“Unprecedented Threats to the Nonprofit Sector” – A Briefing from the National Council of Nonprofits (NCN)

What happened:
The National Council of Nonprofits (NCN) pulled together more than a year of escalating federal pressure on the charitable sector into a single timeline. NCN organizes the developments into two categories — threats to nonprofits’ financial stability and politically motivated targeting — and closes with recommendations for how the sector can respond.

Why it matters: 
Individually, many of these developments have already appeared in PANO’s newsletters and weekly memos over the past several months — the GSA certification proposal, the OMB grantmaking overhaul, the Stopping Fraudulent Payments Act, the Form 990 transparency initiative, and others. Seeing them assembled in one place makes clear this is not a series of unrelated incidents, but a coordinated and sustained effort touching nearly every major funding and oversight mechanism nonprofits rely on.

Where things stand:
The items below summarize NCN’s national timeline as of September 4, 2026, organized into financial threats and political threats, with notes on how each connects to what PANO has already reported and what Pennsylvania nonprofits should be watching.

Financial Threats

1. Federal Funding Freeze Litigation — Injunction Vacated After Serving Its Purpose
   What happened: In January 2025, the Office of Management and Budget (OMB) attempted to freeze roughly $3 trillion in federal funding overnight. NCN, together with Democracy Forward and other partners, immediately sued and secured a nationwide preliminary injunction in National Council of Nonprofits v. OMB. Facing intense political pressure, OMB rescinded the freeze within 48 hours.
   Where things stand: That injunction protected nonprofits for more than a year. This August, after the government acknowledged that the original freeze attempt was unlawful, the judge vacated the injunction. The litigation accomplished what it needed to — the freeze was blocked and never reimposed — but nonprofits should note that the specific court order that guarded against a repeat is no longer in effect.

2. Administration Has Withheld More Than $410 Billion From Nonprofits and Other Grantees
   What happened: Beyond the January 2025 freeze attempt, the administration has used a range of tactics — delays, denials, and new procedural barriers — to withhold more than $410 billion from nonprofits and other federal grantees, prompting hundreds of lawsuits nationwide. In one notable case, Woonasquatucket River Watershed Council v. USDA, NCN secured a March 2026 preliminary injunction protecting funding enacted under the bipartisan Inflation Reduction Act and Infrastructure Investment and Jobs Act.
   Where things stand: A federal court of appeals has upheld that injunction as the underlying case continues. It remains one of the clearer examples of successful litigation protecting congressionally enacted funding from executive branch withholding.

3. GSA’s Proposed Grant Certifications — Awaiting White House Review
   Background: PANO first flagged this proposal in the March newsletter. In January 2026, the General Services Administration (GSA) proposed requiring nonprofits and other federal grantees to sign new, vague certifications — under threat of civil and criminal penalty — attesting to compliance with executive orders on DEI, immigration, and terrorism.
   What happened since: More than 1,300 organizations signed an opposition letter led by NCN and the Legal Defense Fund, and more than 22,000 public comments were submitted during the comment period that closed March 30.
   Where things stand: GSA has not yet finalized the rule. The proposal is now awaiting White House review, which will trigger a second public comment period once that review concludes. Organizations that receive federal funding should continue watching for that second comment window.

4. OMB’s Grantmaking Overhaul — Implementation Delayed to December 11
   Background: PANO covered this proposal in detail in the June newsletter. In May 2026, OMB proposed sweeping changes to the Uniform Guidance — the rules governing federal grants, cooperative agreements, and other awards — that would let an administration determine awards based on political ideology rather than objective criteria, decrease transparency, and expose grantees to greater financial and legal risk.
   What happened since: Nearly 2,000 organizations signed NCN’s opposition letter, and close to 500,000 public comments were submitted, the vast majority in opposition.
   Where things stand: This is an important update to what PANO previously reported: Congress has passed legislation delaying implementation of the OMB regulation through December 11. That buys the sector additional time, but the underlying proposal has not been withdrawn. Organizations that have not yet submitted a comment or contacted their members of Congress should still do so.

Political Threats

1. Administration Targets Nonprofits It Disfavors
   • 2025: The President threatens to revoke tax-exempt status from nonprofits and Harvard University, and directs the Dept. of Justice (DOJ) to investigate Open Society Foundations.
   • January 2026: The president threatens to unlawfully suspend federal funding to sanctuary cities.
   • February 2026: An executive order directs federal agencies to compile lists of nonprofits and others for possible investigation over alleged “illegal” DEI practices.
   • April 2026: Politically motivated criminal charges are filed against the Southern Poverty Law Center.
   • August 2026: The White House is reviewing a soon-to-be-released proposed regulation that could revoke tax-exempt status from nonprofits that address racial inequities in their communities. 
   • Why it matters: To date, the administration and Congress have opened criminal and civil investigations — without evidence of wrongdoing — against more than 400 organizations nationally. 
2. Administration Claims Nonprofits Are Fraudulent
   • January 2026: DOJ creates a new assistant attorney general position focused on fraud investigations, reporting directly to the president.
   • February 2026: The president declares a “war on fraud” during his State of the Union address.
   • March 2026: An executive order asserts that nonprofits engage in widespread fraud, waste, and abuse.
   • May 2026: Vice President Vance hosts the first meeting of the newly created White House Task Force to Eliminate Fraud.
   • June 2026: The House passes the Stopping Fraudulent Payments Act (H.R. 8464) — which NCN opposed and PANO flagged for members in the May and June newsletters.
   • August 2026: The IRS announces plans to require nonprofits to report on government grants, contracts, and fiscal sponsorship arrangements, citing a need to “detect misconduct and hold wrongdoers accountable” — building directly on the Form 990 transparency initiative and IRS Whistleblower Alert PANO reported on in April. 
3. Administration Claims Nonprofits Support Terrorism and Political Violence
   • September 2025: The president signs a national security presidential memorandum directing agencies to “investigate, prosecute, and disrupt” nonprofits it claims support or finance domestic terrorism.
   • January 2026: The Department of Homeland Security investigates several nonprofits for “domestic terrorism” following the murder of Alex Pretti.
   • March 2026: The IRS and FBI form a joint initiative to investigate nonprofits over alleged links to domestic terrorism.
   • May 2026: DOJ and Treasury investigate 145 nonprofits over alleged coordination with Cuban government officials.
   • July 2026: The White House hosts an event on “far-left political violence”; Treasury alleges nonprofit structures are being abused for illicit finance, and the State Department designates several organizations as terrorist organizations. Separately, a House committee approves legislation that would require nonprofits to track all foreign donors, limit political activity, and impose significant financial penalties on fiscal sponsors.
   • August 2026: The IRS considers a proposal requiring nonprofits to disclose whether top officials have been convicted of certain financial or terrorism-related crimes. 

What Nonprofits Can Do

• Stay unified: Division is a strategy; unity is the sector’s strength. NCN notes that the sector’s biggest wins over the past year and a half — including reversing the January 2025 funding freeze — have come when organizations spoke with one voice.

• Prioritize wellness and safety: At the staff level, the organizational level, and the sector level. Sustained scrutiny and uncertainty take a real toll, and organizations should be checking in on capacity and morale, not just compliance.

• Treat advocacy as core to your mission: Congress needs to hear directly from nonprofits about the real-world impact of these developments. Speaking out — and staying united with the broader sector — remains the most effective tool nonprofits have.

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Photo by Jonathan Simcoe on Unsplash.