New NC House Bill Would Exempt Charitable Nonprofits from Paying Sales Tax

A bipartisan bill (H.B. 882) filed on Tuesday in the NC House of Representatives would exempt most 501(c)(3) nonprofits from paying sales tax on their purchases. Under existing law, nonprofits must pay sales tax when they buy goods and services in North Carolina, but they can apply for semi-annual refunds from the NC Department of Revenue. The Center has advocated for this bill to be filed based on feedback we have received from hundreds of nonprofits that the current sales tax refund system is a financial and administrative burden for nonprofit organizations. 

Thank you to the nearly 200 nonprofit leaders who reached out to your House members about cosponsoring the bill over the past two days. As a result of your advocacy, the bill has 30 cosponsors in addition to its four primary sponsors – Representatives Allen Chesser (R-Nash), Jason Saine (R-Lincoln), Stephen Ross (R-Alamance), and Brandon Lofton (D-Mecklenburg). The large number of bipartisan cosponsors sends a powerful message to legislative leaders that nonprofit sales tax exemption is an important issue for the General Assembly to consider this year.

The House Finance Committee is the first committee scheduled to consider the bill. To become law, both the House and Senate would need to approve of the legislation. The Center will keep you posted on the bill’s progress and on additional opportunities to advocate in support of nonprofit sales tax exemption.

NC Senate Committee Approves Charitable Solicitation Reforms

On Tuesday, the NC Senate Finance Committee unanimously approved a bill (S.429) that would make four important reforms to the state charitable solicitation licensing statute: 

• Make automatic extensions of charitable solicitation filings identical to those for IRS Form 990. The IRS currently allows nonprofits to receive an automatic six-month extension of their filing deadline for 990s. The North Carolina charitable solicitation statute only allows for a three-month automatic extension, and further extensions may be made at the discretion of the NC Secretary of State. Practically, this creates situations where some nonprofits are unable to file their charitable solicitation paperwork in a timely manner if their Forms 990 have not yet been completed.
• Exempt more small nonprofits from needing charitable solicitation licenses. Currently, nonprofits are exempt from having charitable solicitation licenses if they receive less than $25,000 in contributions per year (which generally includes foundation grants but not government grants and contracts) and do not pay compensation to fundraisers. The $25,000 threshold was established when the Internal Revenue Service (IRS) had a threshold of $25,000 in annual expenses for filing Form 990 (the annual information return for tax-exempt entities). Because the IRS threshold is now $50,000 (and organizations below that threshold now need to file the simple, online Form 990-N), some small nonprofits need to have charitable solicitation licenses – and spend significant time completing paperwork and preparing financial statements – even though they are exempt from basic filing requirements from the IRS.
• Eliminate notarization requirements for charitable solicitation applications and renewals. Currently, the state charitable solicitation licensing law requires nonprofits to have charitable solicitation licensing applications and renewals notarized each year. The notarization requirement creates an extra burden for nonprofits in completing their charitable solicitation licensing documents and does not provide any additional public protection. 
• Count charitable solicitation forms as timely filed if they are postmarked by the filing deadline. This change could help prevent nonprofits from being identified as out of compliance if there are mail delays.

The Center has advocated for this bill to be filed based on input from many nonprofits and from attorneys who work with nonprofit organizations. The bill now moves to the Senate Judiciary Committee, which is likely to vote on it by next week.

Legislators Vote on Hundreds of Bills in Preparation for Next Week’s Crossover Deadline

Next Thursday (May 4) is the NC General Assembly’s “crossover” deadline. Officially, most legislation needs to pass at least one chamber prior to the crossover deadline to be eligible to become a law in 2023 or 2024. Legislation affecting state spending, taxes, election laws, and redrawing congressional or state legislative districts aren’t subject to the crossover deadline, and legislators – particularly those in leadership roles –often find creative ways of getting bills passed even if they didn’t meet the crossover deadline. Leading up to the crossover deadline, House and Senate committees discussed hundreds of bills this week – and will consider many more next week – to ensure that a wide variety of legislation is eligible for consideration this year or next year.

With legislators considering so much nonprofit sector legislation, and with many nonprofits supporting or opposing other bills that are moving through committees that may affect their missions, many nonprofits may be wondering how they can keep track of fast-moving legislation. The Center recognizes that most nonprofits don’t have dedicated staff who come to Raleigh every day when the General Assembly is in session to track legislation and lobby on issues important to their organizations. Fortunately, the General Assembly’s website offers many tools to help nonprofits track bills – and interact with legislators – from their homes or offices (or anywhere internet access is available). To help you take advantage of these free resources, the Center has put together a brief tutorial video with tips on how your nonprofit can track what’s happening at the General Assembly in real time.

NC House of Representatives Approves BCBSNC Restructuring Legislation

Yesterday, the NC House of Representatives overwhelmingly approved a bipartisan bill (H.B. 346) that would allow the state’s two hospital service corporations – BlueCross BlueShield of North Carolina (BCBSNC) and Delta Dental Plans Association – to create “nonprofit holding corporations” to restructure some of their assets. Earlier in the week, the House Health Committee and House Insurance Committee both approved the bill with minimal discussion. Under existing law, hospital service corporations are regulated by the NC Department of Insurance, and these entities need state approval for many types of transactions. This legislation would enable hospital service corporations to move some or all of their operations to other nonprofits that are not regulated by the NC Department of Insurance, potentially cutting red tape that can undercut their ability to make investments or engage in certain transactions.

In 1998, the Center worked with a large coalition of nonprofits to help ensure that if a nonprofit health insurer were to convert to a for-profit that the full fair market value of the nonprofit would remain in the nonprofit sector by being transferred to a charitable foundation. The Center is appreciative of Rep. John Bradford (R-Mecklenburg), the bill’s primary sponsor, for making a change to the bill this week to help preserve this important protection of nonprofit assets if BCBSNC were to restructure and then convert to a for-profit.

The bill has broad bipartisan support in both the House and Senate, so it is likely to become law this year. 

NC Senate Begins Work on State Budget

Three weeks ago, the NC House of Representatives passed its version of the state budget for FY2023-25 (H.B. 259). The proposed House budget would include $29.8 billion in total state spending in FY2023-24 and $30.9 billion in FY2024-25. Now that the House has approved its budget, Senate leaders are completing work on their own version. The Senate plans to pass the budget next month, and then House and Senate leaders will negotiate on a final version to send to Governor Cooper. Legislators expect to have a state budget in place before the start of the new fiscal year on July 1, 2023. The Center has prepared an updated analysis of the nonprofit provisions and appropriations in the House budget.

NC House Banking Committee Approves Bill Requiring Retailers to Accept Cash Payments

Yesterday, the NC House Banking Committee approved a bill (H.B. 20) that would require retailers to accept cash payments. The bill also would prohibit retailers from charging customers more to pay in cash than to pay with a credit or debit card. The legislation could affect nonprofits that sell products and services. The full House is likely to vote on the bill next week.

U.S. House of Representatives Passes Debt Limit Legislation

On Wednesday, the U.S. House of Representatives narrowly approved the Limit, Save, Grow Act of 2023 (H.R. 2911), the House plan to raise the federal debt limit and limit federal spending. Unless Congress raises the federal debt limit by this summer, the United States could default on its debt, causing a global financial crisis. The bill would extend the debt limit through March 31, 2024 or until it increases by $1.5 trillion, whichever occurs first. This would mean that Congress would need to renegotiate the debt limit within the next year, creating another opportunity for a potential financial crisis. 

Several of the spending provisions in the bill could affect nonprofits and the people they serve, including:

1. Language to claw back unappropriated funds from the American Rescue Act Plan and other COVID relief programs; some of these unappropriated funds in North Carolina could still be used by the state and local governments to support the work of nonprofits;
2. A provision prohibiting executive actions to forgive student debt or make changes to income-driven repayment plans;
3. Repeal of a variety of green tax credits that were passed into law last year, some of which benefit nonprofits making energy-efficient upgrades to their facilities; and
4. Provisions extending the work requirements for the Supplemental Nutrition Assistance Program (SNAP) from the current age range of 18-49 to an age range of 18-55 and adding work requirements for Medicaid recipients.

The Limit, Save, Grow Act passed by a 217-215 margin, mostly along party lines; all seven Republican House members from North Carolina voted for the bill, and all seven Democratic House members from North Carolina voted against the bill. The Limit, Save, Grow Act is unlikely to become law, since neither the Democrat-controlled Senate nor President Biden support this proposal. Instead, leaders in both chambers in Congress and the White House are likely to continue to negotiate a debt limit extension and federal spending changes in the coming weeks and months.

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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.