FEDERAL UPDATES
1. DHS Shutdown Ends after 76 Days
The big picture: President Trump signed a bill on April 30 funding most of the Department of Homeland Security (DHS), ending the longest agency shutdown in U.S. history. Notably, the bill does not include funding for Immigration and Customs Enforcement (ICE) or Customs and Border Protection (CBP); Republicans plan to fund those agencies separately through the budget reconciliation process.
Why it matters: The end of the shutdown restores operations at TSA, FEMA, and the Coast Guard, and ends the immediate threat of missed paychecks for DHS's 260,000 employees. For nonprofits, the restoration of FEMA operations is particularly significant - disaster response organizations and those relying on FEMA grants can now resume normal operations. The Nonprofit Security Grant Program, which funds protection for faith-based and community organizations, should also return to normal processing. ICE and CBP funding remains unresolved and will continue to move through reconciliation.
More details: Continue reading about the end of the shutdown here.
2. Treasury Announces Form 990 Transparency Initiative
The big picture: The IRS plans to revise Form 990 to improve transparency and strengthen oversight of tax-exempt organizations, including new reporting requirements around government contracts, grants, and fiscal sponsorship arrangements. Proposed regulations and a public comment period are expected before any changes are finalized.
Why it matters: This initiative signals intensified federal scrutiny of the sector, specifically putting fiscal sponsorship arrangements in the crosshairs. Nonprofits should ensure their governance, grant reporting, and any fiscal sponsorship arrangements are well-documented and clearly structured. PANO will monitor developments as proposed regulations take shape.
More details: Continue reading about implications for fiscal sponsorship here.
3. IRS Whistleblower Alert: Heightened Scrutiny of Nonprofits
The big picture: The IRS issued a Whistleblower Alert encouraging individuals to report evidence of federal fund misuse, explicitly including by tax-exempt organizations, with cash rewards of up to 30% for information leading to successful enforcement actions.
Why it matters: The National Council of Nonprofits (NCN) anticipates that unfounded allegations of nonprofit fraud will intensify heading into the midterms. Ensure your internal financial controls, grant compliance practices, and reporting are current. NCN has released messaging guidelines for responding to fraud allegations and for protecting nonprofit civic engagement work.
More details: Continue reading about the Whistleblower Alert here.
4. Johnson Amendment: Rule Holds, but Watch for New Guidance
The big picture: A federal court dismissed a legal challenge to the Johnson Amendment, the provision in the tax code that prohibits 501(c)(3) organizations from endorsing or opposing political candidates. The rule remains in place, but the Treasury Department and IRS have announced plans to issue new guidance on how the law applies to religious organizations, and the plaintiffs are expected to appeal.
Why it matters: The Johnson Amendment protects public trust in nonprofits as nonpartisan institutions and prevents political donors from routing campaign contributions through charities to receive tax deductions. Nonprofits can still advocate on policy issues, conduct nonpartisan voter education, and engage in issue lobbying — but cannot endorse candidates or use nonprofit communications to advocate for a specific candidate.
More details: Continue reading about the Johnson Amendment here.
5. Supreme Court Guts Voting Rights Act in Landmark Ruling
The big picture: In a 6-3 decision in Louisiana v. Callais, the U.S. Supreme Court struck down Louisiana's congressional map that had created a second majority-Black district, ruling it an unconstitutional racial gerrymander. While the court stopped short of formally striking down Section 2 of the Voting Rights Act, Justice Elena Kagan wrote in dissent that the majority had rendered it "all but a dead letter" - effectively requiring proof of intentional discrimination, a standard Congress did not write into the law and that is extremely difficult to meet. Republican-led states began immediately moving to redraw congressional maps in the ruling's wake.
Why it matters: The decision effectively combines with the court's 2019 Rucho ruling to make all gerrymandering - racial or partisan - nearly unchallengeable in federal court. Nonprofits doing nonpartisan voter registration and civic engagement work should be aware that the communities they serve may face newly redrawn district lines before November, and should be prepared to communicate clearly about the distinction between nonpartisan civic engagement - which remains fully protected - and partisan political activity, which 501(c)(3)s cannot engage in.
More details: Continue reading about the Voting Rights Act here.
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