Center Releases 2024 Public Policy Agenda for NC’s Nonprofit Sector

As a reader of these weekly policy updates, you are probably aware that the Center takes positions on – and lobbies on – state and federal public policy issues that affect most or all 501(c)(3) nonprofits in North Carolina. Yesterday, the Center’s Board of Directors approved the 2024 Public Policy Agenda for North Carolina’s Nonprofit Sector, which describes the Center’s current positions on state and federal public policy issues affecting nonprofits. Many of the public policy solutions and challenges identified on the Center’s 2024 public policy agenda are included because of your input and the input of other nonprofits.

U.S. House Committee Held Hearing on Nonprofits’ Election-Related Activities

On Wednesday, a subcommittee of the U.S. House of Representatives Ways and Means Committee held a hearing on “Growth of the Tax-Exempt Sector and the Impact on the American Political Landscape.” The hearing focused on election-related activities of 501(c)(3) and 501(c)(4) tax-exempt organizations. Federal tax law prohibits 501(c)(3) nonprofits from engaging in partisan election-related activities like endorsing or opposing candidates for public office or making financial contributions to political campaigns. However, longstanding guidance from the Internal Revenue Service makes clear that 501(c)(3) organizations can participate in nonpartisan voter registration, voter education, and get-out-the-vote work.

One witness at the hearing recommended that Congress consider legislation prohibiting 501(c)(3) nonprofits from engaging in or funding nonpartisan voter registration and get-out-the-vote work, and the chair of the Ways and Means Committee appeared to express support for this idea during his questioning of witnesses. The Center opposes legislation at the federal or state level that would limit or eliminate the ability of 501(c)(3) nonprofits to engage in nonpartisan voter registration, voter education, or get-out-the-vote activities. 

Witnesses at the hearing also recommended some changes to the Form 990 that tax-exempt nonprofits file with the Internal Revenue Service each year. These recommendations included greater disclosure of fiscally-sponsored groups and clearer definitions for various terms on the Form 990 to ensure that nonprofits have greater uniformity in their reporting of activities. 

The hearing was a follow-up to the Committee’s “request for information” about election-related activities of 501(c)(3) charitable nonprofits and 501(c)(4) social welfare organizations from this summer. In September, the Center submitted a written response to the Committee highlighting that:

1. Charitable nonprofits support the provision in Section 501(c)(3) of the Internal Revenue Code that protects the public’s trust in nonprofits by requiring charitable organizations to operate in a nonpartisan manner.
2. The rules on permissible nonpartisan election-related activities for 501(c)(3) are already quite clear. Nonprofits have access to plenty of information about these rules, both in the form of formal guidance from the IRS (e.g., IRS Revenue Ruling 2007-41) and in the form of free, user-friendly materials from the Center and other partners (e.g., the Center’s answers to common questions about nonprofits and elections and many great resources from Nonprofit VOTE).
3. It is important for Congress to continue to allow 501(c)(3) nonprofits to engage in nonpartisan voter education activities. We explained that: “Charitable nonprofits engage in nonpartisan voter education not because it is profitable (it isn’t) or because they want to influence partisan election outcomes (they don’t), but rather because they see this type of nonpartisan civic engagement as a necessary public service to their clients and their community, and therefore something that is complementary to their charitable missions.”

IRS Increases Standard Mileage Rate to 67 Cents Per Mile for 2024

This week, the Internal Revenue Service issued a notice raising the standard business mileage rate to 67 cents per mile for 2024 (up from 65.5 cents per mile for 2023). Many nonprofits use this rate when reimbursing their employees for work-related driving. The volunteer mileage rate – the amount that is tax-deductible when your nonprofit's volunteers drive on behalf of your organization – remains at 14 cents per mile and can only be changed by Congress. The Center continues to advocate for Congress to increase the volunteer mileage rate.

More Nonprofits Will Need to File IRS Information Returns Electronically Next Year

A new federal regulation requires employers, including nonprofits, that file 10 or more “information returns” in a calendar year to file these forms electronically. The “information returns” included in this new electronic filing requirement include the Form 1099 series (typically used for nonprofit contractors), Form W-2, and Affordable Care Act information returns like the Form 1094 series and Form 1095-C. Practically, this means that many nonprofits, including any organization with a total of 10 or more employees and independent contractors, must file these forms electronically next year. The Internal Revenue Service can impose significant financial penalties for employers that don’t comply with electronic filing rules. 

Nonprofits already must file their Forms 990 electronically. However, in the past, nonprofits were only required to file most other information returns electronically if they filed 250 or more of any specific form per year. Nonprofits that have not filed information returns electronically in the past will likely need to register with the IRS to e-file in 2024. Nonprofits that use third-party providers to process their payrolls may want to check with these providers to confirm that they are filing Forms W-2 electronically (hint: they probably are).

DHHS Materials Help Nonprofits Provide Outreach on Medical Expansion

Medicaid expansion began in North Carolina on December 1. The NC Department of Health and Human Services (DHHS) expects that at least 300,000 North Carolinians will be automatically enrolled in Medicaid and that about another 300,000 may be eligible for coverage under Medicaid expansion. DHHS launched a website to help with community outreach on Medicaid expansion, including basic information on eligibility for Medicaid coverage, details of costs and coverage, and free materials to help nonprofits provide clear and accurate information about Medicaid and Medicaid expansion to their clients and communities. Please share this information widely, especially with clients who may now be eligible to apply.

Some Nonprofits Will Need to File Corporate Transparency Act Reports in 2024 or 2025

The Corporate Transparency Act, a new federal law requiring business corporations to file annual reports with the Financial Crimes Enforcement Network (FinCEN), takes effect on January 1, 2024. Generally, 501(c)(3) nonprofits are exempt from filing reports with FinCEN as long as they have current exemption letters from the IRS. However, FinCEN’s rules, which were finalized earlier this year, do not extend that exemption to nonprofit corporations whose tax-exemption determination has been revoked or is pending with the IRS. Specifically:

1. Nonprofits that have their 501(c)(3) status revoked by the IRS, including those that fail to file some version of Form 990 for three consecutive years, will need to file a report with FinCEN within 180 days after their tax-exempt status is revoked.
2. Nonprofits that have submitted Form 1023 or Form 1023-EZ with the IRS in 2023 or earlier will not need to file reports with FinCEN as long as they receive determination letters from the IRS by the end of 2024. 
3. Nonprofits that are incorporated in 2024 or later will need to file reports with FinCEN if they do not receive IRS determination letters within 90 days after the date of their incorporation with the NC Secretary of State (or the equivalent agency in other states). Since many nonprofits do not apply for tax-exemption that quickly – and many more do not receive determination letters from the IRS within 90 days of incorporating – the Center is exploring ways to advocate for FinCEN to amend its rules to extend this 90-day period.

Fox Rothschild law firm has a helpful summary of the ways that nonprofits may be affected by the Corporate Transparency Act.

Center Offers 2023 Legal Compliance Checklist for North Carolina Nonprofits

The Center’s weekly policy updates (i.e., the email you are reading right now!) provide updates on new and proposed legislation and regulations that might affect your nonprofit’s operations and mission. The Center also recognizes that it is helpful for nonprofits to review the many federal and state laws (some new, some longstanding) that are necessary for your nonprofit to remain compliant. With this in mind, the Center has published its annual Legal Compliance Checklist for North Carolina Nonprofits, a comprehensive summary of laws affecting NC nonprofits’ tax exemption, governance, finances, advocacy, human resources, and fundraising – and how to comply.

The Legal Compliance Checklist is included as part of membership in the Center. If your nonprofit is a Center member, all of your staff and board members have access (download it here). The checklist is also available for purchase for nonprofits and others that are not Center members (purchase it here). Any 501(c)(3) nonprofit can also become a Center member to get free access to the Legal Compliance Checklist and a wide range of other resources and services.

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Nonprofit Policy Update is North Carolina Center for Nonprofits' weekly newsletter of state and federal policy issues that affect all 501(c)(3) nonprofits. Learn about the Center's public policy priorities and agenda, or contact David Heinen, Vice President for Public Policy and Advocacy, for more information.

©2023 North Carolina Center for Nonprofits