A congressional committee is considering holding a hearing as soon as next month to identify challenges and barriers that nonprofits have with processes for accessing federal grant money. Our colleagues at the National Council of Nonprofits are preparing written testimony in advance of the possible hearing and would like to include your nonprofit’s input. If you would like to provide input on your nonprofit’s experience with federal grants, please let us know any examples, observations, and potential solutions on the following three topics:

1. Accessing Grants: Does your organization have difficulty finding relevant funding opportunities and/or lack the capacity to apply for and/or manage the compliance aspects of grants?  
2. Technology and Technical Assistance: Have you experienced technical difficulties with federal grants websites (e.g., grants.gov) or had trouble getting technical assistance from the funding agency?
3. Other: Are there other challenges with the federal grants process that your organization has experienced related to accessing, managing, or reporting on federal grants? 

If you share input, please let us know whether you would like it to be attributed to your nonprofit or to be shared anonymously. Please share any input by next Thursday, April 27. Note that this hearing is focused on challenges that nonprofits have experienced with federal grants, not with state or local grants.

A bill (H.B. 741) introduced in the NC House of Representatives on Tuesday would make a variety of changes to modernize state nonprofit laws. The bill 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 Internal Revenue Service (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 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 bill also 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. These changes include: 

• Creating a simple, online, no-fee annual report for North Carolina nonprofits. This change would help protect the reputation of our state’s nonprofits by helping prevent fraud and abuse of defunct nonprofits. Almost all other states currently have annual reporting requirements for nonprofits.
• Allowing nonprofits to merge with unincorporated nonprofit associations or limited liability companies (LLCs) that are treated as 501(c)(3) charitable organizations for federal tax purposes. As more nonprofits are looking to collaborate with other organizations or consolidate their operations, this revision would help ensure that they have the option of merging with other charitable organizations, regardless of their corporate form.
• Simplifying the process for nonprofits incorporated in other states to become North Carolina nonprofit corporations. This type of “domestication” provision could allow nonprofits to relocate to North Carolina without having to re-apply for tax-exempt status with the Internal Revenue Service.
• Creating a process for other business entities to convert to become nonprofit corporations. Under existing law, there is not a simple way for for-profit businesses to become nonprofits.
• Requiring nonprofits incorporated in North Carolina in the future – other than private foundations – to have at least three board members. This would make the North Carolina law consistent with nonprofit best practices, with IRS requirements for 501(c)(3) organizations, and with most other state nonprofit statutes.
• Removing a requirement that nonprofits that are ending their operations must have the NC Attorney General approve of their distribution of assets. This change could help nonprofits ensure that any remaining assets go to programs consistent with their missions and their donors’ intent – rather than to attorney’s fees – when they are going out of business.

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 Center appreciates Representatives Harry Warren (R-Rowan), Brandon Lofton (D-Mecklenburg), Julia Howard (R-Davie), and Robert Reives (D-Chatham) for filing this bill.

The provisions from the bill are included in two separate Senate bills: chartable solicitation changes (S.429) and nonprofit corporation statute changes (S.529). The Senate Finance Committee is scheduled to consider the charitable solicitation legislation next Tuesday.

Two 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 FY 2024-25. Now that the House has approved its budget, the Senate is working on its 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 hope to have a state budget in place before the start of the new fiscal year on July 1, 2023.

The Center has prepared an initial analysis of the nonprofit provisions and appropriations in the House budget. Inevitably we have missed some things in the 1,056 pages of budget documents, so please let us know if you notice missing items of importance to nonprofits or other mistakes in this analysis, and we’ll fix them in the next version.

A major national survey and report in late 2021 identified the scope of the problems related to nonprofit workforce shortages. That report identified both public policy and practical solutions that have helped organizations hire and retain the staff they need to advance their missions. The results of that survey – especially responses from North Carolina nonprofits – have been particularly useful in helping the Center and our state and national partners advocate more effectively for state and federal policy solutions that help build nonprofits’ staff capacity.

Earlier this month, the National Council of Nonprofits opened an updated survey to find out the current state of the nonprofit workforce shortage. We invite you to complete the updated survey and help the nonprofit sector tell its story. Thank you if you have already completed the survey.

A bill (H.B. 798) filed in the NC House of Representatives on Tuesday 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. A similar bill (S. 571) was introduced in the NC Senate two weeks ago. The Center supports this bill since it can help provide legal protections for many nonprofits.

A recent report from the Fundraising Effectiveness Project found that overall charitable giving in the United States declined by 1.7% in 2022. The report also found that the number of donors to nonprofits declined by 10.0% last year. The decline in charitable contributions is particularly troubling at a time when demand for nonprofits’ services is increasing and nonprofits’ expenses are going up due to inflation. The Center encourages federal and state policymakers to help nonprofits have the resources they need to provide services for their communities by creating new tax incentives for charitable giving, including:

1. A federal universal tax deduction for charitable contributions. A bipartisan U.S. Senate bill known as the Charitable Act (S.566) would create a non-itemizer, universal charitable deduction. The legislation would enable taxpayers who use the standard deduction (which includes more than 90% of North Carolinians) to deduct charitable donations of up to one-third of the standard deduction, about $4,600 for individuals and $9,200 for married couples.
2. A state tax credit for charitable contributions. A bipartisan NC Senate bill (S.449) 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-income and middle-income individuals and families – to donate to charitable nonprofits or to increase the amount of their charitable contributions.

A bill (H.B. 598) introduced in the NC House of Representatives last week would prevent counties and municipalities from setting property tax rates above 1% of the assessed value of the property. With many local governments across North Carolina facing revenue shortfalls, this legislation would limit their options for raising new revenue by increasing property tax rates. Most 501(c)(3) nonprofits that own property are currently exempt from paying property tax on land and buildings that they own and use for their nonprofit’s programs and services. However, it is possible that limitations on the ability to raise property tax rates for individuals and businesses that pay property tax could force some local governments to try to impose new taxes, fees, or payments in lieu of taxes on charitable nonprofits in their communities.

On Wednesday, the NC House of Representatives approved a bill (H.B. 374) that would increase the maximum value of real estate that nonprofits can raffle each year from $500,000 to $2 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 also 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 it would create a new (or at least improved) fundraising opportunity for some nonprofits. The bill now goes to the Senate for consideration.

With legislators considering so much nonprofit sector legislation, and with many nonprofits supporting or opposing other bills that have been introduced and/or 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 helpful 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 (18-minute) tutorial video with tips on how your nonprofit can track what’s happening at the General Assembly in real time.

On Wednesday, leaders in the U.S. House of Representatives released details of the Limit, Save, Grow Act of 2023, their 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 by 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.

While the Republican-controlled House is quite likely to pass some version of this plan, it 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.

A bill (H.B. 737) filed in the NC House of Representatives on Tuesday would give the NC Attorney General greater authority to review – and take action on – proposed mergers and consolidations of hospitals and health systems. Most hospitals and health systems in North Carolina are 501(c)(3) nonprofits. The bill also would require entities that acquire hospitals or health systems to be subject to stringent monitoring for three years after the transaction. The bill does not make changes to the Attorney General’s authority to review transactions of other nonprofits. An identical bill (S.16) was filed in the Senate in January.

Nonprofits that are registered as lobbyist principals (and their staff or contractors who were registered as lobbyists) must file their first quarterly reports of 2023 with the Secretary of State Lobbying Compliance Division by this Monday, April 24. To better understand the basics of state lobbying laws affecting nonprofits, check out the Center's summary of NC lobbying laws for nonprofits.