September is Better Breakfast Month, and anyone who has ever skipped breakfast knows the feeling: You start the day already behind, running on empty, hoping to make it to lunch before the wheels come off. Congress returned from August recess in much the same condition — a government funding deadline looming on September 30, a Senate that hasn’t passed a single full-year appropriations bill, and a charitable sector that has spent the summer watching the clock tick down. The good news is that a continuing resolution has already bought some breathing room, pushing the deadline to December 11. The bad news is that breathing room is not a meal plan. This month, we’re breaking down what’s on the table, and what the sector needs to make sure doesn’t get skipped.
The December 11 Deadline and What Comes with It
With the September 30 funding deadline just around the corner, Congress has already moved to avert a shutdown. The continuing resolution (H.R. 6500) passed 370-48 in the House and 90-6 in the Senate, extending government funding at current levels through December 11. Critically, the bill also delays the OMB proposed rule overhauling the federal grantmaking system from taking effect until at least that same date. For nonprofits, the CR is a double win: it keeps the lights on and buys additional time to work with policymakers to address the most harmful provisions of a rule that drew nearly 500,000 public comments in opposition.
That December 11 deadline, however, is not a finish line — it’s a reset. Three of the 12 Fiscal Year 2027 appropriations bills have passed the House floor and all 12 have cleared committee, but the Senate has yet to act on any full-year bill. A final deal will require serious bipartisan negotiation during the lame-duck period after November’s midterm elections, and the stakes are high. President Trump’s FY2027 budget request includes $1.5 trillion in total defense resources, a 44% increase over FY2026 that Senate Democrats have already called a nonstarter. The deeper the cuts to non-defense discretionary spending needed to offset those defense increases, the greater the pressure on the programs and grants that nonprofits and communities depend on. Independent Sector will continue monitoring both the appropriations process and the OMB rulemaking closely, and will keep members informed as December 11 approaches.
Comment Now: IRS Proposed Stripping Tax-Exempt Status from Private Schools Over Race
On September 3, 2026, the Treasury Department and the IRS released a proposed rule, formally titled “Racial Nondiscrimination in Private Schools,” which would deny or revoke 501(c)(3) tax-exempt status from any private educational institution that considers race, color, or national or ethnic origin in any school program or policy, for any purpose, including remedial or diversity objectives. The rule would apply across admissions, scholarships, financial aid, athletics, and all other school-administered programs — covering private elementary and secondary schools, colleges, universities, and professional and trade schools. Treasury and the IRS estimate the rule could affect up to 18,000 private schools and 750,000 students. If finalized, it would take effect for taxable years beginning after May 31, 2027.
The rule invokes the public policy doctrine — a longstanding legal principle holding that tax-exempt organizations must operate consistently with fundamental public policy — to justify expanding the nondiscrimination standard well beyond what prior IRS guidance had required. For decades, the IRS had recognized that affirmative action programs designed to redress historic discrimination did not run afoul of that doctrine. This rule would eliminate that exception entirely. For Independent Sector, the concern extends beyond education: As Dr. Akilah Watkins has stated, a rule that empowers the IRS to strip tax-exempt status based on how an organization defines its charitable mission sets a dangerous precedent that any future administration could use to target politically disfavored causes. The comment period is open now and closes November 3, 2026. You can submit comments here.
A Win for Nonprofit Due Process, More Work Needed
The Senate Finance Committee took an important step forward for the charitable sector this month, advancing the Taxpayer Assistance and Service Act by a 26-1 vote. Tucked into the bill is a bipartisan amendment offered by Senators James Lankford (R-OK) and Raphael Warnock (D-GA) — and supported by Independent Sector — that would strengthen due process protections for nonprofit organizations facing IRS action on their tax-exempt status. The amendment was incorporated into the bill without objection, a signal of the broad consensus behind it.
The amendment does two things. First, it explicitly adds “determinations of tax-exempt status” to the list of situations under which taxpayers have a right to appeal to the IRS Independent Office of Appeals, covering both revocations of existing status and denials of initial applications. Second, it codifies that the IRS must notify nonprofit organizations of their right to appeal, making current IRS practice a legal requirement rather than an administrative courtesy. The broader bill also strengthens the IRS Independent Office of Appeals by granting it direct hiring authority for its own attorneys and requiring it to consider all hazards of litigation when resolving cases.
“For nonprofit organizations, tax-exempt status is a privilege and a responsibility,” said Independent Sector President and CEO Dr. Akilah Watkins. “The bipartisan Taxpayer Assistance and Service Act is an important step towards safeguarding fair and impartial due process for every American, including the millions of nonprofit organizations entrusted with tax-exempt status.”
In a related development, Rep. Lloyd Doggett (D-TX) and Rep. Terri Sewell (D-AL) introduced the Protecting the Rights of Organizations Fairly (PROOF) Act on September 3, which writes due process protections directly into the tax code for audits of existing nonprofit organizations. The Lankford-Warnock amendment and the PROOF Act together reflect a growing recognition on both sides of the aisle that the sector needs clearer, codified protections, and that the time to act is now.
National Voter Registration Day: The Sector Shows Up
National Voter Registration Day took place on September 15, bringing together more than 2,000 community partner organizations and 140 premier partners, including Independent Sector, across all 50 states to power more than 3,500 events nationwide. From local libraries and food pantries to national nonprofits and campus organizations, the charitable sector once again played a central role in making democracy accessible — meeting eligible Americans where they live, work, learn, and gather to help them register, update their information, and get ready for November’s midterm elections. The official voter registration total is still being finalized and expected to be released this week.
The timing could not be more meaningful. With midterms now just weeks away and nearly one in four eligible Americans still unregistered to vote, the nonpartisan voter registration work that nonprofits do every day has never been more important, or more worth protecting. As we have reported throughout the year, the OMB proposed rule currently under review includes provisions that would restrict the use of federal grant dollars for nonpartisan voter engagement activities. The sector’s ability to do this work is not just a civic good. It is something we must actively defend.
Form 990 Is Getting Its Biggest Makeover in Nearly 2 Decades
On April 23, 2026, the U.S. Department of the Treasury announced that the IRS intends to revise Form 990, the annual information return filed by most tax-exempt organizations, in what would represent the most significant overhaul of nonprofit reporting requirements since 2008. Treasury’s stated focus is greater transparency and stronger oversight, particularly around disclosure of government grants and contracts and fiscal sponsorship arrangements, which it described as higher-risk areas for misuse of funds and reduced public accountability. No changes have been finalized, and Treasury and the IRS are expected to publish formal proposed regulations and open a public comment period before anything takes effect, though no specific timeline has been announced.
The direction, however, is clear and the charitable sector is watching closely. While framed as a transparency initiative, the announcement signals a broader shift: Form 990 is increasingly viewed not only as an informational return but as a tool for enforcement and public oversight. Combined with the administration’s broader posture toward organizations engaged in DEI, immigration advocacy, and public policy work, these changes raise real questions about how expanded disclosure requirements could be used — and against whom. Independent Sector will continue monitoring the rulemaking process and will alert members when a public comment period opens. In the meantime, nonprofits that receive government grants, manage fiscal sponsorship arrangements, or operate in areas of heightened federal scrutiny should take this opportunity to review their governance and documentation practices now, before proposed rules arrive.
Don’t Miss the Policy Professionals Advocacy Intensive at ISNS 2026
Independent Sector’s National Summit 2026 is just weeks away. If you work in government relations, policy, or advocacy, there is one pre-summit opportunity you won’t want to overlook. The Policy Professionals Advocacy Intensive (PPAI) takes place on Tuesday, October 13 from 9:00 AM to 4:00 PM MT, the day before the full summit kicks off, and is designed specifically for experienced advocates and government relations professionals who want to go deeper than the typical conference session allows.
PPAI creates a dedicated space to reflect on how the sector is navigating today’s challenging policy landscape, share hard-won lessons from the past two years of federal policy, and develop strategic approaches to building sector resilience going forward. Sessions will explore emerging themes including AI policy, workforce policy solutions, and what the past two years of federal policy activity mean for the road ahead. If you are registered for ISNS 2026, make sure to add PPAI to your agenda. It is free to add for Independent Sector nonprofit members. Not yet registered? There’s still time. We look forward to seeing you in Phoenix!
Travis Swanson is the Government Relations Manager at Independent Sector
