Coming This October: Major Improvements to Federal Rules for Nonprofit Grants

Last week, the federal Office of Management and Budget (OMB) released its major rewrite of the Uniform Guidance, the set of common rules governing most federal grantmaking to charitable nonprofits. The reforms correct longstanding challenges in the government grants process that have limited nonprofit effectiveness, discouraged qualified organizations from seeking and performing under federal grants, and wasted billions of dollars and countless hours in needlessly complex application and reporting requirements. Of particular note, the revised Guidance raises the de minimis indirect cost rate that governments using federal funds must pay to every grantee to 15% (up from 10%), removes multiple barriers to accessing federal grant funding, mandates streamlining and simplifying of Notices of Funding Opportunities (requests for proposals), and raises the Single Audit threshold to $1 million (from $750,000). The changes go into effect on October 1, 2024. For more details, check out the helpful new resource from the National Council of Nonprofits highlighting the key provisions affecting charitable nonprofits working with governments at all levels.

Coming in Less Than Two Weeks: Legislators Set to Begin 2024 Short Session

Earlier this week, the NC General Assembly held a two-day, non-voting session. The real legislative action for the year will begin in less than two weeks when the NC General Assembly will return to Raleigh on Wednesday, April 24 to begin its 2024 short session. Legislators’ main priority for the short session will be to make adjustments to the state budget for FY2024-25. While the amount of available revenue won’t be known for certain until later this month (once most individuals have filed their 2023 income tax returns), there is a good chance that the state will have a small revenue surplus. Legislators could use extra revenue for a variety of purposes, including:

1. Easing the “child care cliff” that is expected when temporary expanded federal funding for child care ends on July 1. Without significant additional state funding this year, the current shortage of affordable, accessible, high-quality child care – which affects nonprofits as both employers and service providers – could get much worse.
2. Providing more earmarked appropriations to nonprofits and local governments. Typically, earmarks in the budget go primarily to nonprofits in influential legislators’ districts and don’t have an application process. Last year’s state budget included more than $1.5 million in direct appropriations to more than 600 nonprofits. 
3. Accelerating state income tax rate cuts that are already scheduled to reduce the tax rate from 4.75% this year to 2.49% by the end of the decade. Further tax rate cuts could ultimately lead to budget cuts for nonprofits later this decade and into the 2030s. 
4. Providing additional funding for the Opportunity Scholarship program, which provides vouchers that families can use to cover tuition to (mostly nonprofit) private schools. Nearly 72,000 families applied for the significantly expanded voucher program this year, and thousands are expected to be on the waiting list unless legislators provide more funding for scholarships for the 2024-25 school year.  

During the short session, legislators also can take action on a variety of other bills that passed either the House or Senate in 2023 or that affect state taxes or spending. Among the bills eligible for consideration are legislation to exempt nonprofits from paying sales tax on their purchases and to modernize the NC Nonprofit Corporation Act. In a recent NC Health News story, two influential legislators suggested they are considering changes to laws related to hospitals’ property tax exemption and sales tax refunds. Legislation affecting nonprofit hospitals could ultimately have implications for all 501(c)(3) nonprofits. And legislators could revisit other legislation affecting nonprofits this spring, such as a 2022 bill (that was ultimately vetoed) that would have created a controversial donor privacy law in North Carolina.

The Center will continue to advocate on nonprofits’ behalf on these and other issues, and we will keep you posted with any developments and/or opportunities for your nonprofit to take action.

Coming Soon? Final DOL Overtime Rule Could Be Published This Month

On Wednesday, the White House Office of Management and Budget (OMB) completed its review of the U.S. Department of Labor’s (DOL) final rule on the salary threshold for overtime pay under the Fair Labor Standards Act (FLSA). The OMB review is typically the final step before a new federal rule is published to the Federal Register. That means that the final rule could be published soon (perhaps in the next few weeks) and could take effect this summer, although its implementation may (or may not) be delayed by expected court challenges. 

Under FLSA, employers, including nonprofits, must pay employees one-and-one-half times their regular rate of pay for all time worked in excess of 40 hours in any work week. However, workers are exempt from this overtime pay requirement if they:

1. Are paid at least the minimum salary level under DOL regulations (currently set at $684 per week or $35,568 per year);
2. Are paid on a salary basis; and
3. Exercise job duties that are classified as exempt under FLSA (which means administrative, executive, or professional job duties for most nonprofit positions).

Last fall, DOL issued a proposed rule that would raise the salary threshold for exempt employees to $1,059 per week or $55,068 per year. A footnote in the proposed rules suggested that the final rule could set the salary threshold above $60,000 per year. The Center submitted comments on DOL’s proposed overtime rule in November noting that it will likely have a disproportionate impact on North Carolina nonprofits. The Center also prepared an analysis of the proposed regulations and their potential impact on nonprofit organizations, concluding with 15 compliance options and eight next steps for nonprofits to consider while we wait for a final rule from DOL.

Once the final rule is published, the Center will share additional analysis, including compliance options for nonprofits, and offer a webinar to answer nonprofits’ questions about the rule.

Federal Tax Court Case Could Fundamentally Alter (for the Worse) Rules for 501(c)(3) Nonprofits

Last month, a Louisiana nonprofit filed a lawsuit in the U.S. Tax Court seeking a ruling that the provisions in Section 501(c)(3) of the Internal Revenue Code prohibiting charitable nonprofits from engaging in partisan electioneering activities (known as the “Johnson Amendment”) and limiting the lobbying activities of charitable nonprofits are unconstitutional. The organization applied for tax-exemption last year and noted in its Form 1023 application for exemption that its activities would include endorsement of candidates for office and substantial lobbying (more than would be permissible under Section 501(c)(3) of the Internal Revenue Code). Because its application for tax-exemption is still pending with the Internal Revenue Service, the nonprofit is asking the court to grant it 501(c)(3) status.

Regardless of the decision of the U.S. Tax Court, it is quite possible that this case could be appealed through the federal court system to the U.S. Supreme Court. As the Center has explained in the past, a court ruling invalidating the Johnson Amendment could have devastating effects for nearly every 501(c)(3) nonprofit, including reduced funding, allowing politicians to exert their influence over charitable nonprofits, jeopardizing nonprofits’ reputations in their communities, and forcing many charitable nonprofits to prioritize partisan politics over their missions in election years. The Center will keep you posted as the case moves through the federal court system and let you know if there are any ways your nonprofits can take action to help preserve this essential provision in Section 501(c)(3) of the Internal Revenue Code.

Register for Nonprofit Policy Conversations (Including Newly Scheduled One in Greenville)

This spring, the Center is hosting a series of Nonprofit Policy Conversations around the state to bring together nonprofit leaders and local elected officials (mostly 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 nonprofit sector trends and potential public policy solutions and challenges for nonprofits in 2024 and beyond. Register now for Conversations scheduled for:

• Monday, April 15 from 10:00 a.m.-12:00 noon at Cumberland Community Foundation in Fayetteville in partnership with Cumberland Community Foundation
• Friday, April 19 from 1:00-3:00 p.m. at UNCW Truist Hall in Wilmington in partnership with QENO
• Friday, April 26 from 10:00 a.m.-12:00 noon at Triangle Community Foundation in Research Triangle Park. Note: Space is limited; register soon.
• Friday, May 17 from 1:30-3:30 p.m. at Pitt County Council on Aging in Greenville in partnership with Heart for ENC
• Monday, May 20 from 10:00 a.m.-12:00 noon at Foundation For The Carolinas in Charlotte

More Than 400,000 North Carolinians Have Health Coverage Through Medicaid Expansion

According to the NC Department of Health and Human Services (DHHS), more than 400,000 North Carolinians have now enrolled in health care through Medicaid expansion since it became available in December, with about 1,000 more people enrolling every day. DHHS estimates that more than 200,000 additional North Carolinians may be eligible for coverage under Medicaid expansion. Almost all potential Medicaid expansion enrollees receive services from nonprofits, so it is important for nonprofit organizations to spread the word about Medicaid expansion eligibility and the application process. 

The DHHS website includes basic information on eligibility for Medicaid coverage, details of costs and coverage, and free materials to help nonprofits provide clear and accurate information about Medicaid and Medicaid expansion to their clients and communities. Please share this information widely, especially with clients who may now be eligible to apply.

Biden Administration Proposes Additional Student Debt Relief

On Monday, the U.S. Department of Education announced plans for student debt relief for millions of Americans. The plans include:

1. Debt relief for borrowers with long-term student debt (including those who have been paying off their undergraduate debt for 20 years or more and those who have been paying off graduate school debt for 25 years or more);
2. Waiver of much of the interest payments on student debt for low and moderate income borrowers; and 
3. Debt cancellation for “borrowers experiencing hardship in their daily lives that prevent them from fully paying back their loans now or in the future.”

The newly announced student debt relief plan is the Biden Administration’s second attempt at providing cancellation of student loans. Last year, the U.S. Supreme Court struck down the Administration’s broader student debt cancellation plan. The new plan is narrower in scope than the previous debt cancellation proposal, but it is still likely to be challenged in court once final details are released later this year.

The new student debt relief plan is in addition to the improvements that the Department has made to the administration of the Public Service Loan Forgiveness (PSLF) program, which provides student loan forgiveness for borrowers who work in public services jobs – including positions with 501(c)(3) nonprofits – for 10 years while making payments on their student debt. Last month, the Department announced that it has approved $5.8 billion in student loan relief for nearly 77,000 public service workers through PSLF. Over the past three years, the Education Department has provided student loan relief through PSLF to more than 871,000 employees in nonprofit and government jobs, compared to only about 7,000 borrowers from 2017-2020.

First Quarter Lobbying Reports Due April 19

Nonprofits that are registered as lobbyist principals (and their staff or contractors who were registered as lobbyists) must file their first quarterly reports of 2024 with the Secretary of State Lobbying Compliance Division by April 19. All reports must be filed electronically. To help your organization understand the basics of state lobbying laws affecting nonprofits, check out the Center's summary of NC lobbying laws for nonprofits.

Bipartisan Data Privacy Bill Unveiled

Last weekend, chairs of the U.S. House of Representatives and U.S. Senate commerce committees announced bipartisan legislation to create a national data privacy standard. The American Privacy Rights Act would require many businesses and organizations to be transparent about how they use consumer data and give consumers the right to access, correct, delete, and export their data, as well as opt out of targeted advertising and data transfers. The legislation would expressly exempt nonprofits and small businesses with annual gross revenues of $40 million or less that do not annually collect data from more than 200,000 individuals and do not sell covered data to third parties. For more details, see the bill summary.

Current Center Member? Access your benefits or create your account.

Not a Center Member? Join now.

If a colleague forwarded this message to you, sign up for our emails.

Nonprofit Policy Update is 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.

©2024 North Carolina Center for Nonprofits