Nonprofits partner with state government agencies in many important ways, including through contractual relationships, to provide programs and services that benefit communities throughout the state. Earlier this year, the Center sought feedback from nonprofits about their challenges with state grants and contracts and about examples of contractual partnerships between nonprofits and state agencies that are working well. In the feedback we received from about 100 nonprofits (thank you if you responded!), we heard consistently that nonprofits are experiencing five types of challenges with their state grants and contracts:

1. Payments often don’t cover the full cost of providing contracted services and often provide little or no support for nonprofits’ indirect costs;
2. The application process for grants and contracts can seem overly complex;
3. Reporting requirements can appear redundant, unclear, and overly complex;  
4. Government agencies sometimes make midstream changes to the terms of nonprofits’ contracts; and
5. Many nonprofits experience late payments from the state. 

This summer, the Center began having conversations with a variety of state leaders about ways to strengthen contractual relationships between nonprofits and state agencies. As we continue these conversations and work on solutions to some of the persistent challenges that nonprofits have identified, it will be essential to have more nonprofits at the table. If your nonprofits has state grants or contracts, let us know if you would like to be a part of these ongoing conversations about one or more of the five challenges listed above or about strengthening partnerships between nonprofits and a particular state agency (or agencies).

Last year, the Federal Reserve conducted a survey to better understand the range of challenges facing communities and individuals served by nonprofits as a result of the COVID-19 pandemic. The resulting report helped shape nonprofit advocacy efforts and informed equitable recovery programs, policies, and investments.

Earlier this month, the Federal Reserve launched an updated survey on how the effects of COVID-19 are evolving in communities and among the organizations serving them. The Center encourages all North Carolina nonprofits to complete the 2022 survey today and share the survey link with others serving the community. The survey is open through next Tuesday, August 23.

On Monday, President Joe Biden signed the Inflation Reduction Act of 2022, into law. The House passed the bill last Friday in a party-line vote, and the Senate approved it by a 51-50 vote earlier this month.  The Inflation Reduction Act is intended to reduce the federal deficit, combat climate change, and decrease healthcare costs for people with Affordable Care Act health insurance subsidies. The bill helps nonprofits in three ways:

1. Deficit reduction. The bill is projected to reduce the federal deficit between $275 billion and $300 billion over the next decade by raising taxes on large corporations, increasing Internal Revenue Service (IRS) enforcement of tax laws, and allowing Medicare to negotiate for prescription drug prices. This deficit reduction could help combat inflation and other challenges for the economy that have increased costs for nonprofits and created more demands for nonprofits’ services.
2. Increased capacity for the IRS. The bill includes significant new resources for enforcement, operations, and taxpayer services by the IRS. This could help reduce the time it takes for nonprofits to have their tax-exempt applications processed, receive tax credits like the Employee Retention Tax Credit, and get clear guidance from the IRS on a variety of issues affecting tax-exempt organizations. It also could help improve the public’s trust in the nonprofit sector by ensuring that the IRS has adequate resources to enforce federal tax laws affecting nonprofits.
3. Climate change and energy independence provisions. Many of the provisions designed to fight climate change would create tax credits and grant programs that would help nonprofits and the people they serve improve the energy efficiency of their offices, homes, and vehicles.

The National Council of Nonprofits has prepared a useful summary of some key provisions for nonprofits in the Inflation Reduction Act. The bill does not include many of the provisions in the $1.7 billion Build Back Better legislation that the U.S. House of Representatives passed last November. That bill, which was the House’s plan for a budget reconciliation bill, also would have included other nonprofit priorities like continuing the expanded Child Tax Credit, investing significant federal support in child care and early childhood programs, providing more funding for national service programs, and supporting new and expanded affordable housing programs. It appears unlikely that Congress will fund these investments this year.

When the NC General Assembly adjourned its 2022 short session on July 1, lawmakers agreed to schedule brief sessions for each month during the remainder of the year to consider any unfinished business from the short session or to respond to any emergencies that might arise. The NC Senate and NC House of Representatives will be in session next Tuesday, but lawmakers are unlikely to vote on any legislation next week. 

Notably for nonprofits, legislators are not expected to take action this month on legislation to expand Medicaid coverage to adults with incomes up to 133% of the federal poverty level. Both the Senate and the House passed versions of Medicaid expansion this summer, but leaders in the two chambers have been unable to agree on final details of the legislation. As we explained in a recent Care4Carolina blog post, the Center strongly supports Medicaid expansion because it would support the work of charitable nonprofits in three ways:

1. Complementing the work of many nonprofits that provide services to North Carolinians who don’t currently have adequate health coverage;
2. Providing health coverage for some employees of nonprofits that don’t offer group health plans and whose salaries leave them in the health care coverage gap; and 
3. Providing payment for some types of Medicaid-eligible services that nonprofits currently provide to clients for free.

The Center continues to work with our partners to advocate for legislators to come to an agreement and pass Medicaid expansion this year. We will let you know when there is a need for your nonprofit to take action.

This month, the IRS changed the login process for Form 990-N (e-Postcard), which many small nonprofits use for their annual tax filing. Under the new process, small nonprofits filing the 990-N must sign into the IRS modernized authentication platform using either their active IRS username or create an account with ID.me, which requires an email address and multifactor authentication. Form 990-N filers who have an existing IRS username and register for an ID.me account must use the same email address.

Nonprofits can use Form 990-N, which is much simpler than the full Form 990 or the Form 990-EZ, if they regularly have annual gross receipts of $50,000 or less. It is important for small nonprofits (as well as mid-sized and large nonprofits) to file some version of the Form 990 with the IRS every year. The IRS automatically revokes the tax-exempt status of any nonprofit that doesn’t file for three consecutive years. Note that the login process hasn’t changed for nonprofits that file Form 990 or Form 990-EZ.