On May 29, the Office of Management and Budget (OMB) published a proposed rule rewriting the rules governing all federal grants and cooperative agreements – rebranded the “Uniform Grants Regulation.” If finalized, it will take effect October 1, 2026, and apply to more than 40 federal agencies simultaneously, including HHS, NIH, NSF, HUD, DOJ, FEMA, and DOE.
This is not a technical update: It fundamentally restructures who controls grant decisions, what recipients may do with federal funds, and how quickly awards can be terminated.
The direct impact on direct federal grantees is significant – but the downstream effects on nonprofits receiving state and county grants may be equally consequential, and in some ways harder to navigate. This analysis covers both, with a call to comment on the impact of proposed changes on your work and your community.
What OMB says about the proposed changes
The rule frames itself around three goals:
- Transparency, accountability, and oversight, in order to prevent what is characterized as the “wasteful spending” that took place from 2021–2024.
- Clarifying OMB’s binding regulatory authority over all agencies.
- Reducing recipient burden, framed as eliminating DEI and other “add-on” requirements.
The preamble to the rule explicitly criticizes DEI programs, gender-related research, foreign NGO overhead, and NSF grants it characterizes as politically motivated. The practical effect, however, goes well beyond streamlining – as the provisions outlined below make clear.
Key provisions
Political appointees control grant awards [200.205]
Senior political appointees – not program officers or career scientists – must pre-approve every discretionary grant before it is awarded. They are explicitly forbidden from deferring to peer reviewers. Grant decisions must “advance the President’s policy priorities,” and criteria include blocking awards that touch on denial of “the sex binary in humans,” illegal immigration, or anything deemed to “promote anti-American values.”
Peer review becomes advisory only [200.205(d)]
Peer review recommendations are explicitly made non-binding. This dismantles the post-WWII independent review system used by NIH, NSF, DOE, and NASA, in which scientific merit – not politics – was the primary criterion for funding.
Active grants can be terminated at any time [200.340]
Active multi-year grants may be cancelled mid-project simply because they become “inconsistent with agency priorities.” Agencies need only provide a brief written rationale. No finding of noncompliance or fraud is required. Organizations that have hired staff, signed leases, or enrolled clients based on a multi-year award face sudden, uncompensated wind-down.
DEI, gender research, and related topics banned [200.300]
Federal award funds may not be used to fund, promote, or facilitate:
- DEI or DEIA policies or practices
- “Gender ideology,” defined as any theory that “denies the biological reality of sex or the sex binary”
- Any assistance with gender transition for individuals under 19
Critically, an organization conducting such work with entirely separate, non-federal funds could still face grant termination if the activity is found to conflict with award conditions.
“Gold Standard Science” – an undefined political test [200.205]
All grants must include benchmarks for compliance with “Gold Standard Science,” tied to Executive Order 14303 – but never defined in measurable terms. Institutional prestige is explicitly deprioritized. Because the standard is undefined, the administration retains broad discretion to favor or disfavor grantees based on political alignment.
International collaboration broadly banned [200.220]
Federal funds – including indirect costs – may not support research, travel, or collaboration involving entities in broadly defined “covered foreign countries.” The prohibition extends beyond China to all countries on broad sanctions lists.
Conference attendance requires express pre-approval [200.432]
Conference participation is allowable only if expressly approved by the federal agency and written into the award terms. Conferences not anticipated at award time cannot easily be added, and agencies may simply decline to include them.
Journal subscriptions and publication costs banned [200.454, 200.461]
Professional journal subscriptions are categorically unallowable. Publication fees and open access charges are unallowable by default, conflicting directly with the 2022 OSTP open access mandate.
E-Verify mandated for all recipients [200.303]
All recipients and subrecipients must enroll in and use DHS E-Verify for every employee and contractor working on a federal award. Any Final Nonconfirmation must be reported to the awarding agency.
Issue advocacy prohibited [200.450]
Federal grant funds may not be used for:
- Messaging that promotes or opposes any social or political policy position unrelated to the award’s statutory objectives
- Voter registration activities
- Attempting to influence state executive agencies outside the precise scope of the award
Eligibility narrowed by nonprofit category [200.202(d)]
Agencies may restrict grant eligibility to specific IRS nonprofit categories – for example, 501c3 only – excluding 501c4 advocacy-affiliated organizations that have historically been eligible.
Applicants can be denied based on organizational affiliations [200.206]
Expanded risk criteria allow agencies to deny awards based on an applicant’s affiliations with organizations deemed to “undermine public safety or national security.” Given the preamble’s broad framing of anti-American activity, this could disqualify organizations affiliated with civil rights, environmental, or public health advocacy.
Grant program design must align with administration priorities [200.202]
Every new federal grant program must be designed with goals that explicitly align with administration policies – not solely scientific need, statutory mandate, or expert input.
What nonprofits face at the federal level
For organizations receiving federal grants directly, the most acute concerns are:
Funding instability. The termination-at-will provision [200.340] means any active multi-year grant can be cancelled mid-project without a finding of wrongdoing. Organizational commitments – staff, leases, enrolled clients – are all at risk.
Eligibility restrictions. 501c4 organizations and advocacy-adjacent nonprofits in public health, environmental, or civil rights work may be disqualified under expanded eligibility and affiliation criteria.
Mission alignment conflicts. Organizations whose missions involve DEI, equity, gender health, or immigration services may find their activities prohibited under mandatory grant conditions – even when funded with separate private dollars.
Issue advocacy restrictions. Nonprofits that communicate policy implications of their work, engage in public education, or seek to influence state agencies as part of program delivery could be in violation of the new issue advocacy prohibition.
Administrative compliance burden. E-Verify mandates, conference pre-approval requirements, journal subscription bans, and publication fee restrictions all add significant overhead – with no cost-benefit analysis provided by OMB.
Reduced transparency. A new “national interest” exemption could allow agency heads to exempt funding opportunities from public posting on Grants.gov, reducing nonprofits’ ability to even know what funding exists.
The downstream impact: State and local funding is not a safe harbor
Organizations that do not receive federal funds directly are not insulated from this rule. Federal conditions flow through to state and county grants – and most nonprofits are subrecipients, whether they know it or not.
The pass-through problem
Most state and county grants to nonprofits include federal dollars passed through from agencies like HHS, HUD, DOJ, and FEMA. Under the Uniform Guidance, when a state or county receives federal funds and passes them to a nonprofit subrecipient, that nonprofit is legally bound by the same federal grant conditions – including every new requirement in this proposed rule.
A nonprofit receiving a housing assistance grant from a county may never interact with HUD directly – but if HUD money flows through that county grant, the nonprofit (as a “subrecipient”) is now subject to the DEI ban, the issue advocacy prohibition, the E-Verify mandate, and the termination-at-will provision.
State and county agencies become compliance enforcers
State and county agencies that receive federal dollars will be required to embed these new conditions into their own grant agreements with nonprofits. This means:
- State health departments passing through Medicaid or HHS funding must impose E-Verify, DEI restrictions, and issue advocacy prohibitions on their nonprofit service providers.
- County human services agencies passing through FEMA, HUD, or DOJ funding must do the same.
- State and local governments that fail to impose these conditions on subrecipients risk losing their own federal funding.
In effect, the rule deputizes state and county agencies as political compliance officers for the federal government – whether they want that role or not.
Eligibility restrictions ripple downward
If a federal program restricts eligibility to 501c3 organizations, a state or county may be prohibited from subgranting to a 501c4 advocacy organization it has historically partnered with – even if state law places no such restriction.
Termination risk cascades downward
If a federal agency terminates a prime award to a state or county, that entity will almost certainly be forced to immediately terminate its subgrants to nonprofits – mid-program-year, without recourse, regardless of staff hired or clients enrolled.
State-only funding may not be clean
Some nonprofits may assume grants funded entirely with state general revenue or county appropriations are insulated. There are important caveats:
- Many states commingle federal and state funds within programs, making clean segregation difficult. Any federal pass-through taints the entire award.
- Some states may voluntarily align their grant conditions with federal requirements for administrative simplicity, extending restrictions to state-funded work as well.
- State legislatures under federal pressure may impose analogous restrictions through appropriations riders or grant conditions.
Smaller and midsized nonprofits bear disproportionate risk
Large nonprofits with dedicated compliance staff can adapt. Smaller community-based organizations – often the most critical service providers at the local level – frequently lack that infrastructure. They may:
- Be unaware that a county grant carries federal pass-through conditions
- Lack the capacity to implement E-Verify across all award-funded staff
- Be unable to afford legal review of newly revised grant agreements
- Face audit findings or repayment demands after the fact
Your voice can shape the outcome: Comments are due by July 13
This rule is proposed, not final. The public comment period is the most direct and legally significant mechanism available to shape it. OMB is required to formally review and respond to every substantive comment before issuing a final rule – and the written record of public input shapes both the final regulation and any subsequent legal challenges.
Whether your organization receives federal funds directly, through a state or county grant, or not at all, your experience regarding these changes, and how they would affect the communities you serve, belongs in that record. Specific, concrete comments tied to identifiable impacts carry the most weight.
▶ Submit your comment by July 13 at www.regulations.gov under docket OMB-2026-0034.
Reference the section numbers most relevant to your organization, for example:
- [200.340] Discretionary grant termination
- [200.300] DEI and gender-related prohibitions
- [200.303] E-Verify mandate
- [200.450] Issue advocacy prohibition
- [200.202] Eligibility restrictions and program design requirements
- [200.206] Expanded organizational affiliation risk criteria
The volume and specificity of the public record will matter both for the final rule and for any future litigation. Every substantive comment submitted strengthens that record.
Share this analysis with your network
Nonprofits across your network – including those that receive only state or county funding – need to understand their exposure. Share this analysis and the policy alert widely.
Direct links:
▶ Policy analysis | www.regulations.gov/document/OMB-2026-0034-0001
▶ Submit a public comment | www.regulations.gov/commenton/OMB-2026-0034-0001
▶ Full proposed rule | www.federalregister.gov/documents/2026/05/29/2026-10817
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