State Department Issues New Foreign Assistance Rules, Expanding the Mexico City Policy

I. Introduction

On January 23, 2026, the Trump Administration announced three rules that impose specific limitations on recipients of grants and cooperative agreements issued under Title III Bilateral Economic Assistance, the primary funding source for U.S. government humanitarian and international development programs.¹

Collectively denominated the Promoting Human Flourishing in Foreign Assistance Policy (the “PHFFA Policy”),² these rules mark an expansion of previous iterations of the Mexico City Policy, which conditions eligibility for U.S. assistance on a foreign NGO’s agreement not to perform or actively promote abortion as a method of family planning. The PHFFA Policy also imposes “DEI” and “gender ideology” conditions on foreign assistance funds.

This Alert addresses the content of these new rules, outlines possible legal challenges, provides suggestions for award recipients in evaluating these policy changes, and includes a chart detailing the restricted activities and key definitions applicable to U.S. NGOs, foreign NGOs, and IOs.

II. Background

First articulated by the Reagan Administration in 1984, the Mexico City Policy generally conditions eligibility for U.S. assistance on a foreign NGO’s agreement not to perform or actively promote abortion as a method of family planning with funds from any source.³ Since its inception, the Mexico City Policy has been rescinded and reinstated along party lines of the then governing administration.⁴ The policy goes beyond statutory restrictions on U.S. funding for abortion-related activities, applying to recipient entities that engage in restricted activities, even if those activities are not themselves funded by U.S. funds. The policy has increased administrative burdens, disrupted service delivery, and led some NGOs to decline participation in federal programs.

III. The PHFFA Policy

On January 23, 2026, the U.S. Department of State (the “State Department”) issued three foreign assistance rules, which, collectively, make up the PHFFA Policy:

1. Protecting Life in Foreign Assistance (“Protecting Life Policy”);⁵
2. Combating Gender Ideology in Foreign Assistance (“Gender Ideology Policy”);⁶ and
3. Combating Discriminatory Equity Ideology in Foreign Assistance (“DEI Policy”).⁷  

Key elements of the rules are set forth below, and a detailed chart can be found here:

Types of Funding Mechanisms. The rules govern non military foreign assistance administered by the State Department through grants and cooperative agreements under Title III and specified appropriations (including, without limitation, Global Health Programs, humanitarian, development, stabilization, civil society/democracy, Migration and Refugee Assistance, and voluntary contributions to international organizations (“IOs”)). The PHFFA Policy will be applied prospectively to (i) all new grants and cooperative agreements that provide foreign assistance and (ii) all existing grants and cooperative agreements that provide foreign assistance when amended to add new funding. The State Department is developing parallel rules for contracts. Until such time, the PHFFA Policy does not cover foreign assistance contracts, however, the State Department specifically indicates that grants issued under contracts are covered by the PHFFA Policy.

Types of Entities. The rules apply to U.S. NGOs, foreign NGOs, and IOs, and may apply to foreign governments and parastatals, with flow down requirements to certain subrecipients.

Restricted Activities. Requirements under the PHFFA Policy differ slightly across entity type. This Alert focuses on U.S. NGOs, foreign NGOs, and IOs.

Each of the three rules prohibits U.S. NGO recipients of foreign assistance from engaging in certain activities outside the U.S., regardless of the funding source used to conduct those activities, and other activities “within the scope of any program, project, or activity for which foreign assistance funds are made available” (“program-specific restrictions”). Specifically:

• The rules prohibit U.S. NGOs from engaging in the following activities outside the United States, regardless of funding source: providing abortion as a method of family planning, providing “sex-rejecting procedures,” or engaging in “unlawful DEI-related discrimination.”
• Program-specific restrictions include promoting abortion as a method of family planning, “gender ideology,” or “discriminatory equity ideology.” The rules further require U.S. NGOs that engage in these activities using non-federal funds to “physically and financially separate” those activities from their activities funded by U.S. foreign assistance.

Foreign NGOs and IOs are broadly prohibited from, outside the U.S. and regardless of funding source, providing or promoting abortion as family planning, promoting gender ideology, promoting discriminatory equity ideology, engaging in unlawful DEI related discrimination, or funding any entities that conduct such activities.

Key Considerations

• No New Certifications/Attestations. The PHFFA Policy does not impose new certification or attestation requirements on award recipients and does not reference the False Claims Act (“FCA”).⁸ Nonetheless, it is possible that FCA liability could still attach; in accepting an award (including through funding draw-down), an awardee accepts an award’s terms and conditions, which typically include general statements of compliance with agency guidance and applicable laws and regulations, such as the PHFFA Policy.
• Ambiguous Definitions. As with revised award terms and conditions imposed by various federal agencies in 2025, the DEI Policy and Gender Ideology Policy incorporate prohibitions that require recipients to make practical decisions without clear guardrails. For example, terms such as “discriminatory equity ideology” and “gender ideology” are capable of varying interpretations, with recipients making programmatic decisions informed by their organizational risk tolerance. Also, the DEI Policy defines “unlawful DEI-related discrimination” as discrimination on the basis of race, color, religion, or national origin if such discrimination violates U.S. federal antidiscrimination law or would violate U.S. federal antidiscrimination law if it occurred inside the United States.” Requiring U.S. NGOs to adhere to U.S. federal antidiscrimination laws while operating in another country could conflict with their legal obligations under the host country’s laws.
• Separation. The rules do not prohibit U.S. NGOs from promoting abortion as a method of birth control, so-called discriminatory equity ideology, or so-called gender ideology outside the United States using non-federal funds, if they maintain strict physical and financial separation of bilateral assistance from those other funds. In such case, foreign assistance-funded programs must be “physically and financially separate” from prohibited activities. Compliance is assessed under a facts-and-circumstances test, looking to factors such as the separation of accounting records, facilities, personnel, and records/workstations, as well as appropriate signage and branding that avoids referencing prohibited activities.
• Waivers and Exemptions. Recipients may apply for a waiver from the State Department for national security or foreign policy purposes or for an exemption in the event of a conflict between an award term and local law. The State Department noted that related process guidance is forthcoming.

IV. Potential Legal Challenges

Cases filed in response to agency implementation of the Trump Administration’s Executive Orders on DEI⁹ and gender ideology¹⁰ (the “Gender EO”) provide a potential roadmap for challenging the PHFFA Policy. In those cases, some district courts found that agency conditions on grant funding likely violated the First Amendment and were unconstitutionally vague under the Fifth Amendment because certain key terms (e.g., “illegal” DEI, “promoting” DEI or gender ideology) were not defined clearly or at all. Some district courts also found separation of powers problems because agencies imposed conditions not approved by Congress, as well as likely conflicts with Spending Clause limits and the Administrative Procedure Act (“APA”). The PHFFA Policy could be challenged along similar theories, particularly on the First Amendment theories, the application of unconstitutionally vague definitions, and arbitrary-and-capricious review under the APA.

Importantly, as with the above-noted executive orders, the PHFFA Policy does not change existing federal anti-discrimination laws or the courts’ interpretation of those laws. Indeed, courts have held that agency implementation of Trump’s Gender EO, which contains several parallels to the new Gender Ideology Policy, likely violates Title VI and Title IX. In addition, the definition of “unlawful DEI-related discrimination” goes beyond the holding of Students for Fair Admissions v. President and Fellows of Harvard College,¹¹ in which the Supreme Court held that race-based affirmative action in college admissions violated the Equal Protection Clause of the Fourteenth Amendment.

The PHFFA Policy also may be challenged on procedural grounds. The State Department issued the rules without notice and an opportunity to comment under the APA’s exceptions for notice-and-comment rulemaking applicable to rules that involve a “foreign affairs function of the United States” or “a matter relating to . . . grants.” Parties may attempt to challenge the State Department’s authority to invoke these exceptions, which are narrowly construed.

V. Recommendations

Below are practical suggestions for U.S. NGOs, foreign NGOs, and IOs to assess exposure and compliance considerations under the PHFFA Policy. These compliance suggestions will be familiar to clients who have reviewed their institutional projects and programs for compliance with the above-referenced executive orders.

• Self-assess. Review existing programs for abortion, gender, and DEI elements and assess how such programs align with the PHFFA Policy, award terms and conditions, and anti-discrimination laws. Determine whether websites, portals, participant materials, and other program materials include keywords associated with restricted activities outlined in the PHFFA Policy. Press releases and media engagements should present messages neutrally and avoid exhortative language or calls to action that could be construed as promoting abortion, gender ideology, or DEI in a way that violates the PHFFA Policy.
• Align policies and trainings with new definitions and scope. Review institutional policies and trainings for alignment with updated definitions and conditions referenced in the new PHFFA policy, as applicable.
• Recognize ongoing legal uncertainty and monitor developments. Given the significant legal uncertainty surrounding the new PHFFA Policy, we anticipate it will likely invite litigation and associated compliance challenges. Stakeholders should monitor court filings and enforcement developments to assess risk and adjust implementation plans on an ongoing, iterative basis.

We will continue to monitor developments in this area. For more information or assistance in navigating these developments, please contact the authors or your usual Ropes & Gray advisor.