Today, President Trump released a “skinny” budget, an outline of his administration’s spending priorities for Fiscal Year 2026, proposing historic and sweeping cuts to domestic discretionary programs, many of which are essential to the nonprofit sector and the communities we serve. The skinny budget proposes to slash domestic discretionary spending by 22.6%, a $163 billion reduction, while increasing defense and homeland security spending by 13%.

If enacted, the U.S. Departments of Education (Education), Housing and Urban Development (HUD), Labor and Interior, the Environmental Protection Agency (EPA), and U.S. Agency for International Development would be among the departments and agencies most impacted by the spending cuts. More specifically, the budget proposes significant cuts to:

  • Resources enacted by Congress under the Infrastructure Investment and Jobs Act (cut by $15.2 billion) and other energy-efficiency programs (cut by $2.6 billion).
  • FEMA preparedness grants and state-level programs (cut by $646 million).
  • Substance use disorder programs administered by the Substance Abuse and Mental Health Services Administration (SAMHSA) (cut by $1.06 billion).
  • Funding at the EPA to support clean and drinking water (cut by $2.46 billion).
  • Assistance for refugees (cut by $650 million).
  • Fair housing enforcement (cut by $60 million).
  • Heating assistance for low-income households (cut by $4 billion).
  • Community services block grants (cut by $770 million).
  • Rental assistance (cut by $26 billion) and resources to build affordable housing (cut by $1.2 billion) and revitalize communities (cut by $3.3 billion).
  • AmeriCorps and other workforce programs.

For a complete list of the proposed discretionary cuts, click this link. The budget also contains ideological attacks on DEI, with language from the Office of Management and Budget (OMB) describing grant recipients as “radical,” “wasteful,” or aligned with a “leftist agenda.” This budget proposal represents the Trump administration’s latest effort to eliminate or deeply reduce critical federal resources to nonprofit organizations that lawfully and effectively serve their communities.

This budget proposal represents President Trump’s funding priorities, but it is ultimately up to Congress to draft and enact a spending bill. A more detailed budget request from the White House is expected later this month, which will formally launch the FY2026 appropriations process. NAO will be sure to provide updates as the process moves forward.
Yesterday, the Trump Administration issued a new executive order titled Establishment of the Religious Liberty Commission, signaling a renewed push to weaken or eliminate the longstanding nonpartisan requirement for 501(c)(3) nonprofits under the 1954 Johnson Amendment.

The executive order creates a 14-member Religious Liberty Commission tasked with recommending executive or legislative actions on a broad range of religious liberty topics. Critically, the first issue listed for the Commission’s review is “the First Amendment rights of pastors, religious leaders, houses of worship, faith-based institutions, and religious speakers.”

Despite this executive action, federal law remains unchanged, and charitable nonprofits, foundations, and houses of worship are still strictly prohibited from endorsing, opposing, or contributing to political candidates under Section 501(c)(3) of the Internal Revenue Code. This nonpartisan standard protects the integrity and public trust of the nonprofit sector.

The Commission may, however, also help build momentum for the Free Speech Fairness Act, a bill introduced last month that would weaken the nonpartisan protections under Section 501(c)(3). If enacted, the bill would permit charitable nonprofits, foundations, and houses of worship to engage in partisan campaign speech as part of their “regular and customary activities” and authorize a limited amount of political spending.

NAO will continue to closely monitor developments related to this EO and share updates as we know more.