Federal
Federal oversight and enforcement are intensifying
Nonprofits engaged in advocacy, policy, or federally funded work should expect closer scrutiny. Treasury is increasing monitoring of nonprofit lobbying and policy activity, raising the risk of reclassification if organizations devote excessive resources to influencing legislation.
At the same time, federal agencies – particularly Health & Human Services – are expanding the use of AI tools to flag grants, programs, and job postings that may violate executive orders related to DEI, abortion-related services, or “gender ideology.”
Many federal grants now include contract provisions requiring compliance with immigration enforcement and other federal laws, which organizations should review carefully.
Federal budget clarity brings both stability and leverage
Congress passed – and the President signed – a FY 2026 funding package ending the partial shutdown. Five full-year appropriations bills cover major grant-making agencies relevant to nonprofits, including HHS, HUD, Labor, Education, and Transportation.
Importantly, Congress included detailed funding directives that limit the executive branch’s ability to delay, withhold, or reprogram funds. For nonprofits, this means agencies have less discretion to slow-walk grant awards, and organizations funded through clearly specified line items are in a stronger position to expect timely payment and implementation.
Federal election legislation is advancing
As part of negotiations to reopen the federal government, House Speaker Mike Johnson and the White House agreed to move forward with votes on the Safeguard American Voter Eligibility (SAVE) Act (H.R. 22). The bill would require individuals to provide proof of citizenship to register or update voter registration for federal elections and would eliminate automatic, same-day, online, and mail-in voter registration. The SAVE Act was passed by the House on Feb. 11, and will now be considered by the Senate.
If enacted, these changes could significantly affect nonprofits that conduct nonpartisan voter registration and civic engagement efforts, increasing administrative burdens and potentially limiting who can be reached through existing registration models.
Bipartisan effort to streamline federal grants reintroduced
Separately, a bipartisan group of lawmakers has reintroduced legislation aimed at improving how federal grants are administered. The Streamlining Federal Grants Act would simplify and standardize grant application and reporting processes across federal agencies. The proposal is designed to make federal funding more accessible – particularly for nonprofits that are smaller, rural, or operating with limited administrative capacity.
A House companion bill was introduced in the prior Congress, and the legislation has received endorsement from national nonprofit advocacy organizations.
State
State funding delays putting nonprofit providers at risk
The Georgia Division of Family and Children Services (DFCS), housed in the Georgia Department of Human Services, is facing a significant budget shortfall – originally projected at around $85 million for FY 2026.
This shortfall has forced the agency to enact emergency cost-control measures and contract changes affecting service providers, including contract payment delays on delivered work. These delays are causing disruption including staff downsizing, reserve tapping, and use of lines of credit for multiple providers.
Georgia budget items affecting nonprofits are advancing
At the state level, several nonprofit-relevant budget items are moving through the General Assembly. These include a proposed $50 million Homelessness Response Grant, funding to address the DFCS budget shortfall affecting child welfare partners, SNAP administrative backfill, and a small expansion of the housing voucher program.
These items signal continued reliance on nonprofits to deliver core services, but outcomes will depend on upcoming House appropriations subcommittee action.
Tax policy debates could affect nonprofit funding and partners
Lawmakers are weighing a mandatory statewide property tax cap that would limit local governments’ ability to grow revenue with inflation. Because cities, counties, and school systems are major nonprofit funders and contracting partners, a hard cap could constrain contract adjustments, discretionary grants, and service expansion – particularly in housing, homelessness, food access, arts, and youth services.
Additional proposals include a large state tax rebate and further income tax reductions, which could affect long-term state and local revenue capacity.
Nonprofit-specific tax provisions remain in play
HB 1132 would exempt materials used in the construction, renovation, and rehabilitation of affordable housing from both state and local sales and use tax when those projects are undertaken by qualifying nonprofit.
HB 1077 would extend the sales and use tax exemption for sales of tickets, fees, and charges of admission to certain museums and fine arts performances or exhibitions at nonprofit facilities. The exemption currently exists in statute but is subject to a sunset date; HB 1077 aims to extend that exemption and clarify related provisions.
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