Yesterday, leaders in the NC Senate and the NC House of Representatives announced that they have agreed on a deal to enact Medicaid expansion in North Carolina. Medicaid expansion, which has been a major policy priority for the Center and hundreds of other nonprofits for more than a decade, will provide health coverage for about 600,000 North Carolinians in the health coverage gap who have incomes too high to qualify for Medicaid but too low to receive health care subsidies under the Affordable Care Act marketplace. 

Last month, the House passed Medicaid expansion legislation (H.B. 76), but the Senate didn’t immediately take it up because Senate leadership wanted to couple Medicaid expansion with changes to the state’s Certificate of Need (CON) laws that limit the ability of health care providers to offer a variety of health-related services. Hospitals and health systems – many of which are 501(c)(3) nonprofits – have been concerned that major changes to CON laws could significantly reduce their revenue, potentially causing some hospitals to close. As part of the Medicaid expansion deal, legislators agreed to make some changes to CON laws without fully repealing them.

The Medicaid expansion bill will enable North Carolina to participate in the Healthcare Access and Stabilization Program (HASP), a federal program that will help provide better financial stability for many nonprofit hospitals. The bill also will develop a program to improve access to workforce development services for North Carolinians enrolled in the state’s Medicaid programs. While final language has not yet been made available to the public, legislative leaders have indicated that Medicaid expansion will take effect once the Senate and House pass final versions of the legislation and the state budget for FY 2023-24 has been enacted.

As we explained in a Care4Carolina blog post last summer, the Center strongly supports Medicaid expansion because it would support the work of charitable nonprofits by:

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.

Thank you to the many nonprofit leaders who have advocated for Medicaid expansion over the years.

A bill that was introduced in the NC Senate (S.174) and NC House of Representatives (H.B. 228) this week would enable nonprofits to offer up to six tax-exempt annual sales events per year. Under existing law, nonprofits are exempt from collecting and remitting sales tax on a fundraising sales event (e.g., Girl Scout cookie sales) that it held on an annual basis where all sales take place within a 60-day period. The new legislation, which is part of a larger bill making changes to various state tax laws, would permit nonprofits to offer up to six of these tax-exempt sales events per year as long as:

1. The events don’t overlap with one another;
2. The nonprofit sells different products during each sales event; and 
3. Each event funds a distinct project from the other annual sales periods occurring during the year. 

The Center supports this change, which would expand tax-exempt fundraising opportunities for nonprofits.

Two other provisions in the tax legislation could affect some nonprofits:

1. One provision would enable any representative of a nonprofit to request a quarterly refund of motor fuel tax paid by the nonprofit. Under current law, only the nonprofit’s chief executive officer may make this request on behalf of the organization.
2. Another provision would clarify that marketplace facilitators like Amazon.com or eBay.com don’t need to remit sales tax to the state if sellers on their platforms have already remitted sales tax on the same transactions. This proposed change is a good reminder to nonprofits that sell products through third party websites that the marketplace facilitators, not the nonprofits themselves, are now responsible for collecting and remitting sales tax.

The Senate Finance Committee approved S.174 on Wednesday.

On Wednesday, a bipartisan group of U.S. Senators introduced the Charitable Act (S.566), which 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. In advance of the bill filing, the Center signed on to national letters of support for the Charitable Act from the National Council of Nonprofits and the Charitable Giving Coalition. We will keep you posted if the Charitable Act has any chances of advancing in Congress and when there are opportunities for your nonprofit to take action to support this legislation.

Over the past year (and the past decade), the Center has heard from MANY nonprofits about challenges they are experiencing with government grants and contracts. We are working with state agencies and state legislators to try to identify ways to strengthen the contractual partnerships between state government and nonprofits. With the 2023 legislative session underway and many nonprofits in the middle of their FY 2022-23 contracts with the state, the Center is seeking input to help identify policy solutions that could strengthen nonprofit-government contracting. If your nonprofit has state grants or contracts, please take a few minutes to complete a brief survey on the challenges your nonprofit is experiencing, your positive experiences with state agencies, and potential policy solutions. If it’s easier, you can share your input with us by email. Thank you if you have recently shared your input with us!

This year, state lawmakers could revisit legislation intended to protect donor privacy after Governor Roy Cooper vetoed a donor privacy bill (S.636) in 2021. Legislators are asking the Center what, if any, donor privacy legislation nonprofits would like to see this year. In some states, legislation branded as “donor privacy” protections have been used to limit the ability of state officials to regulate potential inappropriate activities by nonprofits, including 501(c)(4) social welfare organizations that make partisan political contributions. Under existing federal law, donor information in Schedule B of the Form 990 is already shielded from the public. Let us know if your nonprofit is concerned about donor privacy, and whether your organization is interested in, or would be opposed to, donor privacy legislation in North Carolina. 

Note: As part of the Center’s 2023 public policy agenda, the Center supports policies that ensure that personal information about individual donors to 501(c)(3) nonprofits remains protected from public disclosure while also ensuring that state agencies that regulate 501(c)(3) nonprofits and other tax-exempt organizations have access to information they need to protect the public and the integrity of the nonprofit sector by providing oversight of nonprofits.

On Tuesday, the NC Senate Agriculture, Energy, and Environment Committee approved a bill (S.58) that would create new criminal penalties for anyone who knowingly and willfully damages or destroys energy facilities and other utility infrastructure in the state. The legislation was filed in response to an incident two months ago that left most of Moore County without power for several days. That incident created hardships for nonprofits that had to provide increased services to the community while the organizations themselves were without power. Two more Senate committees would need to approve the bill before it goes to the full Senate for a vote.

Thousands of North Carolina nonprofit employees had their student debt forgiven in 2022 through the Public Service Loan Forgiveness (PSLF) program. If you received PSLF loan forgiveness last year and are in the process of filing your income tax forms for 2022, don’t forget that you do not need to pay federal or state taxes on the amount of your loan forgiveness under PSLF. The Center prepared an analysis last fall explaining why PSLF loan forgiveness is not taxable for state income tax purposes. The NC Department of Revenue recently confirmed this analysis in the footnote of a tax notice on state taxability of loan forgiveness (see footnote 8).

The NC Department of Justice recently issued an alert warning student loan borrowers, including nonprofit employees who are using the PSLF program, to be wary of potential scams. The PSLF program helps make nonprofit careers sustainable for many workers with college debt. The Department noted that various recent changes to PSLF and other federal loan forgiveness programs increase the likelihood of scams.

Separately, two bills (S.194 and S.196) were filed in the NC Senate yesterday to create several new protections for student borrowers and add new regulation for student lenders. This could help more North Carolinians – including many nonprofit workers – access PSLF.

A bill (S.167) filed in the NC Senate on Monday would amend the State Fair Housing Act to make it illegal to discriminate on the basis of “source of income,” including housing assistance from a nonprofit or government program. This change could make it easier for people receiving housing assistance from nonprofits to rent or purchase homes.

A bill (H.B. 209) introduced in the NC House of Representatives this week would prohibit retail businesses, state agencies, and local governments from imposing extra charges for payments by credit card or debit card. The legislation could affect nonprofits that sell products and services; it also could help prevent nonprofits from having to pay surcharges. A separate House bill (H.B. 20) filed earlier in the session would require retailers to accept cash payments and would prohibit retailers from charging customers more to pay in cash than to pay with a credit or debit card.

On Wednesday, the NC House of Representatives approved a bill (H.B. 11) that would create independent boards for three state schools for individuals with disabilities. One provision in the bill would enable the schools to create independent nonprofits to raise private funds to support their operations. Unfortunately, the bill requires that these nonprofits “shall not engage in partisan political activity or policy advocacy.” While the prohibition on partisan political activity makes sense and is the same limitation that is in place for any 501(c)(3), the limitation on “policy advocacy” may be problematic for nonprofits established to support these schools. Because “policy advocacy” is a very broad term, this limitation could prevent nonprofits formed by these schools from engaging in many forms of legal and legitimate policy advocacy such as educating the public about policy issues and advocating with local governments on matters affecting their organizations’ operations or the people they serve.

Governor Roy Cooper vetoed a similar bill (S.593) that was introduced and quickly passed near the end of last year’s legislative session. At the time, the Center explained to legislators and the Governor’s staff that the bill could set a troublesome precedent by limiting the ability of a few 501(c)(3) nonprofits to engage in policy advocacy. The Center will continue to work with legislators to educate them that 501(c)(3) nonprofits can – and often should – legally engage in policy advocacy and to ensure that future legislation doesn’t set unreasonable limits on some nonprofits’ advocacy.

The language in the bill tracks a similar (and similarly problematic) provision in state law that prohibits nonprofits formed by local school systems from engaging in “partisan political activity” or “policy advocacy.” The Center is trying to learn whether any nonprofits have been created under the existing law and, if so, how the law has limited those organizations’ advocacy efforts. Let us know if your nonprofit was created to support a local school system or if you know of any nonprofits in your area that were created by school systems.

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