Defining "Nonprofit" and the Streamlining Federal Grants Act of 2023

The National Council of Nonprofits reports that the Senate Homeland Security and Governmental Affairs Committee approved Senate Bill 2286, the Streamlining Federal Grants Act of 2023.  According to the Council,

the legislation seeks to improve the effectiveness and performance of federal grants and cooperative agreements, simplify the application and reporting requirements, and facilitate greater coordination among federal agencies responsible for delivering services to the public. Notably, the bill mandates consultation with charitable nonprofits and governments and calls for improving services delivered to communities and organizations that historically have not received federal grants or cooperative agreements.

In summary, the Act requires each federal agency to appoint a senior official to oversee federal grant administration for that agency.  In addition, the Office of Management and Budget (OMB) must establish a Grants Council, made up of the Controller of OMB as the chair, the senior grants officials from the various agencies, and others as determined by the chair.  The Grants Council is charged to “consistently and regularly solicit input and collect feedback and user experience information with respect to the application, administration, and reporting of grants and cooperative agreements, including from non-Federal entities” (emphasis added). The Director of OMB, in consultation with Grants Council, must develop plans for improving grants administration, including streamlining application and reporting processes, simplifying grant opportunity notices, and increasing opportunities for training and education in federal grants administration.

As indicated, the Grants Council is supposed to work with “non-Federal entities” in developing these grant procedure improvement plans.  A “non-Federal entity” is defined as  a “State, local government, Indian Tribe, institution of higher education, or nonprofit organization.” In turn, the term “nonprofit organization” is defined as follows:

any corporation, trust, association, cooperative, or other organization that—

(A) is operated primarily for scientific, educational, service, charitable, or similar purposes in the public interest;

(B) is not organized primarily for profit;

(C) uses net proceeds to maintain, improve, or expand the operations of the organization; and

(D) is not an institution of higher education.

I’m struck by the definition of a nonprofit organization for these purposes. It clearly is not co-terminus with the requirements of Code Section 501(c)(3).  For example, it includes “service” purposes…” and contains an odd variation on the nonprofit distribution constraint.  Confusingly, it uses terms that do not seem to exclude for-profit entities, as the organization only need be “not organized primarily for profit” – would this include, for example, an L3C?   A for-profit traditional (not next gen) cooperative?

In a concededly brief effort to find more information on the definition of “nonprofit” in the bill, I took a very quick look at some of the hearing testimony.  The Senate Committee held a hearing on May 2, information about which can be found here. I didn’t find a great deal of information on that specific issue – in fact, most of the testimony revolves around state and local government capacity challenges and it barely mentions private entities.  I’d be curious if anyone out in Nonprofit Land recognizes this definition from another Federal grant statute or otherwise has any background on from whence it came.  

Perplexedly, eww