from the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) would make changes to the rules implementing the Community Reinvestment Act (CRA) and could have significant implications for banks’ investment in the work of charitable nonprofits. Among other things, the rule could mean that fewer banks are required to make CRA investments, could prohibit banks from making general operating support grants to nonprofits as CRA investments, and could require larger banks to limit indirect cost rates on nonprofit grants to 15% or less. The proposed rule is open for public comments through October 13.
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New eligibility requirements for refundable tax credits. A proposed rule from the U.S. Treasury Department and the IRS would create new eligibility requirements for individuals and married couples claiming four refundable tax credits – the Earned Income Tax Credit, the child tax credit, the adoption tax credit, and the American Opportunity Tax Credit. Under the proposed rule, to be eligible for a tax refund for any of these four tax credits, individuals or married couples would need to be a U.S. citizen, U.S. national, or a lawful permanent resident, asylee, or refugee and declare on their tax return, under penalty of perjury, that the taxpayer is eligible to receive the refunded portion of the credit. It is possible that, if the rule is finalized, changes to individual income tax forms (specifically IRS Form 1040) could cause confusion for other individuals or couples claiming these credits. If the rule is ultimately finalized, it is quite possible that many nonprofits will need to help educate the people they serve about the new requirements so that they don’t lose out on these tax credits. The proposed rule is open for public comments through October 5.
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The Center encourages nonprofits that could be affected by any or all of these rules to consider submitting public comments (use the links above). |
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Learn About Impact of Three Constitutional Amendments on 2026 Ballot in North Carolina |
This fall’s ballot will include three state constitutional amendments with implications for nonprofits and the people they 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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OMB Reportedly Considering Politicizing NIH Grants |
Earlier this month, Congress passed a law that prevents 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 this 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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This week, several media sources reported that the Trump Administration is considering an executive order that would circumvent the congressional delay of the final OMB grant rule by enabling political appointees rather than agency staff to have the authority to determine organizations that are awarded grants from the National Institute for Health (NIH). The potential executive order could allow political appointees to reject grant applications that they deem inconsistent with Trump Administration priorities. This could set a precedent of using executive orders – rather than laws, congressional appropriations, or the formal rulemaking process – to politicize federal grants to nonprofits. The chair of the U.S. Senate Appropriations Committee responded with a statement urging OMB not to politicize the grantmaking process for NIH or other federal agencies.
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New Lawsuit Challenges CMS Rule on Medicaid Work Requirements |
This week, several individuals and organizations filed a lawsuit in a federal court in Maryland challenging an interim final rule from the Centers for Medicaid and Medicare Services (CMS) establishing the details of community engagement requirements for Medicaid participants. The lawsuit alleges that CMS violated the federal Administrative Procedures Act in promulgating the rule. A different federal court dismissed a similar case filed by North Carolina and 24 other states this summer.
The One Big Beautiful Bill Act (OBBBA) that President Trump signed into law on July 4, 2025 required many people aged 19-64 who receive health coverage through Medicaid expansion to meet work or community engagement requirements (typically by working or volunteering for at least 80 hours per month or by attending school at least half-time), starting on January 1, 2027. The new CMS rule, which took effect on July 31, provides guidance for states on the details of how these work and community engagement requirements will be implemented.
The OBBBA Medicaid work requirement provision included an exemption for individuals who are “medically frail.” The CMS rule significantly limits the definition of “medically frail” by adding a requirement that the underlying medical condition must prevent Medicaid recipients from satisfying the work or community engagement requirements. This regulatory change could mean that many more people will lose their health coverage under Medicaid expansion because they are unable to meet the work or community engagement requirements.
The challenged CMS rule also provides more clarity on how individuals receiving health coverage through Medicaid expansion can count their time spent volunteering with 501(c)(3) nonprofits as some or all of their hours for their community engagement requirements. Notably, the rule explains that nonprofits must: | -
Provide oversight of the volunteer activities of Medicaid expansion recipients; and
- Have processes in place to track the community service completed by Medicaid expansion recipients, including the type of community service activities they performed, the dates and hours they worked, and a point of contact who can confirm the hours of community service completed.
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It is unclear how quickly the court will rule in the case. |
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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) created a toolkit with print, video, and social media materials in English and Spanish to explain these changes. 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 earlier this month: “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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U.S. Education Department Removes “Substantial Illegal Activities” Certification from PSLF Form
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On Tuesday, the U.S. Department of Education published a notice that it is revising the eligibility form for the Public Service Loan Forgiveness (PSLF) program to remove a new requirement that nonprofits seeking to be PSLF-eligible employers must certify that they do not participate in activities that have a “substantial illegal purpose.” The change in the form comes after two federal courts, one in Massachusetts and one in the District of Columbia, recently issued rulings vacating the Department’s final rule on nonprofits’ eligibility to be employers in the Public Service Loan Forgiveness (PSLF) program. Both courts found that the Department of Education exceeded its statutory authority in issuing the rule. The Department of Education is appealing the court rulings, but the rule is not currently in effect, so nonprofits are not currently required to certify that they are not engaged in “substantial illegal activities” (hence the change in the certification form).
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. |
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