Federal Courts Temporarily Stomp Federal Grants Pause

As you are likely aware from reading these policy updates and other sources, the federal Office of Management and Budget (OMB) sent a memo to federal agencies two weeks ago ordering them to pause most of their grants and loans – including billions of dollars in grants to nonprofits. Even though OMB rescinded the memo and two federal judges have issued temporary restraining orders directing OMB and federal agencies to stop the funding freeze, some nonprofits remained unable to access their federal funds this week. Because of this, the judge in one of the two cases issued an additional ruling on Monday finding that OMB and federal agencies were not fully complying with the temporary restraining order stopping a funding freeze and granting a motion for enforcement that directs OMB and federal agencies to restore federal grant funding while the temporary restraining order is in effect.

Judges in both cases will hold hearings in the coming weeks to determine whether they will issue preliminary injunctions that would prevent a federal funding freeze while the litigation is pending. Check out the Center’s resource page on the federal grants pause for the latest information and resources for NC nonprofits.

White House Directs Federal Agencies to Review All Funding of NGOs

Last Thursday, the White House sent a memo to the heads of all federal agencies directing them to review all funding they provide to “Nongovernmental Organizations” or NGOs to ensure that this funding aligns with the Administration’s priorities. The full text of the memo reads:

“The United States Government has provided significant taxpayer dollars to Nongovernmental Organizations (NGOs), many of which are engaged in actions that actively undermine the security, prosperity, and safety of the American people. It is the policy of my Administration to stop funding NGOs that undermine the national interest.

“I therefore direct the heads of executive departments and agencies (agencies) to review all funding that agencies provide to NGOs. The heads of agencies shall align future funding decisions with the interests of the United States and with the goals and priorities of my Administration, as expressed in executive actions; as otherwise determined in the judgment of the heads of agencies; and on the basis of applicable authorizing statutes, regulations, and terms.”

The memo does not provide a definition for “Nongovernmental Organizations,” but it appears likely that the intent of the memo is to review most or all federal grants to nonprofits. It is not clear how quickly these reviews will be conducted, what next steps the White House and federal agencies may take with nonprofit grantees that they deem to be inconsistent with Administration priorities, and whether (when?) this directive will be challenged in federal court. The Center will (of course) keep you posted as more information becomes available. 

NC House Committees Approve Hurricane Helene Relief Legislation

This week, both the NC House of Representatives Select Committee on Helene Relief and the House Appropriations Committee approved a $500 million proposal for Hurricane Helene relief (H.B. 47). Among other things, the bill would provide:

• $10 million to the Division of Emergency Management in the NC Department of Public Safety to make grants to nonprofits that are Volunteer Organizations Active in Disaster (VOADs) that are providing assistance in Hurricane Helene relief and recovery.
• $10 million to the State Fire Marshall for grants to small and volunteer fire departments in western North Carolina, many of which are nonprofits.
• $150 million for home construction and repair in western North Carolina.
• $55 million to establish a grant program for local governments to expedite infrastructure repairs that impact the operation of small businesses (potentially including nonprofits) in western North Carolina. While local governments would be the recipients of these grants, the infrastructure repairs or improvements funded by the grants could benefit some nonprofits.
• A provision allowing VOADs working on Hurricane Helene relief and recovery efforts to access heavy construction equipment and motor vehicles from the state’s surplus property.

The bill does not include relief for nonprofits or small businesses that suffered economic harm from Hurricane Helene. The bill now goes to the House Rules Committee. The full House could vote on it next week, and it could move to the Senate soon after the House approves it. Lawmakers will consider additional relief later this winter or spring, and the Center will continue to advocate for future relief legislation to include support for nonprofits in western North Carolina that have suffered economic harm.

NC House Committee Approves Bill Making Significant Changes to Unemployment Benefits

On Tuesday, the NC House Finance Committee approved a bill (H.B. 48) that makes three significant changes to the state’s unemployment laws:

1. It would ratify an executive order from former Governor Roy Cooper that provided unemployment relief for individuals and employers affected by Hurricane Helene. Among other things, the executive order, which extends through March 1, temporarily increased maximum weekly unemployment benefits to $600 per week (up from $350 per week) and ensured that nonprofits (including those that pay state unemployment tax and those that reimburse for unemployment claims) and other employers will not be charged for Hurricane Helene-related unemployment claims of their employees. The Center has a resource page with more information on the ways this executive order would help nonprofits. 
2. It would increase the maximum weekly benefit amount for unemployment benefits from $350 to $450, beginning with claims filed on March 2, 2025. This change would help unemployed workers who receive services from nonprofits and also would benefit staff who are laid off or furloughed by nonprofits. However, it also could create additional liability for nonprofit organizations that elect to reimburse for unemployment claims instead of paying state unemployment tax.
3. It would offer an unemployment tax credit for 2025 for employers that would be equal to the amount of unemployment taxes they paid in the fourth quarter of 2024. Nonprofits that pay state unemployment taxes would be eligible for this tax credit, although reimbursing nonprofits would not.

If you’ve read all the way through this and are confused by the references to “reimbursing” nonprofits and those that pay state unemployment taxes, here is some quick background. Nonprofits fall into one of three categories for the purposes of unemployment laws:

1. Some charitable nonprofits pay state unemployment taxes like other businesses. These organizations pay quarterly taxes based on their “experience rating,” a formula based on the recent history of unemployment claims by their former employees.
2. Charitable nonprofits have the option of electing to self-insure rather than pay state unemployment taxes. Nonprofits that elect this option are required to reimburse their state unemployment insurance trust funds for the amount of benefits their terminated or laid off employees claim. In North Carolina, self-insuring nonprofits must also maintain an escrow account with the state with 1% of their annual payroll.
3. Some nonprofits are exempt from unemployment laws. These include houses of worship, religious organizations that are affiliated with houses of worship, and religious schools. Nonprofits with fewer than four employees who work during 20 weeks of the year are also exempt. Employees of SUTA exempt charitable organizations are not eligible to receive state unemployment insurance benefits if they lose their jobs.

President Trump Establishes White House Faith Office to Collaborate with Nonprofits

Last Friday, President Donald Trump issued an Executive Order establishing the White House Faith Office. The Executive Order focuses on ways that the federal government can partner with nonprofits on policy initiatives and in the delivery of programs and services to communities. In the Executive Order, President Trump explains that “[t]he executive branch wants faith-based entities, community organizations, and houses of worship, to the fullest extent permitted by law, to compete on a level playing field for grants, contracts, programs, and other Federal funding opportunities. The efforts of faith-based entities, community organizations, and houses of worship are essential to strengthening families and revitalizing communities, and the Federal Government welcomes opportunities to partner with such organizations through innovative, measurable, and outcome-driven initiatives.” Among other things, the Faith Office is empowered to work with businesses to promote volunteerism and charitable giving, to consult with nonprofits on policy matters, to help “non-profit faith-based entities, community organizations, and houses of worship” identify and apply for federal grants, and to promote the “free exercise of religion.”

Congress Begins Budget Reconciliation Process

This week, both the U.S. Senate and U.S. House of Representatives began the first step in the budget reconciliation process by releasing their proposed plans for federal spending levels for the next 10 years. The House and Senate will work over the next month to agree on the same budget resolution. While most legislation requires 60 votes to pass the U.S. Senate, a budget reconciliation bill can be used to pass major legislation that affects federal taxes or spending with a simple majority vote in the Senate. Budget reconciliation is most frequently used when the same party controls both houses of Congress and the White House. In the past, Congress has passed bills like the 2010 Affordable Care Act, the 2017 Tax Cuts and Jobs Act, and the 2022 Inflation Reduction Act through the budget reconciliation process. This year, Congress is planning to use the budget reconciliation process to make significant federal tax law changes (including extending many parts of the Tax Cuts and Jobs Act that are set to expire after this year) and to enact parts of President Trump’s policy and spending agenda.

Join a Nonprofit Policy Conversation in Asheville on February 28

In collaboration with WNC Nonprofit Pathways, the Center is hosting a Nonprofit Policy Conversation on Friday, February 28.

The Center will provide a public policy briefing that includes the latest information about recent federal executive actions that could affect nonprofits, a preview of what nonprofits can expect from Congress this year, and highlights from the first month of the state legislative session. We’ll also have a discussion for participants to share their insights about priorities for Hurricane Helene recovery legislation and other important state and federal policy issues for 2025.  

Additionally, Dr. Chris Cooper, Professor of Political Science and Public Affairs at Western Carolina University, will discuss the current political climate and its implications for nonprofits. Drawing on his extensive research in state politics, political behavior, and policy trends, Dr. Cooper will discuss key legislative developments, shifts in voter dynamics, and how upcoming elections could shape policies affecting the nonprofit sector. Participants will gain a deeper understanding of how these changes might impact funding, advocacy efforts, and nonprofit operations in the year ahead.

A buffet lunch will be provided. Register today!

Take 30 Minutes to Complete 2025 State of the Nonprofit Sector Survey

There has never been a more critical time to understand the biggest challenges and opportunities facing the nonprofit sector in North Carolina. To help get a sense of sector trends, the Nonprofit Finance Fund (NFF) recently opened its 2025 State of the Nonprofit Sector Survey to gather data about timely social sector issues such as federal funding, real estate ownership, workforce and staffing, and other topics relevant to creating community wealth and well-being.  

The Center encourages every North Carolina nonprofit to take 25-35 minutes to complete the survey. Results of past surveys have been helpful to the Center and other nonprofit advocates in making the case to policymakers about policy solutions that can benefit nonprofits and the communities they serve. The survey is open until March 7. Please take the survey today. Note: NFF requests that only one person from your nonprofit complete the survey.

Learn More About New Association Health Plan for NC Nonprofits

North Carolina nonprofits now have the opportunity to join the Center's new association health plan (AHP) with options to offer health insurance, among other benefits, to your employees. Learn more about the program and plan options and ask questions during a free, virtual information session on March 7 at 11:00 a.m. Register now.

Note: All nonprofits are welcome to join the March 7 session or complete an interest survey to get more information. If your nonprofit is not a current Center Member, your organization will need to join the Center before becoming a participant of the AHP.

NC Senate Approves Bill Aimed at Lowering Health Costs

On Wednesday, the NC Senate approved a bill (S.24) aimed at controlling health care costs for North Carolinians. The bill would require that any legislation establishing new “health insurance mandates” for private health insurance (including health plans that nonprofits offer to their employees) or the State Health Plan must repeal an equivalent number of existing “health insurance mandates.” Advocates for the bill have explained that government insurance mandates – which can include things like requirements that insurance plans cover certain types of treatments or drugs, requirements for cost-sharing mechanisms, and pre-approval requirements – can increase the costs of health insurance plans across the marketplace.

Nonprofits consistently report to the Center that the cost of providing high quality health coverage to employees is one of their most significant operational challenges. Potentially, this legislation could lead to policy changes that could lower health insurance costs for nonprofits and other employers. The bill now goes to the House for consideration.

New U.S. Senate Bill Aimed at Increasing Charitable Giving

Two weeks ago, the Charitable Act was re-introduced in the U.S. Senate. This bipartisan bill would encourage all Americans to support the work of charitable nonprofits by establishing a non-itemized (above-the-line) deduction up to roughly $4,500 for individuals and $9,000 for married couples. The Center supports the Charitable Act because it would help offset recent challenges nonprofits have experienced with reductions in individual giving. Two years ago, Senator Ted Budd (R-NC) and Congresswoman Deborah Ross (D-NC) were cosponsors of identical legislation.

Two New Bills Would Expand Property Tax Exemption in North Carolina

Many charitable nonprofits that operate in North Carolina and own their property are exempt from paying property tax to their counties and municipalities if their land and buildings are used “wholly and exclusively” for their nonprofit purposes. A pair of bills filed in the NC House of Representatives this week would expand property tax in North Carolina:

• One bill (H.B. 100) that was filed on Tuesday would allow houses of worship and related faith-based organizations to obtain property tax exemption for undeveloped land for up to five years if they plan to use the land for religious purposes.
• Another bill (H.B. 115) would provide for property tax exemption for buildings and land owned and used by licensed child care providers. Many nonprofit child care providers already should be exempt from property tax under existing law, but this bill would provide greater certainty that these nonprofits are eligible for property tax exemption and also would extend property tax exemption to some for-profit child care centers.

NC House Bill Would Establish New Rules for Voter Registration Drives

A bill (H.B. 127) filed in the NC House of Representatives yesterday would create new rules for nonprofits (and other entities) operating nonpartisan voter registration drives in North Carolina. The bill would prohibit organizations from using actual voter registration application forms during voter registration drives. Instead, it would require the NC State Board of Elections to create a sample voter registration form with information about registering to vote that organizations could distribute during voter registration drives. Organizations seeking to sponsor or conduct voter registration drives also would need to register with their county boards of election and provide a variety of information about their nonprofit’s structure and their plans for a voter registration drive.

NC House Bill Would Create New Retirement Program that Could Help Some Nonprofit Workers

A bill (H.B. 79) filed in the NC House of Representatives on Tuesday would create the NC Work and Save Program, which would offer a retirement savings plan for workers at nonprofits and small businesses that don’t offer their own retirement plans. The NC Work and Save Program would allow workers to make direct contributions from their payrolls to individual retirement accounts (IRAs) and would simplify and reduce costs for employees to contribute to IRAs. The Center has supported similar legislation in the past because it would help more nonprofit employees save for retirement.

NC House Bill Would Limit Attorney General’s Ability to Challenge Presidential Executive Orders

A bill (H.B. 72) filed in the NC House of Representatives on Tuesday would prohibit the NC Attorney General from participating in litigation challenging an Executive Order issued by the President. The bill would not likely prevent NC Attorney General Jeff Jackson from continuing to be a plaintiff in the lawsuit challenging the OMB funding freeze (see the first item in today’s policy update for more details). However, it could prevent him and future attorneys general from joining in other lawsuits challenging presidential actions that could have adverse impacts on North Carolina nonprofits and the communities they serve. The House Committee on Federal Relations and American Indian Affairs is scheduled to hold a hearing on the bill next Wednesday. An identical bill (S.58) was filed in the NC Senate last week.

Several Other New State Bills Would Affect Some Nonprofits

Dozens of new bills were introduced in the NC Senate and NC House of Representatives this week. Several of these bills could affect the operations, missions, programs, and services of some nonprofits. These include:

• A House bill (H.B. 113) to create a joint legislative committee to explore Medicaid sustainability in North Carolina. This could be particularly important if Congress makes changes to the federal Medicaid payment structure that reduces the federal funding that states receive for Medicaid and other healthcare programs.
• A House bill (H.B. 85) that prohibits people from doing election-related work (including volunteer work) if they have been found to have not exercised due care and diligence in previous election-related work.
• A House bill (H.B. 78) that would prohibit local law enforcement officials from participating in immigration enforcement activities in houses of worship, hospitals, and elementary and secondary schools. 
• A House bill (H.B. 89) that would end vaccination requirements for students attending colleges or universities in North Carolina.
• A Senate bill (S.77) that would give parents the option of having their children use outside nurses (potentially including nurses who work for nonprofits) in schools if their children have individualized education programs. 
• A Senate bill (S.92) that would allow public school students to attend classes on religious moral instruction, some of which could be offered by nonprofits, during the school day. 
• A Senate bill (S.81) to have North Carolina use Daylight Savings Time throughout the year if authorized by Congress.
• Legislation to establish an official state cookie (H.B. 124), an official state star (H.B. 125), and an official state fried apple festival (S.78).

The Center has not taken a position on any of these bills.

Nonprofit Policy Update is the 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 agenda or contact David Heinen, Vice President for Public Policy and Advocacy, for more information.

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