May 20 Federal Update: Nonprofit Sector Faces Challenges as House Republicans Cut Key Earmarks

In a significant shift in policy, House Republicans have announced changes to the annual process for funding community projects, excluding nonprofits from eligibility for Community Project Funding (CPF) through the Department of Housing and Urban Development (HUD) Economic Development Initiative (EDI) account. This decision, part of broader modifications to align projects with federal community development goals, has sparked concern and opposition within the nonprofit sector.

The House Appropriations Committee, led by Chairman Tom Cole (R-Okla.), emphasized the need for changes to avoid political conflicts related to earmarks, especially concerning contentious issues like abortion and LGBTQ services. “I shouldn’t have to have a political problem in my district because I voted for a bill that had your earmarks in it,” Cole explained, highlighting the bipartisan frustration with some earmark requests.

However, Democrats, including House Appropriations Committee Ranking Member Rosa DeLauro (D-Conn.), argue that these changes unfairly target nonprofits, which play a crucial role in community development. DeLauro pointed out that nearly half of the 2024 House-funded EDI projects were directed to nonprofit recipients, including organizations like YMCAs and Boys & Girls Clubs.

“Deeming nonprofits ineligible for Community Project Funding in the Economic Development Initiative (EDI) account is a seismic shift,” DeLauro stated. “The restrictions House Republicans started last Congress were misguided. The changes to eligibility announced today are even worse. When House Democrats are in control next Congress, we will reverse these decisions.”
The nonprofit community, represented by leaders from major organizations, has expressed deep concern over the ramifications of this policy change. In a letter addressed to House leaders, including Speaker Mike Johnson and Minority Leader Hakeem Jeffries, nonprofit CEOs outlined the negative impact this decision will have on their ability to serve millions of Americans.
“Nonprofits count on this funding to support and expand access to essential services,” the letter stated, listing programs such as child care, mental health services, affordable housing, and support for survivors of domestic violence. The exclusion from CPF grants will significantly limit the ability of nonprofits to provide these critical services, affecting the most vulnerable communities.

The controversy over nonprofit earmarks is part of a broader debate about the role of federal funding in community development. As the nonprofit sector grapples with increasing demands and decreasing charitable donations, the loss of CPF eligibility through T-HUD and other key appropriations bills poses a significant challenge.

Nonprofit leaders call on Congress to restore eligibility and explore alternative ways to support their organizations and critical services. The sector’s ability to meet the growing needs of communities, especially in the aftermath of the pandemic, depends on continued access to federal funding.

As the debate unfolds, Social Current remains committed to working with lawmakers to find solutions that ensure the continued provision of essential services to millions of people in the U.S.

House Ways and Means Committee Passes Bills Impacting Nonprofits and Human Service Organizations

On May 15, the House Ways and Means Committee held a markup session and approved several bills that could have significant implications for nonprofits and human service organizations. The following summarizes the critical pieces of legislation and their potential impacts:

H.R. 8314 – No Foreign Election Interference Act
This bill, which passed with a vote of 25-15, amends the Internal Revenue Code to impose penalties on tax-exempt organizations that receive contributions from foreign nationals and then contribute to political committees. Nonprofits inadvertently violating these provisions could face severe financial penalties, undermining their operational capacities.

H.R. 8293 – American Donor Privacy and Foreign Funding Transparency Act
Passed by a vote of 23-17, this legislation requires tax-exempt organizations to report detailed information about contributions from foreign sources publicly. While aimed at increasing transparency, this bill could burden nonprofits with additional reporting requirements, potentially deterring foreign donations and straining administrative resources.

H.R. 8292 – Taxpayer Data Protection Act
Approved with a vote of 27-13, this bill increases penalties for unauthorized disclosure of taxpayer information. Although primarily targeted at government employees, the increased scrutiny and penalties could indirectly affect nonprofit organizations that handle sensitive donor information, necessitating enhanced data security measures.

H.R. 8291 – End Zuckerbucks Act
This bill passed with a vote of 22-18 and aims to prohibit specific tax-exempt organizations from providing funding for election administration. This restriction could limit the ability of nonprofits to support election-related activities, potentially affecting voter turnout initiatives and civic engagement efforts.

H.R. 8290 – Foreign Grant Reporting Act
This act, which passed with a vote of 24-16, mandates public disclosure of grants made by tax-exempt organizations to foreign entities. While transparency is crucial, the additional reporting could complicate the international grantmaking process for nonprofits, affecting their ability to provide timely support to foreign partners.

Next Steps and Potential Impacts
These bills must now pass the full House of Representatives and be considered in the Senate. While the chance of these bills becoming law is low, their passage in the House Ways and Means Committee reflects a shifting attitude among House Republicans regarding nonprofits and human services organizations.

The proposed legislation could impose significant administrative burdens on nonprofits, diverting resources from programmatic activities to compliance and reporting efforts. The penalties and reporting requirements associated with foreign contributions and grants could deter international collaborations and impact the funding landscape. Moreover, restrictions on election-related funding could hamper civic engagement and voter participation efforts, particularly those aimed at underrepresented communities.

Social Current’s Engagement and Advocacy
Social Current is actively engaging with legislators to voice the concerns of nonprofits and human service organizations. We will continue to track these and other developments closely, providing updates and advocating for policies that support the vital work of our sector. Nonprofits and human service organizations must stay informed about these legislative developments and consider engaging in advocacy to address their concerns.

President Biden Announces New Actions to Advance Racial and Educational Equity

On May 17, 2024, the 70th anniversary of the Brown v. Board of Education decision, President Biden announced new measures to promote racial and educational equity, ensuring all students have access to high-quality education. These actions are particularly relevant for nonprofit and human service organizations supporting underserved communities.

One key initiative is the allocation of $20 million in new Magnet School Grants to help create programs in seven states designed to attract a diverse student body and reduce segregation. Additionally, the Department of Education is establishing a new technical assistance center on fiscal equity to support states and school districts in developing equitable resource allocation strategies, enhancing fiscal data transparency, and prioritizing support for high-need communities.

To address ongoing racial inequities, the Department of Education will release a report highlighting access to math, science, and computer science courses, providing data to inform advocacy and program development. Furthermore, an interagency effort will focus on preserving historic sites, literature, and educational resources related to African American history, ensuring these integral parts of American history are accessible.

Significant investments are also being made in underserved schools. The American Rescue Plan allocated $130 billion to schools, focusing on underserved areas. At the same time, additional Title I funding and increased support for Full-Service Community Schools aim to close resource gaps and provide essential services like healthcare, housing, and childcare.

The administration is prioritizing efforts to increase teacher diversity, awarding nearly $450 million to programs to improve teacher preparation and retention. Over $23 million has been allocated to Historically Black Colleges and Universities (HBCUs), Tribally Controlled Colleges and Universities (TCCUs), and Minority-Serving Institutions (MSIs) to prepare diverse educators.
Finally, to improve school diversity, the Department of Education is investing over $300 million to enhance diversity through magnet programs and new initiatives to increase socioeconomic diversity. Increased funding for Head Start and the Child Care & Development Block Grant program will help close the readiness gap for Black children and improve long-term educational outcomes.

These initiatives support nonprofit and human service organizations in their mission to foster equitable, high-quality education for all students, building on the legacy of Brown v. Board of Education.

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