October is National Book Month, and if Congress were a novel right now, it would be the kind of thriller where everything hinges on the final chapters, and the clock is running out. With midterm elections around the corner, lawmakers have largely left Washington to make their case to voters.
But the story is far from over. When Congress returns for a lame-duck session, it will face a packed agenda with real consequences for nonprofits and the communities they serve — a December 11 government funding deadline, unfinished FY2027 appropriations negotiations, and a Taxpayer Assistance and Service Act that has cleared the Senate and awaits House action. The charitable sector has been an active author in this story all year — submitting comments, mobilizing members, and making the case on Capitol Hill.
Case Closed: The PSLF Employer Eligibility Rule Is Dead
The Public Service Loan Forgiveness Program scored another major victory this month. On October 21, the Department of Justice dropped both of its appeals challenging two federal court rulings from June that had vacated the administration’s PSLF employer eligibility rule. With those appeals dismissed, the lower court decisions remain in place — and the rule is dead.
The rule, finalized by the Department of Education in October 2025, would have granted the Education Secretary broad discretionary authority to strip PSLF-eligible status from employers deemed to have a “substantial illegal purpose” — a vague standard the Department indicated could cover organizations serving undocumented immigrants, providing gender-affirming care for minors, or operating DEI programs. For the 2.3 million borrowers currently pursuing PSLF, the stakes could not have been higher: Payments made while working for a disqualified employer would no longer count toward the 120-payment threshold for forgiveness.
Independent Sector opposed this rule from the start. In September 2025, we submitted formal comments to the Department of Education urging it not to finalize the rule and arguing that the statute establishing PSLF is clear: Working for any 501(c)(3) organization is a qualifying public service job, and the Department lacked statutory authority to narrow that definition. The courts agreed.
The withdrawal of these appeals is a meaningful win for public service workers and the nonprofits that depend on PSLF to attract and retain talent. Independent Sector will continue to monitor any future attempts to restrict the program and will keep members informed.
December 11 or Bust: The Fight to Block the OMB Grantmaking Rule
For months, the charitable sector has been sounding the alarm about a sweeping proposed rule from the Office of Management and Budget that would overhaul the Uniform Guidance, the rules governing more than $1 trillion in federal grants to nonprofits, state and local governments, and other grantees. The good news: The continuing resolution Congress passed last month includes a provision delaying the rule from taking effect until at least December 11, buying the sector critical time to fight back. The bad news: That deadline is approaching fast, and the rule is not dead yet.
The proposed rule would radically reshape the federal grantmaking landscape for nonprofits, state and local governments, and other grantees. Among its most concerning provisions, this rule would expand federal agency authority to modify or terminate grants mid-project without hearing or appeal; and broad discretion to scrutinize the subject matter of grants based on the administration’s policy priorities, opening the door to politically motivated funding decisions across the sector.
As December 11 approaches, Independent Sector is engaged in ongoing coalition discussions with policymakers to ensure that any must-pass legislative package includes language to permanently block this rule from taking effect. Our partners at the National Council of Nonprofits are organizing a Day of Action on November 10 to amplify the sector’s concerns and urge Congress to act before the deadline. We encourage members to participate and make their voices heard.
Comment Now: The IRS Nondiscrimination Rule and What’s at Stake
On September 3, the Treasury Department and the IRS released a proposed rule — formally titled “Racial Nondiscrimination in Private Schools” — that 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 program or policy, for any purpose. That includes affirmative action programs, diversity initiatives, and other efforts specifically designed to address historic and ongoing disparities in educational access and opportunity. Treasury and the IRS estimate the rule could affect up to 18,000 private schools and 750,000 students.
The rule invokes the public policy doctrine, a longstanding legal principle holding that tax-exempt organizations must operate consistently with fundamental public policy. For decades, the IRS recognized that programs designed to redress historic discrimination did not run afoul of that standard. This rule would eliminate that exception entirely, effectively treating remedial and diversity programs the same as discriminatory ones.
The implications extend well beyond admissions. Tax-exempt status touches every dimension of how educational institutions operate: Scholarships, financial aid, athletics, and all other school-administered programs would fall under scrutiny. And as Independent Sector President and CEO Dr. Akilah Watkins noted in public comments, the broader precedent is deeply concerning: A rule that empowers the IRS to strip tax-exempt status based on how an organization defines its mission is a tool that any future administration could use to target causes it disfavors.
The comment period closes November 3. We strongly urge members to submit comments before the deadline. This is a critical moment to push back.
From Phoenix with Purpose: PPAI Recap
Thank you to everyone who joined us for this year’s Policy Professionals Advocacy Intensive at Independent Sector’s 2026 National Summit. We were thrilled to convene nearly three dozen sector professionals in Phoenix for a full day of training on the issues shaping the nonprofit sector right now.
Participants tackled some of the most pressing questions facing the field — how to build strategic advocacy plans over the next two years; how to navigate the growing implications of AI in nonprofit spaces; and how organizations can use social media to take ownership of their narratives and amplify their missions. Throughout the day, attendees had the opportunity to engage across topics with peers from across the country and the sector, exactly the kind of cross-pollination that makes this intensive so valuable.
Next year we’re bringing it to Washington, DC. We hope to see you there!
Travis Swanson is the Government Relations Manager at Independent Sector
