On January 28, 2026, the General Services Administration (GSA)—the federal agency that keeps government operations running smoothly—introduced sweeping proposed changes to the System for Award Management (SAM), the online gateway nonprofits and other organizations rely on to access federal funding and do business with the government.

If enacted, these changes would reach far beyond paperwork. Nonprofits, state and local governments, tribal entities, and others that depend on federal financial assistance—whether through grants, cooperative agreements, loans, or direct appropriations—could face new and serious challenges. The ripple effects could disrupt essential services that communities depend on every day, including housing, healthcare, education, food access, disaster recovery, and more.

At the heart of the proposal is a new set of required certifications. Organizations seeking or receiving federal funding would have to attest—under penalty of civil and criminal law—that they comply with a series of provisions tied to recent federal directives. These include interpretations of diversity, equity, and inclusion (DEI) policies, as well as language related to undocumented immigration and terrorism. While intended to align with executive branch guidance, these requirements raise significant concerns for the nonprofit sector.

One of the most pressing issues is uncertainty. The proposed rules are complex and, in many cases, unclear—leaving organizations unsure of what compliance actually looks like. This ambiguity creates real risk. Nonprofits could find themselves vulnerable to audits, investigations, or legal challenges, even when acting in good faith. Defending against such claims would demand substantial time, money, and staff capacity—resources that are already stretched thin.

Faced with unclear expectations and heightened legal exposure, some organizations may ultimately decide the risk is too great to continue pursuing federal funding. And when nonprofits step back, it’s not just the organizations that feel the impact—it’s the communities they serve.

In the end, these proposed changes could have unintended consequences, weakening the very support systems millions of people rely on. Because of this, ANAFP was a signer of a national letter led by the National Council of Nonprofits and Legal Defense Fund opposing the proposed changes.

During the course of the past year, there has been rapid growth in the number of US-based nonprofits that are seeking to establish offices or entities abroad. Canada, the Netherlands, and the United Kingdom are three standout counties that have seen a surge in demand to register sister organizations. According to DEVEX, this trend is driven by many nonprofits in an effort to secure their operations against an unpredictable political and regulatory environment in the US under the current administration, characterized by threats of funding cuts, investigations, and restrictions on tax-exempt status.

Key details regarding this trend include:

• Surge in International Registration: Legal firms in the U.K. and Canada have reported a fivefold to tenfold increase in inquiries from U.S. nonprofits looking to establish overseas entities.
• Preventative Measures: Many organizations, including those in the global development and human rights sectors, are acting to safeguard their funds and programming, with some considering moving their money out of the United States.
• Targeted Sectors: Nonprofits involved in climate change, social justice, immigration, and those that receive federal funding are particularly focused on this expansion, as they perceive a high risk of being targeted by potential executive orders or funding restrictions.
• "Refuge" from Regulatory Pressure: This effort is described as a strategy to create "shelter" abroad, often establishing foreign arms as independent legal entities to continue operations even if U.S.-based operations face federal hurdles. 

According to a recent Reuters article, this preemptive shift follows reports of a broad crackdown on "progressive" nonprofits, including potential initiatives to revoke tax exemptions for environmental groups and restrict funding for DEI (Diversity, Equity, and Inclusion) projects. 

Representative Nathaniel Moran (R-TX) recently introduced HR7799 to amend the Internal Revenue Code of 1986 to provide that 501(c)3 organizations are liable for the use of funding provided as a fiscal sponsor.  The "Stop Proxy Organizations Nurturing Subversive Operations and Riots ("SPONSOR") Act" is a proposed a proposed federal bill targeting protest activity by expanding civil and criminal liability to fiscal sponsors. It specifically targets 501(c)(3) organizations supporting groups engaged in protests that block commercial, transport, or energy infrastructure. The bill essentially makes fiscal sponsors liable for "covered activities' conducted by groups they support, even if the sponsor only provides administrative support or grants. 

The SPONSOR Act is similar to the Nonprofit "Killer" Bill (H.R. 9495/S. 3554) that was re-introduced on Dec. 17, 2025, which allows the Treasury Department to revoke the tax-exempt status of organizations deemed to support terrorism, which critics fear could be used to penalize organizations supporting protest movements. 

Both bills face opposition from civil liberties groups, who argue they could be used to silence dissent by creating high financial and legal risks for organizations that support advocacy. 

A lawsuit was recently filed by Philip Peterson, a 63-year old resident of Kansas, against the sponsor organization that administers his family's donor-advised fund (DAF) for failure to make charitable donations to nonprofits based on his recommendations. 

This lawsuit showcases one of the biggest risk with donating through a DAF -- the ability to only "advise" sponsoring organizations on how to disburse funds. This is because sponsor organizations, unlike private foundations, are not legally required to distribute funds as recommended by the actual donor. Although most sponsor organizations do adhere to the donor's requests, because this is not legally required, some donors are noticing that DAFs come with limitations that they may not be aware of when they decide to pursue this donation vehicle.

With DAFs quickly gaining in popularity due to the immediate tax deduction provided to the donor, individuals and nonprofits should carefully consider the risks and limitations associated with DAFs. In addition, nonprofits are learning that accounting for DAFs also come with their own set of requirements. 

The U.S. General Services Administration (GSA), which administers the System for Award Management (SAM), has proposed revising the certification requirements for recipients of federal financial assistance. The change would align SAM certifications with updated executive branch guidance, including Executive Order 14173 (“Ending Illegal Discrimination and Restoring Merit-Based Opportunity”) and a July 2025 Department of Justice (DOJ) memorandum addressing unlawful discrimination.

Currently, entities certify general compliance with federal anti-discrimination laws when registering or renewing in SAM. The proposed amendment would add more specific certification language, potentially requiring recipients to affirm they are not engaged in practices identified as impermissible under the DOJ’s updated interpretation of federal law—even where courts have not definitively resolved those interpretations. Certifications would likely be deemed material to payment decisions.

Although aspects of the DEI Executive Order have been challenged in court, recent Supreme Court precedent has limited the scope of nationwide injunctions, allowing much of the policy implementation to proceed.

Public comments on the proposal are open through March 30, 2026.

IRS Issues New Rules for Group Exemptions: Key Takeaways for Nonprofits

On January 20, 2026, the Internal Revenue Service issued Revenue Procedure 2026-08, significantly overhauling the rules governing nonprofit group tax exemptions. The new guidance ends a multi-year moratorium on new group exemption letters and reflects longstanding IRS concerns that prior rules were overly permissive.

The new requirements apply to both new and existing group exemptions, subject to transition and grandfather relief.

Why This Matters

Group exemptions allow national nonprofits with chapters or affiliates to avoid filing individual exemption applications. The IRS estimates more than 4,000 group exemptions covering over 400,000 organizations, making these changes broadly impactful.

Key Changes for Central Organizations

To obtain or maintain a group exemption, central organizations must now:

• Have at least five subordinate organizations to obtain a group exemption

• Maintain at least one subordinate organization at all times

• Hold only one group exemption letter

• Continue to exercise meaningful supervision or control over subordinates

New and Clarified Standards for Subordinate Organizations

The IRS introduced clearer definitions and tighter standards governing relationships between central and subordinate organizations:

• Affiliation: Determined under a new “facts and circumstances” test

• General supervision: Requires annual review of subordinate finances, activities, and compliance (Form 990 or 990-EZ required; Form 990-N is insufficient)

• Control: Established through board or officer appointment authority, leadership overlap, or a written control agreement

Additional Subordinate Requirements

Subordinate organizations must now meet several new conditions:

• Uniform purpose statements for subordinates sharing the same purpose

• No Type III supporting organizations permitted

• Separate EINs required for all subordinates

• Written authorization allowing the central organization to add or remove subordinates, with or without cause

• 501(c)(4) subordinates must file Form 8976 (Notice of Intent)

Transition and Grandfather Relief

To ease compliance:

• Existing central organizations have a one-year transition period (through January 22, 2027) for certain requirements

• Preexisting subordinate organizations are broadly grandfathered and may continue operating under prior rules (Rev. Proc. 80-27)

• New subordinates, even under existing group exemptions, must fully comply with the new rules

Special Rules for Churches

The revenue procedure includes tailored guidance for churches and church conventions, recognizing religious affiliation and providing examples of acceptable supervision structures.

Filing, Revocation, and Administrative Oversight

• Annual group updates must now be filed electronically (once IRS guidance is issued)

• Updates must include subordinates with automatic revocations

• Subordinates that lose exempt status cannot remain in or be added to a group exemption

• The IRS may terminate a group exemption if more than half of subordinates lose exempt status

Effective Date of Exemption

A newly formed subordinate added to a group exemption within 27 months of formation will have its exempt status recognized retroactively to its formation date.

What the IRS Dropped

The final rules are narrower than earlier proposals and do not require:

• Uniform governing instruments

• Identical public charity classifications under Section 509(a)

• Identical NTEE codes across subordinates

Bottom Line

Revenue Procedure 2026-08 replaces prior guidance and took effect January 20, 2026. With the moratorium lifted, the IRS is once again accepting group exemption applications—but under far more rigorous standards. Central organizations should promptly assess their structures, documentation, and oversight practices to ensure compliance during the transition period and beyond.

As 2025 came to a close, New York Governor Kathy Hochul vetoed legislation that would have significantly expanded the scope of New York’s Limited Liability Company Transparency Act (the NY Transparency Act). The vetoed bill, Senate Bill S8432, would have imposed new beneficial ownership filing requirements on both U.S. and non-U.S. nonprofit organizations that include LLCs formed or registered to do business in New York within their organizational structures.

Governor Hochul’s veto limits the reach of the NY Transparency Act. As a result, the Act’s beneficial ownership disclosure and exemption attestation requirements apply only to LLCs formed outside of the United States that are registered to do business in New York. These requirements became effective on January 1, 2026. Accordingly, foreign nonprofits and other foreign LLCs operating in New York should be prepared to comply with the new reporting obligations.

Nonprofit organizations should assess whether they hold ownership interests in any foreign LLCs that are registered to do business in New York and therefore subject to beneficial ownership reporting or exemption attestation requirements with the New York Department of State (NYDOS). Although the law currently applies only to non-U.S. LLCs, future developments remain possible. 

On October 1, 2025, the U.S. Government shutdown began after Congress failed to pass appropriations (a continuing resolution) to fund parts of the federal government for the next fiscal year. Because of this, certain federal agencies must cease non-essential discretionary activities now that funding has lapsed. 

Unfortunately for those nonprofits that receive federal funding, most will see their grant payments stop, and grant and contract renewals will remain in limbo until the government reopens.  These vulnerable nonprofits need to assess their cash position and calculate how long their organization can maintain operations without these essential grant payments. 

When calculating your cash flow projections, because of the hold on any incoming funds from the federal government, determine at which point your organization will cross into a negative cash position. If this is projected to happen sooner rather than later, work quickly to establish a line of credit if you do not already have one.

If possible, look at suspending nonessential programs so that available cash can be directed solely to essential mission-driven programs. Keep in mind that once the federal government returns to business, there will be a backlogs that delay processing payments, awarding grant applications, and obtaining approvals. 

The IRS recently released final regulations addressing several SECURE 2.0 Act provisions relating to catch-up contributions. 

The SECURES 2.0 Act amended the Tax Code to require that employees aged 50 or older with prior-year FICA wages exceeding $145,000 (indexed for inflation) make catch-up contributions as after-tax Roth contributions for taxable years beginning after December 31, 2023. The law also increased the catch-up contribution limit for participants ages 60 through 63 to 150% of the standard limit, effective for taxable years beginning after December 31, 2024.

For SIMPLE plans, the catch-up limit rose to 110% of the regular limit for certain eligible employers beginning after December 31, 2023, and then to 150% for SIMPLE participants in the 60-63 age group beginning after December 31, 2024.

If any participant is subject to the Roth catch-up requirement, all catch-up eligible participants must be allowed to make Roth catch-up contributions. SECURE 2.0 provided a two-year administrative transition period for 2024 and 2025, during which plans will not be penalized for noncompliance with the Roth catch-up requirement, allowing time for system updates and compliance adjustments.

Learn more: https://www.irs.gov/newsroom/treasury-irs-issue-final-regulations-on-new-roth-catch-up-rule-other-secure-2point0-act-provisions. 

On July 4, 2025, the “One Big Beautiful Bill Act” became law, bringing two notable changes to federal tax reporting rules that affect employers.

1099 Reporting Threshold Increased to $2,000 and Indexed for Inflation

Currently, businesses must file an “information return” — typically Form 1099-NEC — for payments of $600 or more made to non-employees for services during a calendar year. Non-wage payments are also generally reportable on Form 1099-MISC when they reach the same $600 threshold.

Under Section 70433 of the new law, this threshold will rise to $2,000 beginning in 2026. Starting in 2027, the $2,000 limit will be automatically adjusted for inflation. The same increases and indexing will apply to backup withholding requirements, which come into play when a payee does not provide a valid taxpayer identification number on Form W-4 or Form W-9.

Practical Impact on Employers

Although payments below the new threshold will still be taxable to recipients, employers will no longer have to issue 1099s or withhold backup taxes on amounts under $2,000. This change could significantly reduce the volume of 1099 forms that businesses must prepare and file each year.