A bipartisan bill (S.397) filed on Wednesday in the NC Senate would exempt most 501(c)(3) nonprofits from paying sales tax on their purchases. Under existing law, nonprofits must pay sales tax when the buy goods and services, but they can apply for semi-annual refunds from the NC Department of Revenue. The Center has advocated for this bill to be filed based on feedback we have received from hundreds of nonprofits that the current sales tax refund system is a financial and administrative burden for nonprofit organizations.

The bill also would clarify that nonprofits are not required to collect and remit sales tax on the ticket prices of fundraising events where entertainment is provided. Current law is unclear on whether nonprofits need to charge sales tax on the ticket prices to these events, and several nonprofits have told the Center that they have lost fundraising revenue because of this ambiguity in the law.

The Center appreciates Senator Jim Burgin (R-Harnett) for filing the bill and Senators Mike Woodard (D-Durham), Ted Alexander (R-Cleveland), Julie Mayfield (D-Buncombe), Gladys Robinson (D-Guilford), Tim Moffitt (R-Henderson), and Gale Adcock (D-Wake) for joining as co-sponsors. We’ll keep you posted when there are opportunities for your nonprofit to advocate for nonprofit sales tax exemption.

A bipartisan bill (S.449) filed in the NC Senate yesterday 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. The Center has advocated for this bill to be filed based on input from many nonprofits across the state. The Center appreciates Senators Mike Woodard (D-Durham) and Ted Alexander (R-Cleveland) for filing this important bill.

A bipartisan bill (S.429) filed in the NC Senate yesterday would make four important reforms to the state charitable solicitation licensing statute: 

• Making 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 Forms 990 have not yet been completed.
• Exempting 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 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.
• Eliminating 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. During the COVID-19 pandemic, many nonprofits have found it difficult to have documents notarized.
• Counting 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 Center has advocated for this bill to be filed based on input from many nonprofits and from attorneys and CPAs who work with nonprofit organizations. The Center appreciates Senators Tim Moffitt (R-Henderson), Mike Woodard (D-Durham), and Ted Alexander (R-Cleveland) for filing this bill.

Yesterday, the NC House of Representatives Appropriations Committee approved its version of the state budget for FY2023-25 (H.B. 259). The proposed House budget would approve $29.7 billion in total state spending in FY2023-24 and $30.8 billion in FY 2024-25. The House budget proposal includes a variety of appropriations and provisions that could affect nonprofits, including:

• A provision that would require state agencies to make prompt payments to nonprofits receiving direct grants (i.e., one-time appropriations) in the budget and to make advance payments rather than reimbursement payments to most of these organizations. While the Center has asked legislators to apply these prompt payment and advance payment provisions to all nonprofits with state grants and contracts, the House provision is a positive step forward in contracting reform. 
• A provision increasing the cap on the amount of state funds a nonprofit can use to pay any individual employee’s salary from $120,000 to $140,000. The Center asked for this change to help nonprofits by adjusting the state funding salary cap for inflation. The current $120,000 cap has been in place since 2015. The Center appreciates Rep. Larry Potts (R-Davidson) for proposing the unanimously-approved amendment to make this change. Note that nothing in the budget or other state law prohibits nonprofits with state grants and contracts from paying salaries of more than $120,000 per year to any of their employees, as long as any amount above $120,000 is funded by other revenue sources like individual donations, foundation grants, or fees for services. 
• Directed grants for a wide variety of specific nonprofits across the state. The Center plans to provide a more thorough analysis of directed grants in the House budget next week.
• Increased funding for scholarships to nonprofit private K-12 schools and nonprofit private colleges and universities.
• $5.5 million per year ($11 million over the biennium) in one-time funding for free and charitable clinics.
• $3.75 million in one-time funding for Boys and Girls Clubs.
• $1.8 million in one-time funding for hospice and palliative care nonprofits.
• $176 million per year in recurring funding to raise wages of some direct care workers, including many nonprofit employees.
• $14.7 million per year in recurring funding for federally-qualified health centers.
• $3.5 million per year in increased funding for grassroots arts grants.
• Reinstatement of the conservation tax credit that helps support the work of many land conservation nonprofits.
• Creation of a new refundable tax credit for families that adopt children.
• Changes to state sales tax laws applicable to (mostly nonprofit) continuing care retirement communities.
• Several changes to income tax and franchise tax laws, including a reduction of the individual income tax rate in 2025 from 4.6% to 4.5% and increases to the standard deduction and the child tax deduction and significant reductions in the franchise tax rate (which businesses pay but from which nonprofits are exempt). Overall, these tax law changes are projected to reduce state revenue by more than $200 million per year.

The House has posted the bill text (415 pages) and money report (639 pages) for the budget on the General Assembly’s website. Nonprofits with interest in particular budget items may want to do word searches in both documents for the appropriations and/or provisions of interest to their organizations.

Two more House committees will consider the budget early next week, and the full House is expected to vote on (and pass) the budget by next Thursday. Once the House approves its budget, the Senate will get started on its own version. The Senate plans to pass the budget in May, 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.

On Monday, Governor Roy Cooper signed into law a bill (H.B. 76) that 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. Medicaid expansion will begin in North Carolina after the federal government approves North Carolina’s Medicaid expansion plan and a state budget for FY 2023-24 is in place.

Medicaid expansion has been a major policy priority for the Center and hundreds of other nonprofits for more than a decade. 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.

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 really 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 Tuesday, the NC House Health Committee discussed a bill (H.B. 346) that would allow the state’s two hospital service corporations – BlueCross BlueShield of North Carolina and Delta Dental Plans Association – to create “nonprofit holding corporations” to restructure some of their assets. Under existing law, hospital service corporations are regulated by the NC Department of Insurance, and these entities need state approval for many types of transactions. This legislation would enable hospital service corporations to move some or all of their operations to other nonprofits that are not regulated by the NC Department of Insurance.

In 1998, the Center worked with a large coalition of nonprofits to help ensure that if a nonprofit health insurer were to convert to a for-profit that its assets would remain in the public trust by being transferred to a charitable foundation. The Center is working with the sponsors of this year’s legislation to ensure that the bill preserves this important protection for nonprofit assets.

Over the past few years, the NC General Assembly has added security checks, including metal detectors, for all members of the public who enter the Legislative Building and Legislative Office Building. Legislators and legislative staff receive passes that enable them to use separate entrances and bypass security checkpoints. On days when multiple organizations have large advocacy days – such as the past two Wednesdays – the security lines can get long, and it can be difficult for lobbyists and other nonprofit advocates to get between the two buildings. Last week, a bill (H.B. 467) was introduced in the NC House of Representatives that would create “fast passes” that registered lobbyists – including many nonprofit employees and contractors – could purchase to bypass the security checkpoints. The bill would allow the Legislative Services Commission to set the price for lobbyist fast passes at an amount up to $500.

The Center has heard from some nonprofits with lobbyists that are supportive of the proposed lobbyist fast passes. We also have heard from other organizations that the $500 fee could be a burden for some nonprofits and could give businesses or large organizations advantages over small nonprofits in their lobbying efforts by creating inequities in access to the Legislative Building and Legislative Office Building. The current version of the bill does not provide a discounted fee or a fee exemption for lobbyists who work for charitable nonprofits, but the Center may work with legislators to create a nonprofit discount or fee exemption if there is sufficient interest among nonprofits that lobby. If your nonprofit has a registered lobbyist (or even if you don’t), let us know whether you support or oppose the idea of legislative fast passes and whether you would be interested in the Center pursuing a nonprofit discount or fee exemption.

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 – particularly the 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. 

This week, 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 in advance for taking time to complete the survey.

This winter and spring, the Center has hosted a series of Nonprofit Policy Conversations around the state to bring together nonprofit leaders and state legislators to discuss public policy issues that are important to charitable nonprofits and the people and communities they serve. At each Conversation, the Center provides a briefing on 2023 state legislative priorities, nonprofit sector trends, and potential public policy solutions and challenges for nonprofits in 2023 and beyond. The Conversations also include discussions about state and federal public policy issues affecting local nonprofits.

The Center had originally scheduled one of these policy conversations in Kannapolis last month for nonprofits and legislators from Cabarrus and Rowan counties. We had to cancel that event, but we have rescheduled it for Friday, April 21 from 1-3 p.m. Registration is now open. While we request a registration fee in support of these events, please let us know if this is a barrier as we can assist if asked.

In a national survey on the nonprofit workforce shortage from late 2021, nonprofits identified lack of access to affordable, high-quality child care as the second biggest factor for nonprofits being unable to fully fill staff vacancies. Because child care is a sector wide issue, the Center has included investment in accessible and affordable child care as part of our 2023 legislative agenda. The Center supports several legislative proposals being considered this year to expand state investment in affordable, accessible, high quality child care and early education programs. 

One opportunity for nonprofits to advocate for increased state investment in child care is by participating in the Child Care for NC – United for Change advocacy day at the General Assembly on April 20. Registration is open for this advocacy day, and the NC Early Education Coalition has developed an advocacy toolkit on child care issues at the NC General Assembly.

A bill (H.B. 496) filed in the NC House of Representatives on Tuesday would create a new state-run retirement program for workers at small businesses and nonprofits that do not offer employer-provided retirement benefits. The NC Work and Save Program would make it easier for many nonprofit employees to understand the need for planning for retirement, to create individual retirement accounts (IRAs), to plan for retirement savings, and to make regular contributions to their IRAs. This proposal could help many small nonprofits offer retirement benefits to their staff for the first time.

A bipartisan bill (S.394) filed in the NC Senate on Wednesday would create a legislative commission to look into several structural reforms for the NC General Assembly, including term limits for legislators, limits to the length of legislative sessions, and increased compensation for legislators. Potentially, reforms to the legislative process could help increase the ability of nonprofits to advocate effectively for their missions. For example, limits on the length of the legislative session (which are included in most state constitutions but not in North Carolina’s) could add some predictability to the legislative schedule for each year, enabling nonprofit advocates to make better plans for how to allocate their (often limited) advocacy capacity. And increases to legislators’ pay could remove financial barriers that prevent many nonprofit staff, volunteers, and clients from considering running for office.

Earlier this month, North Carolinians set their clocks forward an hour to adjust for the beginning of Daylight Savings Time. A bill (S.392) filed yesterday in the NC Senate would eliminate the need to “spring forward” every March (and to “fall back” each November) by adopting Daylight Savings Time year-round in North Carolina if Congress authorizes the state to do so. An identical bill (H.B. 326) was filed in the House earlier this month. You may be asking: Why does this proposed legislation matter for nonprofits? The answer is that it may increase charitable giving. A recent research report found that charitable contributions are 10% lower than normal during the first week of Daylight Savings Time in March but that there is no corresponding increase in giving during the first week of Standard Time in November.

A bill (S.406) filed in the NC Senate on Wednesday would significantly expand the Opportunity Scholarship program, which provides financial assistance to private school families. Currently, the Opportunity Scholarship program is only available for families that meet income and other eligibility criteria. The Senate bill would make all private school families eligible for the program. A separate House bill (H.B. 420) was filed last week to increase the availability of state financial assistance to students in private K-12 schools. For nonprofit private schools, these proposals could help increase student diversity and raise revenue without increasing tuition rates.

Four bills filed in the NC General Assembly this week would make significant changes to state employment laws affecting nonprofits and employers and service providers:

1. One Senate bill (S.440) would raise the minimum wage in North Carolina from the federal minimum wage of $7.25 per hour to $15 per hour.
2. A second Senate bill (S.447) would raise the minimum wage in North Carolina to $10.35 per hour in 2024 and to $15 per hour in 2025. The bill also would index the minimum wage for cost of living increases each year. It also would eliminate several state laws that exempt certain types of individuals – including people with disabilities, tipped workers, and agricultural, domestic, and incarcerated workers.
3. A third Senate bill (S.418) would create a statewide paid family and medical leave insurance program. Under this proposal, employers – including nonprofits – would make payments into the family and medical leave insurance program so their employees could receive paid leave when they are experiencing health issues or are caring for family members in need.
4. A House bill (H.B. 541) would make a wide range of changes to state employment laws, including gradually raising the minimum wage to $15 per hour over the next five years, requiring employers to provide paid family and medical leave, and increasing unemployment benefits. It also would restore the state earned income tax credit and the state tax credits for child and dependent care expenses. 

All four bills have only Democratic sponsors and are unlikely to be considered this session.

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 April 24. To help you understand the basics of state lobbying laws affecting nonprofits, check out the Center's summary of NC lobbying laws for nonprofits.