NC Senate Approves Charitable Solicitation Reforms

Yesterday, the NC Senate unanimously approved a bill (S.429) that would make three 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 Form 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.
• 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 Senate removed a provision from the bill that would have eliminated notarization requirements for charitable solicitation applications and renewals. The state charitable solicitation licensing law requires nonprofits to have charitable solicitation licensing applications and renewals notarized each year. The Secretary of State expressed concerns that, without notarization requirements, the charitable solicitation law may be unenforceable.

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 House for consideration. The Center will let you know if there is a need to take action.

Legislators Pass More Than 100 Bills in Advance of Crossover Deadline

Yesterday was the NC General Assembly’s “crossover” deadline. Officially, most legislation needed to pass at least one chamber prior to yesterday’s 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. Over the course of the week, the House passed 90 bills and the Senate passed 37 bills to ensure that this legislation is eligible for consideration this year or next year. Several bills of interest to nonprofits didn’t make the crossover deadline, including:

• A House bill (H.B. 798) that would limit liability of nonprofits that are sued while providing a variety of health-related services through contracts with the NC Department of Health and Human Services. Two House committees approved the bill this week, but it didn’t get a vote of the full House. The Center supports this bill since it can help provide legal protections for many nonprofits, potentially reducing their liability insurance expenses. 
• A Senate donor privacy bill (S.505) that would: (1) prohibit nonprofits from disclosing “the identity of any person donating monies or other tangible goods to the nonprofit corporation” if a donor notifies the nonprofit that they would like their identity kept confidential; and (2) prohibit state officials from providing Schedule B of nonprofits’ Forms 990 or 990-EZ (the attachment that includes donor information) in public records requests. The bill is identical to 2021 donor privacy legislation (S.636) that was ultimately vetoed by Governor Roy Cooper, who explained that “this legislation is unnecessary.” The Center is neutral on the bill since it is neither harmful nor helpful for nonprofits (along with being unnecessary). 
• Several House and Senate bills that would make changes to a variety of state employment laws, including raising the state’s minimum wage to $15 per hour, requiring private employers (including nonprofits) to offer paid family and medical leave, increasing unemployment benefits, and changing the state law for worker classification. 
• A Senate bill (S.564) that would create a new cause of action for individuals and entities that are harmed because a state agency knowingly fails to comply with its obligations. Successful claimants would be eligible for damages between $5,500 and $11,000. If this law were to be enacted, nonprofits that experience significant payment delays in their state grants and contracts may be able to take action against state agencies to receive damages. 

It is still possible that legislators could pass the substance of some of these and other bills that didn’t meet the crossover deadline this week. Some provisions in these bills may wind up in the state budget or another omnibus bill (i.e., a lengthy bill comprised of a variety of largely unrelated provisions) near the end of the legislative session, and others could resurface as committee substitutes for unrelated legislation that passed either the House or Senate prior to yesterday’s crossover deadline. The Center will continue to keep you posted on the status of legislation affecting all or most charitable nonprofits.

Several Center-Recommended Nonprofit Bills Remain Eligible for Consideration This Year

In addition to the charitable solicitation reform bill that the Senate passed yesterday (see the first item above for more details), several other Center-recommended bills are not subject to the crossover deadline and remain eligible for consideration this legislative session. These include:

• House (H.B. 882) and Senate (S.397) bills that 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. Thanks to your advocacy, 28% of House members have joined as sponsors or cosponsors of the House version, increasing the likelihood that legislators will give the proposal serious consideration this year. Currently, the Senate bill has been referred to the Senate Rules Committee, and the House bill has been referred to the House Finance and Rules committees.
• A Senate bill (S.449) that would create a new state income tax credit for charitable contributions by taxpayers who use the standard deduction. This tax credit would be a significant fundraising tool for nonprofits since it would create a tax incentive for more than 90% of North Carolinians – including most low- and middle-income individuals and families – to donate to charitable nonprofits or to increase the amount of their charitable contributions. Currently, this bill has been referred to the Senate Rules Committee. 
• House (H.B. 741) and Senate (S.529) bills that would make a variety of changes to modernize the NC Nonprofit Corporation Act to bring it into closer alignment with best practices for nonprofits and with nonprofit corporation laws in other states. Currently, the Senate bill has been referred to the Senate Rules Committee, and the House bill has been referred to the House Judiciary 1, Finance, and Rules committees.

The Center will let you know when there are opportunities to take action on these bills and other legislation that could help (or harm) charitable nonprofits.

NC Senate Expected to Vote on State Budget This Month

Last month, 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 FY 2024-25. Now that the House has approved its budget, Senate leaders are completing work on their own version. The Senate plans to pass its budget in the next few weeks, 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.

U.S. Senate Committee Explores Nonprofits’ Challenges with Federal Grants and Contracts

On Tuesday, the U.S. Senate Homeland Security and Governmental Affairs Committee held a hearing on Improving Access to Federal Grants for Underserved Communities. In the words of the Committee Chair, the hearing was an opportunity to “examine how government can update the federal grants process to help improve communities’ access to critical resources, increase transparency, reduce duplication, and streamline the federal grants process.” The National Council of Nonprofits submitted extensive written testimony laying out the challenges nonprofits face with federal grants and contracts and proposing a variety of solutions for Congress and the federal government to consider. That testimony included several examples and solutions based on experiences that you shared with the Center over the past two weeks. Thank you if you shared feedback with us; your input is making a difference in developing policy solutions that could help your organization and other nonprofits with federal grants and contracts.

NC Senate Regulatory Reform Bill Would Increase Threshold for Nonprofit Real Estate Raffles

This week, both the NC Senate and NC House of Representatives released details of their versions of regulatory reform legislation. Both the House (H.B. 600) and Senate (S.686) versions include a variety of provisions intended to cut red tape by reducing a variety of state and local government regulations, including many environmental rules. 

The Senate regulatory reform bill includes a provision that would increase the maximum value of real estate that nonprofits can raffle each year from $500,000 to $2.25 million. Nonprofits occasionally receive houses or other real estate as bequests or donations. For some nonprofits, the best way to make use of this donated property is to raffle it as a high-value fundraiser to support the organization’s programs and services. With increased property values in recent years, the current $500,000 threshold may be well below the value of property that nonprofits receive and may want to raffle. The bill requires that any real estate raffled by a nonprofit is free of liens or encumbrances – essentially ensuring that a nonprofit isn’t raffling property that will come with significant and unexpected costs for supporters of the organization. The Center supports the bill since this provision would create a new (or at least improved) fundraising opportunity for some nonprofits. Last month, the House approved a similar bill (H.B. 374) that would raise the maximum value of real estate that a nonprofit can raffle each year to $2 million. 

The House passed its regulatory reform bill yesterday, and the Senate will likely add its provisions to that bill so that the two chambers can agree on a final regulatory reform bill within the next couple of months.

Nonprofit Provides Helpful Resources on Medicaid Eligibility Determinations

During the COVID-19 pandemic, Congress created a temporary exemption (known as continuous coverage) from annual Medicaid recertification rules that normally require Medicaid recipients to provide verification of their income, family size, and other information to ensure they remain qualified. The Medicaid continuous coverage provision ended on April 1, and the NC Department of Health and Human Services (DHHS) is now starting the process of recertifying Medicaid beneficiaries in North Carolina. As many as 300,000 North Carolinians could lose their Medicaid benefits if they don’t recertify. Many of these North Carolinians may have begun participation in Medicaid during the pandemic and may be unfamiliar with the recertification process.

NC Child has helpful information that other nonprofits can share with the people they serve to help ensure they don’t lose their Medicaid coverage. As NC Child’s article notes: “The recently launched NCMedHelp.org is here to help answer questions about NC Medicaid services, including eligibility determination. NCMedHelp is a collaboration of three nonprofits – The Charlotte Center for Legal Advocacy, Pisgah Legal Services, and Legal Aid of North Carolina. The project is generously funded by Kate B. Reynolds Charitable Trust.”

NC Supreme Court Issues Three Opinions on Election Laws

Last Friday, the NC Supreme Court issued three opinions that affect state election laws:

1. In one decision, the court reinstated a 2018 law that requires North Carolinians to show photo identification when voting in elections. Many nonprofit organizations have expressed concerns that the voter ID law could make voting more difficult for many people served by nonprofits, particularly seniors, people with disabilities, and low-income citizens. Voter ID requirements will go into effect for this fall’s municipal elections. The NC State Board of Elections is developing resources on the types of photo identification that can be used and on ways that people without driver’s licenses can get photo IDs.
2. In a second decision, the court found that partisan gerrymandering is permissible under state law. The Center has concerns about gerrymandering because it weakens nonprofits’ voices on public policy advocacy. 
3. In a third decision, the court overturned a lower court ruling that had found that convicted felons could vote if they completed their prison time, even if they had not fully completed their sentences. The new ruling means that thousands of previously incarcerated North Carolinians who are still on probation for their felony convictions will not be eligible to vote in elections.

Abortion Legislation Includes Provisions Affecting Nonprofits

This week, the NC House of Representatives and NC Senate released and approved legislation (S.20) making a variety of changes to the state’s abortion laws, including prohibiting most abortions after 12 weeks of pregnancy. The bill, which was approved in party-line votes in both chambers, was negotiated among Republican legislators in both chambers and was approved as a conference committee report, meaning it could not be amended and required just one vote in each chamber to pass. Governor Roy Cooper has indicated that he will veto the bill, but legislators have the votes to override his veto, so it will become law soon. This will directly affect nonprofit health care providers that provide abortion services. Apart from the abortion law changes, the bill includes several provisions of interest to many nonprofits, including:

• $3.5 million in funding for nonprofit community health centers to increase access to contraceptives.
• $75 million in new funding to increase access to child care by increasing child care subsidy rates starting on July 1, 2023. 
• More than $10 million per year in new funding to increase foster care and adoption assistance rates.
• A new state law providing eight weeks paid parental leave for state employees and public school teachers. While this provision doesn’t require nonprofits to provide equivalent parental leave for their employees, it may be a model policy for nonprofit organizations to consider.

NC House Approves Bill Requiring Retailers to Accept Cash Payments

On Wednesday, the NC House of Representatives 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.

NC Senate Approves Bill That Would Impose Limits on Nonprofit NCHSAA Operations

On Wednesday, the NC Senate approved a bill (S.636) that would make changes to the governance and operations requirements on the NC High School Athletic Association, the 501(c)(3) nonprofit that administers interscholastic high school athletic activities in North Carolina. The bill would require the nonprofit to sign a memorandum of understanding with the state that would limit the organization’s contracting and fundraising ability and would make the organization subject to state open meeting laws and public records laws. The Center opposes government policies that limit nonprofits’ governance as independent, nongovernmental corporations with control over their own organizational policies and practices, and we expressed concerns that the bill would have created a precedent of the state limiting the ability of a nonprofit organization to operate as an independent organization.

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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.