FEDERAL UPDATES
1. Congress Temporarily Blocks OMB's Grantmaking Overhaul.
The big picture: The Continuing Resolution funding the federal government through December 11 includes bipartisan language temporarily blocking OMB from finalizing its proposed overhaul of federal grantmaking. Congress acted after nearly 500,000 public comments were submitted, most of them
opposed — a direct result of nonprofit advocacy.
Why it matters: The win is temporary. When Congress returns after the November 3 midterms, it will have four legislative weeks to decide whether to keep blocking the rule, which would let agencies terminate grants without cause and weigh partisan priorities in awards. PA nonprofits brought in $40 billion in federal dollars from 2016 to 2024. NCN's shared strategy document has talking points and congressional targets for the November 10 Day of Action.
More details: Continue reading about the OMB proposal here.
2. White House Rescinds $810 Million in Appropriated Funds
The big picture: On September 25, President Trump announced “pocket rescissions” of $810 million Congress had appropriated for HHS, Education, HUD, and DOJ. The largest cut, $567 million, hits HHS immigration and refugee services, with more rescissions to programs for foreign students, climate change, minority business development, LGBTQ groups, and DEI.
Why it matters: Senate Appropriations Chair Susan Collins called the move unlawful, citing a Government Accountability Office finding that pocket rescissions violate the Impoundment Control Act. Because the fiscal year ended September 30 and the House is out until November, Congress has no practical way to respond before the funds expire. Nonprofits providing refugee resettlement, housing counseling, and equity-focused programming should check whether any current or expected awards draw on these accounts.
More details: Continue reading about the pocket rescissions here.
3. House Ways & Means Committee Advances 3 Bills Opposed by NCN
The big picture: The draft rule PANO flagged last month is now official. The Census Bureau's proposed rule would count only U.S. citizens and lawful permanent residents for apportionment — excluding international students, H-1B holders, and others — and would bar questions on race, ethnicity, and sexual orientation.
Why it matters: Census data drives how trillions of dollars in federal funding reach communities and shapes congressional representation for a full decade. Removing demographic data would leave nonprofits, governments, and businesses without the information they use to understand and address changing community needs. Comment by October 13 and sign NCN's national letter — and feel free to share this one broadly.
More details: Continue reading about the proposed census changes here.
4. IRS Publishes Proposed DEI/Racial Inequities Regulation for Schools
The big picture: The regulation PANO flagged last month was published September 4. The proposed rule would let the IRS revoke tax-exempt status from any private school, college, or university with a program found to discriminate by race — including programs designed to remedy past discrimination or promote diversity. Race-conscious scholarships could lose their tax-deductible status.
Why it matters: The rule applies only to schools for now, not all 501(c)(3)s, but it confirms the administration is willing to use the “fundamental public policy” doctrine from Bob Jones University v. United States in new ways. Comments are due November 3, with a public hearing on December 2.
More details: Continue reading about the proposed DEI regulations here.
5. Treasury, IRS Reportedly Weighing Audits of Disfavored Nonprofits
The big picture: Treasury and the IRS are reportedly considering a draft plan to audit foundations and nonprofits the administration disfavors, using a “substantial illegal purpose” standard that could lead to revocation or fines. Named targets reportedly include Open Society Foundations, the Southern Poverty Law Center, and CAIR.
Why it matters: Sens. Ron Wyden and Raphael Warnock have demanded the agencies preserve all related records. The NCN called using the IRS against disfavored nonprofits an abuse of power under any administration — the same tools could be turned on any organization, on either side of the aisle. Keep governance documents, board minutes, and financial records current.
More details: Continue reading about the reported audit plan here.
6. SNAP Cost Shift to Pennsylvania Begins October 1
The big picture: Under H.R. 1, Pennsylvania now pays 75% of SNAP administrative costs, up from 50%. Starting October 1, 2027, the state will also owe a share of benefit costs tied to its error rate — an estimated $381-$410 million a year.
Why it matters: New state SNAP costs compete directly with the human services lines nonprofits rely on. Food banks and human service providers should expect demand to keep rising and factor the 2027 cost share into planning for the FY 2027-28 state budget. More details: Continue reading about Medicaid and SNAP cuts here.
7. Key Federal Items to Watch
- Public Service Loan Forgiveness (PSLF) Employer Rule: The administration has appealed the district court ruling that vacated the Department of Education's PSLF employer rule. The rule remains blocked while the appeal moves forward.
- Mail-in Voting: On September 14, the Supreme Court declined to lift an injunction blocking the Postal Service's new mail-ballot rule, so mail voting will work as usual this November. Nonpartisan voter registration and education remain fully protected under the Johnson Amendment.
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