A New Era of Federal Restrictions on DEI

In 2025, new federal executive orders are reshaping the landscape for nonprofit diversity, equity, and inclusion (DEI) initiatives.

Executive Orders 14168 and 14173 have sparked controversy by limiting government funding for DEI programs, restricting affirmative action measures, and challenging nonprofit diversity mandates (Vox, 2025).

Key Impacts of the Executive Orders:

• Federal funding for DEI-focused nonprofits is being scaled back.

• Workforce diversity hiring practices face new legal scrutiny.

• DEI training programs within federally funded nonprofits may be restricted.

• State and local governments may adjust their own DEI policies in response.

What does this mean for nonprofits committed to diversity? This article explores how these executive orders affect nonprofit operations, hiring practices, and long-term DEI strategies.

How Executive Orders 14168 & 14173 Are Reshaping DEI in Nonprofits

Key Provisions of the Orders:

• Restrictions on Federal DEI Grants – Nonprofits receiving federal funds must certify that they are not using government resources for race-based hiring or training initiatives.

• Affirmative Action Rollbacks – Any federally funded nonprofit implementing race-conscious hiring policies may be subject to increased legal scrutiny.

• DEI Training Bans – Federal contracts now prohibit funding for DEI-focused workplace training that includes “race-based stereotyping” or “privilege narratives.”

• Increased Reporting Requirements – Nonprofits must disclose how funds are used in relation to DEI programs, potentially deterring organizations from prioritizing diversity efforts.

Why It Matters: These restrictions may force nonprofits to rethink their diversity hiring, training, and funding strategies—especially those reliant on federal support.

The Immediate Impact on Nonprofit Hiring & Workplace Diversity

Workforce Diversity & Inclusive Hiring at Risk?

How Nonprofits Are Affected:

• Hiring practices that prioritize diverse candidates may be legally challenged.

• Federally funded nonprofits may need to remove race-based recruitment strategies.

• DEI-focused job postings could face new compliance requirements.

• Reduced DEI training programs may weaken workplace inclusivity.

Example: A national nonprofit focused on workforce equity had to pause its minority leadership pipeline program after being informed that its federal funding might be revoked under the new executive orders.

Action Step: Nonprofits should review hiring policies and ensure compliance while continuing to prioritize diverse talent in race-neutral ways (e.g., through skills-based hiring or mentorship programs).

State & Local Reactions: Will DEI Policies Be Affected Nationwide?

A Ripple Effect Across the U.S.?

How States Are Responding:

• Some states (e.g., Texas & Florida) are further restricting DEI initiatives, aligning with the federal stance.

• Other states (e.g., California & Illinois) are strengthening DEI protections, passing new laws to maintain diversity efforts despite federal pushback.

• Local governments are exploring alternative funding sources to sustain DEI programs impacted by federal cuts.

• Nonprofits with state funding may need to navigate conflicting policies between state and federal mandates.

Example: Illinois recently defended its nonprofit diversity law against federal legal challenges, aiming to protect DEI transparency requirements for state-funded organizations.

Action Step: Nonprofits should monitor local policy changes and align their strategies with state-level DEI protections when possible.

What Nonprofits Can Do to Sustain DEI Initiatives

Proactive Steps for Nonprofits:

• Diversify Funding Sources – Reduce reliance on federal grants by seeking corporate sponsorships, foundation grants, and donor contributions.

• Ensure Legal Compliance While Maintaining DEI Goals – Adapt hiring and training programs to focus on inclusion without violating executive orders.

• Strengthen Private-Sector Partnerships – Many companies and philanthropic organizations remain committed to equity-focused funding and partnerships.

• Engage in Advocacy & Coalition Building – Nonprofits can join legal challenges, advocate for DEI protections, and collaborate with civil rights groups.

Example: A coalition of national nonprofits has already filed lawsuits against the executive orders, arguing that the restrictions violate First Amendment rights and limit workforce equity efforts.

Action Step: Nonprofits should build partnerships with advocacy groups and explore alternative funding models to sustain DEI commitments.

Final Thoughts: The Future of DEI in Nonprofits

While Executive Orders 14168 and 14173 present new challenges for nonprofit DEI efforts, organizations can still find ways to advance diversity through state-level protections, alternative funding, and compliance-conscious strategies.

Nonprofits that proactively adapt their DEI strategies will be better positioned to navigate these federal shifts while continuing to drive meaningful impact.

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• The Nonprofit DEI Leadership Gap: Why Diverse Leadership Matters

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• The State of DEI in Philanthropy: Are Funders Still Prioritizing Equity?

• 5 Community Engagement Strategies to Make Nonprofit Programs More Inclusive

• Why Nonprofits Must Prioritize Diversity to Stay Competitive in 2025

• Nonprofits & DEI Funding Cuts: How to Adapt After $1.7 Billion in Grant Cancellations

• Illinois’ Nonprofit Diversity Law Under Federal Attack: What This Means for DEI in Other States

• How Nonprofits Can Build Inclusive Workplaces & Improve Hiring Practices

• Should Nonprofits Speak Out on DEI? How to Take a Stand Without Risking Funding

• Losing DEI Funding? 5 Alternative Strategies for Nonprofits to Sustain Inclusion Efforts

• The DEI Lawsuit Against the Trump Administration: What It Means for Nonprofits

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Sources & References:

• Vox. (2025). Trump’s sweeping new order tries to dismantle DEI in government - and the private sector. Retrieved from https://www.vox.com/

• Reuters. (2025). US nonprofits face DEI funding restrictions under new executive orders. Retrieved from https://www.reuters.com/

• National Council of Nonprofits. (2024). State vs. Federal DEI Policy: What Nonprofits Need to Know. Retrieved from https://www.councilofnonprofits.org/

• Philanthropy News Digest. (2024). The Future of DEI in Nonprofit Governance. Retrieved from https://philanthropynewsdigest.org/