September 8, 2026

Bringing you the latest news impacting our network from Congress and the Administration.

In this Edition

• Short-term Government Funding Secured Through December 11, More Work Ahead
• Nonprofit Rules and Regulatory Updates
• HHS/ACL Health at Home Spurs New Opportunities through Hubs
• Immigration and Workforce Updates
• What We Are Reading

Short-term Government Funding Secured Through December 11, More Work Ahead

Government Funding Secured Past Midterms, but Another Showdown Looms

Congress passed a bipartisan continuing resolution (CR), which was signed by the President, funding the federal government through December 11. The measure averts the threat of a government shutdown before the November midterm elections but delays broader fiscal year (FY) 2027 appropriations negotiations until after Election Day.

Lawmakers return to Washington on September 14 facing an ambitious agenda and a compressed legislative calendar, made even tighter by the House's decision to shorten its fall session by two weeks. With the House having approved only three of the 12 annual appropriations bills and the Senate yet to pass any, Congress is unlikely to complete work on FY 2027 funding before the elections. As a result, the appropriations debate is expected to spill into the lame-duck session, setting the stage for a high-stakes spending fight at the end of the year.

Delay of OMB Grantmaking Rule Included in Final Law

Of particular importance to social service providers who are federal grant recipients, the enacted CR delays implementation of the Office of Management and Budget's (OMB) proposed overhaul of federal grantmaking rules. Congressional concerns have focused on provisions in the OMB proposal that could give political appointees greater authority over federal grant decisions and alter long-standing merit-based review processes. By temporarily blocking implementation, the CR preserves existing grant rules while lawmakers continue to evaluate the proposal and consider longer-term legislative responses. We continue to work with coalition partners to support efforts to prevent the OMB-proposed rule from going into effect.

Defense Hawks Continue Pressing for Reconciliation 3.0

Although government funding is now secured through December, a contingent of House Republican defense advocates continues to make the case for a third budget reconciliation package focused on defense priorities. House Armed Services Committee Chairman Mike Rogers (R-AL), Defense Appropriations Subcommittee Chairman Ken Calvert (R-CA), and House Armed Services Committee Vice Chairman Rob Wittman (R-VA), are urging the Senate to take up a "Reconciliation 3.0" package to address defense funding shortfalls. Calvert told reporters that Reconciliation 3.0 "would plug a lot of holes until we can get something else passed." Their comments underscore that, despite the narrow path for major legislation ahead of the midterm elections, there are still attempts to keep reconciliation moving forward.

What Comes Next?

We remain vigilant in following any discussions or updates related to additional budget reconciliation bills, but the path for passage of such bills ahead of the midterm election continues to narrow.

Nonprofit Rules and Regulatory Updates

Federal Funding Freeze Remains Blocked

The D.C. Court of Appeals has vacated the preliminary injunction in National Council of Nonprofits v. Office of Management and Budget (OMB), finding the case moot because the administration is unlikely to reinstate the broad federal funding freeze announced in January 2025. The outcome is a dismissal on procedural grounds only, not a win on the substance for the administration. A separate preliminary injunction secured by 23 attorneys' general remains in effect and continues to block a government-wide funding freeze. Recent court filings suggest the administration no longer disputes the core claims that such a freeze would be unlawful.

IRS Considers New Disclosure Requirement for Nonprofit Leaders

The IRS is considering a proposal that would require nonprofits to disclose on annual tax filings whether senior leaders have been convicted of certain fraud-related or terrorism-related offenses within the previous 10 years. Nonprofit advocates have raised concerns that the change could create new administrative costs by effectively requiring recurring background checks on board members and executives. Others have questioned the proposal's potential implications for privacy and First Amendment protections.

New IRS Guidance on Racial Equity Efforts Expected Soon

Nonprofits should also watch for a forthcoming proposed IRS regulation addressing the application of the "fundamental public policy" doctrine in cases involving racial discrimination. The proposal recently completed White House review and is expected to be released shortly. The doctrine has historically been applied very narrowly, primarily in the context of racial discrimination in education. The forthcoming IRS regulation appears intended to clarify how that principle should be applied going forward. Observers believe it may build on the Supreme Court's decision in Bob Jones University v. United States, which held that nonprofit organizations could lose their tax-exempt status if their practices conflict with core national public policies, such as the prohibition on racial discrimination. The Court held that charitable organizations must serve a public benefit and cannot operate in a manner that violates fundamental public policy.  The new proposal could affect how 501(c)(3) organizations structure racial equity initiatives and related programs in the future.

What Now?

Together, these developments highlight an increasingly active federal environment for charitable organizations. We are closely monitoring these and other pending federal regulatory, legislative, and legal developments affecting the nonprofit sector. As additional guidance, court decisions, or agency actions emerge, we will continue to assess their potential impact and share updates and analysis as warranted.

HHS/ACL Health at Home Challenge Spurs New Opportunities through Hubs

The U.S. Department of Health and Human Services (HHS) Administration for Community Living (ACL) is increasing its focus on Community Care Hubs (CCHs) through its Health at Home Challenge. The initiative is designed to support CCHs to strengthen and expand partnerships with health and social service provider organizations. The effort recognizes the growing role CCHs play in connecting healthcare systems with community-based services that support whole-person health and help people remain safely at home. HHS also plans to award the remaining $4 million in challenge funding to a smaller number of hubs in two additional phases beginning next summer  

ACL and USAging Resources

The Administration for Community Living (ACL) has been leading the development of CCHs nationally, with a focus on building sustainable networks that connect health and social services. USAging's National Community Care Hub Map identifies more than 70 hubs across the country to help social service organizations (SSOs) and community-based organizations (CBOs) identify existing hubs, learn about their capacity, and explore partnership opportunities.

Positioning for the Future

Community Care Hubs are a growing part of the service delivery landscape. The latest HHS investment sends a clear signal that this infrastructure will continue to expand, making it important for providers to position themselves now to take advantage of future partnership, referral, and leadership opportunities.

The Opportunity for Providers

If your organization is not already connected to a CCH, consider outreach now as participation may strengthen referral networks and create new opportunities to work with health partners to improve whole-person health. As CCHs continue to mature, CBOs and SSOs may become integral providers within a CCH service network and, in some cases, may even be well positioned to help start or lead a hub in their respective regions.

Immigration and Workforce Updates

Pause on Visas Lifted for Nationals of 75 Countries

A federal court has lifted the State Department's pause on visa processing for nationals of 75 countries, including Haiti, that had been subject to additional public charge-related restrictions. As a result, visa applications from these countries may again be processed on a case-by-case basis, potentially easing recruitment and onboarding challenges for employers that rely on workers from affected nations. However, providers should note that a separate travel and visa restriction affecting 39 countries on national security grounds remains fully in effect and was not impacted by the court's decision. Individuals from those countries may still face significant barriers to obtaining visas or entering the United States.

DHS Proposes Significant New H-1B Filing Fee

In a separate development, the Department of Homeland Security has proposed a new fee of approximately $103,000 for each cap-subject H-1B petition, beginning no earlier than the 2027 H-1B cap season. The proposal would apply only to cap-subject petitions and is not expected to affect cap-exempt employers, including institutions of higher education, university-affiliated nonprofits, nonprofit research organizations, and government research entities. While many nonprofit health and human services providers would likely remain exempt, organizations that partner with for-profit staffing firms or recruit through other H-1B channels should monitor the proposal. The rule is still in the proposal stage and is expected to face significant legal scrutiny before any implementation.

What We Are Reading 

GRANT FUNDING OPPORTUNITY

• Community Health Improvement Grant Applications | CommonSpirit Health: This grant opportunity (applications due September 18) helps to improve community health and health equity, and enhance local service systems, via restricted charitable contributions for defined projects. Collaborating 501(c)3 non-profit organizations apply to receive grant funds from hospitals to address significant issues in community health needs assessments. 

HEALTHCARE FUNDING

• Private Equity Healthcare Deals Fall as States Tighten Oversight | Modern Healthcare: As more states tighten scrutiny of private equity in healthcare, deal activity is slowing — a shift with real implications for how care is owned and delivered.
• CMS's Medicaid State-Directed Payments Rule Draws Pushback | Modern Healthcare: CMS's move to rein in Medicaid state-directed payments is meeting significant resistance — one to watch given the Medicaid financing stakes for providers.

HOUSING

• Housing Narrative Lab: A national hub working to change how we talk about housing — pairing narrative research with messaging support to build public will for safe, affordable, and supportive housing.
• HUD Funding Notice Upends Housing Counseling Assistance | Shelterforce: A new HUD funding notice is disrupting housing counseling assistance, with real consequences for the organizations and the families who depend on it.
• Our Fight for a Lawful NOFO Continues | National Alliance to End Homelessness: The Alliance presses on with its litigation against HUD, arguing the latest Continuum of Care funding notice violates the two-year NOFO Congress authorized — and pushing for lawful, timely funding communities can count on.

DISABILITY RIGHTS

• Eighteen Governors Send Letter Urging the Trump Administration Not to Retreat from Federal Disability Law | Press Release: 18 governors have sent a letter rejecting the Trump Administration's new interpretation of the Americans with Disabilities Act and Section 504 of the Rehabilitation Act

TECHNOLOGY/AI

• GOP Tries to Thread Needle on Data Center Support/Congress Gets an AI Wake Up Call | POLITICO: Republicans try to walk the line of supporting data centers while acknowledging growing constituent concerns./ Lawmakers receive demonstrations from CivAI on the privacy invading capabilities of AI.
• Patients Wary of Governments, Companies Pushing AI as a Rural Healthcare Solution | KFF Health News: The $50 billion federal Rural Health Transformation Program is set to flood rural America with new AI health tools — despite little evidence on whether health-related AI can improve access to care and patient health in those communities.

DATA/HEALTH-RELATED SOCIAL NEEDS

• The Gravity Project: An Ongoing Evolution | HL7: The national effort to standardize how social-needs data — food, housing, transportation — moves through health systems keeps advancing, laying the technical groundwork for the kind of medical-social integration many of our members are building.
• New Data and New Maps Feature | Congressional District Health Dashboard: This nonpartisan tool just refreshed its Medicaid enrollment and SNAP participation data by congressional district and added hex maps — a clear way to see how recent policy changes are landing district by district.

CHILDREN/FOOD SECURITY

• HHS Joins USDA to Announce Harvest to Hallways Initiative to Invest in Child Nutrition Programs | HHS press release: “Harvest to Hallways includes up to $70 million in investment in school cafeteria infrastructure, an effort to expand schools’ use of local food procurement options, and up to $25 million in additional Farm to School Grants for Fiscal Year 2026.”

For more information, please contact Sarah Dobson, Senior Director of Public Policy and Advocacy.

Lutheran Services in America is one of the nation’s largest national networks of health and human service providers with a mission to cultivate caring communities that advance health and opportunity for all. With 300 nonprofit organizations across 1,400 U.S. communities and more than $26 billion in combined annual services, the Lutheran Services in America network advances equitable outcomes for children, youth and families, improves independence and choice for older adults, champions meaningful services and support for people with intellectual and developmental disabilities, and strengthens stability and purpose for veterans and others. Formed in 1997, Lutheran Services in America brings together a network of leaders, partners and funders to catalyze innovation, strengthen organizational capacity and advance public policy.