Gov. Affairs | Issue 33 | September 17, 2026
Published September 17, 2026 - This content will be updated as developments unfold.
Good News:
Shutdown Averted, Grantmaking Rule Delayed Again
Congress cleared a continuing resolution on September 1 that keeps the federal government funded through December 11, and President Trump signed it into law shortly after. The bill passed the House 370-48 and the Senate 90-6, a rare show of bipartisan agreement heading into the midterms.
Buried inside the CR is a win nonprofits have been pushing for since the spring: a second delay of the Office of Management and Budget's proposed overhaul of the Uniform Guidance, the rulebook governing roughly $1.2 trillion a year in federal grants. That rule would let agencies terminate or reshape awards mid-performance based on "alignment with administration priorities," and would let agencies restrict eligibility by an organization's IRS designation. OMB had wanted it in force by October 1; it's now on hold until at least December 11, and Congress will need to act again to keep it there. More than 65,000 comments were filed on the proposal, and the National Council of Nonprofits calls the reprieve an "important victory," while cautioning that the underlying rule still needs to be permanently blocked. (National Council of Nonprofits)
Call to Action: Any organization with federal grants, subawards, or pass-through funding got a reprieve, not a resolution. Now is the time to keep tracking the rule and make sure your Members of Congress hear from you directly: NCN's advocacy action makes it a two-minute ask.
Read: Congress Delays OMB Proposed Regulation on Federal Grantmaking - National Council of Nonprofits Newsletter (September 8, 2026)
Not So Good News:
Treasury and IRS Widen Their Scrutiny of Nonprofits
Two related developments put tax-exempt status squarely in the spotlight this month.
Private schools and DEI.
On September 3, Treasury and the IRS proposed a rule that would strip 501(c)(3) status from private schools, colleges, and universities that maintain race-based admissions, scholarship, or programming policies, potentially affecting up to 18,000 institutions. Treasury Secretary Scott Bessent frames it as enforcing the nondiscrimination standard from Bob Jones University v. United States; critics, including the Council of Independent Colleges, warn it could chill donor-restricted scholarship funds and invite years of litigation. The rule wouldn't take effect before May 2027, and comments are due by November 3. (U.S. Treasury; NYT/Inside Higher Ed coverage)
A broader targeting plan. Separately, reporting in late August revealed that Treasury and IRS officials are drafting a plan to audit and potentially revoke the tax-exempt status of specific nonprofits the administration disfavors, including the Open Society Foundations, the Southern Poverty Law Center, and the Council on American-Islamic Relations. Senate Finance Committee Chair Ron Wyden and Georgia's Senator Raphael Warnock sent a letter to Bessent and IRS CEO Frank Bisignano demanding records and answers, warning that using the IRS to pursue political opponents is illegal regardless of who's in the White House. (National Council of Nonprofits; New York Post)
Even organizations well outside these specific targets should watch this closely. Two bipartisan bills introduced this month, the Safeguarding America's Nonprofits Act (H.R. 10148) and the PROOF Act (H.R. 10258), would push back on IRS overreach by clarifying tax-exempt status and requiring due process before revocation.
SNAP Cuts Are Already Landing, With More to Come
Roughly 5 million people, including more than 1.5 million children, have lost SNAP benefits since the "One Big Beautiful Bill" took effect, driven by expanded work requirements and new administrative hurdles. Food banks in Arizona, New Mexico, and Arkansas are reporting sharp increases in demand they can't fully absorb; one Arkansas food bank estimates a worst-case cost shift could carry a $1.2 billion hit to the state's economy. Starting October 1, states must also cover 75% of SNAP's administrative costs, with a share of benefit costs to follow starting in 2027 based on each state's payment error rate. The Senate Agriculture Committee has floated a farm bill provision to delay that cost shift, but it hasn't moved in the House. (ABC News)
Nonprofits providing food assistance, case management, or wraparound services should expect continued increases in need this fall and winter, on top of already-strained capacity.
Washington, D.C. Spotlight: Kennedy Center Will Close its Doors for Renovations After a Judge Blocks the Board’s Efforts to Add Trump’s Name to the Building
The Kennedy Center's Trump-appointed board of trustees voted Tuesday to immediately shutter the performing arts center, citing its “dire” financial and structural shape. The vote came shortly after a federal judge in Washington rejected the board’s latest effort to add Trump’s name to the building’s facade. The Trump administration appealed the judge’s ruling Tuesday night. The center's administration cites a recent ceiling collapse as evidence the physical plant also needs urgent work. It was the third time since February that the board has voted to close the center for renovations for two years. Rep. Joyce Beatty, D-Ohio, an ex officio board member, has challenged those efforts in court, saying the board hadn’t done its due diligence before it decided it needed to close the venue. (CNN; NBC News)
Elections and Nonpartisanship: A Few Reminders:
With the midterms approaching, the National Council of Nonprofits is urging charitable nonprofits to keep doing nonpartisan voter registration and turnout work despite legal back-and-forth over mail-in voting rules. For now, mail-in voting proceeds under existing rules for the midterms, though the underlying legal questions remain unresolved. Nonprofits engaging in any election-related programming should stick to nonpartisan activities to protect their 501(c)(3) status. (SCOTUSblog; The Hill)
Resources:
It’s National Arts in Education Week. Click here for Americans for the Arts free toolkit for advocacy resources, marketing assets, and more.
Comment period open: Comments on the Treasury/IRS private school nondiscrimination rule are due November 3, 2026. Anyone can submit comments by searching docket REG-119986-25 on Regulations.gov.
Ongoing resource: Attacks on Freedom of Speech: What Nonprofits Need to Know, National Council of Nonprofits. A running explainer on the administration's actions targeting nonprofits for their advocacy or mission focus, including background on the IRS-targeting story above; useful to bookmark since NCN updates it as developments unfold.
