August 13, 2021
In this issue...
NC House of Representatives approves state budget with $700 million in new nonprofit funding
Free webinar to learn about local government ARP funding for nonprofits
State legislative committees set criteria for redistricting process
Reminder: Share impact of pandemic on your nonprofit
U.S. Senate approves bipartisan infrastructure bill 
U.S. Senate approves $3.5 trillion budget resolution
New IRS guidance could make more nonprofits eligible for employee retention tax credit
Center offers tips as nonprofits consider COVID-19 vaccination requirements for employees
Coalition asks U.S. Department of Labor to provide nonprofit jobs data
General Assembly approves bill that would create penalties for nonprofits that ignore state audits
NC House of Representatives Approves State Budget with $700 Million in New Nonprofit Funding
Yesterday, the NC House of Representatives approved its version of the state budget for FY2021-23 (S.105). The House budget includes more than $700 million in new funding for nonprofits, including $411 in additional support for nonprofits’ operations, programs, and services, and $289 million for capital projects (mostly new or renovated buildings) at nonprofits.

To help your nonprofit understand the budget (without having to read through all 1,397 pages of the House budget), the Center has prepared a chart comparing various appropriations and provisions affecting nonprofits in the House-approved budget and the Senate-approved version. (Let us know if you spot other nonprofit provisions or appropriations that we missed in the chart.) The Senate budget, which passed in June, included much less new funding for nonprofits (a total of about $360 million).

A few key differences in the House and Senate budgets include:
  • The House budget would reduce the state’s individual tax rate (from 5.25% to 4.99%) and corporate income tax rate (from 2.25% to 1.99%) and increase the state standard deduction. While these tax cuts are smaller than those proposed in the Senate’s budget, they are still projected to reduce state revenue by $8.7 billion over the next five years. This would mean that less money would be available in the future for the state contracts, grants, and appropriations to nonprofits.
  • Unlike the Senate budget, the House version does not create an automatic grant program (JOBS grants) for nonprofits and businesses that received Paycheck Protection Program (PPP) loans or other federal COVID-19 support. Instead, the House budget provides businesses a tax deduction for the forgivable portion of their PPP loans. Nonprofits aren’t eligible for this tax deduction, so they would not receive any of the $660 million in business relief in the House proposal. The Center estimates that nonprofits would receive about $100 million in economic relief grants under the Senate’s JOBS grant program.
  • The House budget would require nonprofit donors who use the standard deduction to pay state taxes on the first $300 (for individuals) or $600 (for married couples) of their charitable contributions in 2021, even though these charitable contributions are deductible from federal income taxes. For itemizers, it also limits state charitable deductions to 60% of taxpayers’ adjusted gross income in 2021. These provisions would create tax penalties for charitable giving this year; neither of these charitable giving disincentives are included in the Senate budget.
  • The House budget includes about $22 million in increased funding (over two years) to arts nonprofits and about $16 million in new funding (over two years) for nonprofit museums. The Senate budget provided virtually no support for these organizations.
  • The House budget would create the North Carolina Work and Save program, a new state-run retirement program for workers at small businesses and nonprofits that don’t offer employer-provided retirement benefits. The Center supports the NC Work and Save program because it would make it easier for many nonprofit employees to save for retirement.
  • Unlike the Senate budget, the House version does not allow nonprofits and small businesses to offer exclusive provider benefit (EPO benefit) plans for their employees. EPO benefit plans are more affordable health insurance plans that allow participants to use a limited network of local health care providers. The Center supports this Senate provision because it could provide meaningful health coverage option (about 15%-20% lower than typical health plans) for some nonprofits.

The Senate is likely to formally reject the House version of the budget early next week. Then, the House and Senate will negotiate with each other and with Governor Roy Cooper on a final version of the state budget. Legislative leaders hope to have a final budget in place by the end of the month. The Center continues to advocate with legislators and the Governor’s Office to include favorable nonprofit provisions in the final version of the budget. Because the new state budget hasn’t been finalized, current state spending levels remain in effect for the beginning of the new fiscal year, meaning that state funding won’t be increased or revised to adapt to changing needs in the state.
Join a Free Webinar to Learn about Local Government ARP Funding for Nonprofits
Earlier this year, Congress passed the American Rescue Plan Act (ARP) to assist communities in their continued recovery from the COVID-19 pandemic. The ARP provided billions of dollars to the State of North Carolina and to local governments throughout the state. Local governments can use some of this funding to partner with nonprofits on programs and services to help communities and to provide relief to nonprofits that have suffered economic harm due to the pandemic.

To help nonprofits learn more about local ARP funding , the Center is offering a free webinar on Friday, September 3 at 10 a.m. In this webinar, you’ll learn more about how nonprofits can partner with state and local governments to make the best use of these ARP funds. First, the NC Pandemic Recovery Office will provide an overview of ARP funding in North Carolina, including the amount of funding available, permissible uses of funds, the process for distribution of funds, and the timing for allocation of funds by local governments. Then, the Center will provide an update on the NC General Assembly’s allocation of state ARP funds. Finally, the Center will offer insights into trends in nonprofits’ needs and ways that nonprofits can engage with their local governments to advocate for meaningful and equitable allocation of local ARP funds. Register today.
State Legislative Committees Set Criteria for Redistricting Process
This week, the NC General Assembly began its process of drawing congressional and state legislative districts for elections between 2022 and 2030. Yesterday, House and Senate redistricting committees approved the criteria they will use this year, including:
  • Equal Population. All congressional districts must have the same number of residents, and state legislative districts must have populations within 5% of the average district.
  • Geographic Considerations. All districts need to be contiguous (by more than a single point) and should be reasonably compact, voting precincts should be kept together, counties should generally be kept together in congressional districts, and legislators are required to comply with a variety of court orders in grouping counties together.
  • Impermissible Factors. Legislators may not use racial data or election results data in the redistricting process.
  • Incumbency Protections. Legislators can take the addresses of current members of Congress or the state legislature into account when drawing new districts.
  • Community considerations. Legislators are permitted to consider their knowledge of the character of particular communities or connections between communities when drawing maps.

The General Assembly will likely hold hearings and vote on final maps in October or November. In the meantime, you can share your input with legislators through an online public comment portal.

Yesterday afternoon, the U.S. Census Bureau released data that states will need for redistricting, including population in each Census block, racial and demographic data, and population totals for people living in group quarters like college housing and nursing homes. Legislators will use the new Census data to develop redistricting plans this fall. The new Census data shows that North Carolina’s urban counties – particularly Wake, Mecklenburg, and Guilford counties – had the greatest population growth over the last decade, while population has declined in many rural parts of the state. Carolina Demography has a helpful initial analysis of the 2020 Census data.
Reminder: Share the Impact of the Pandemic on Your Nonprofit
The National Council of Nonprofits and the Federal Reserve are partnering on a survey to create a comprehensive picture of the effects of the pandemic on nonprofits and the communities we serve, both nationwide and here in North Carolina. The results will help the Center and our national partners inform policymakers at every level of government about the challenges nonprofits have faced during the pandemic and can help nonprofit organizations advocate for further relief.

Please take 15 minutes to complete the survey today. The survey is open through August 24.
U.S. Senate Approves Bipartisan Infrastructure Bill
On Tuesday, the U.S. Senate approved the Infrastructure Investment and Jobs Act, a $1 trillion bipartisan bill by a 69-30 margin. Both Senator Richard Burr (R-NC) and Senator Thom Tillis (R-NC) voted for the bill. According to the White House, North Carolina would receive about $8.7 billion of the infrastructure investment in the bill, including $7.2 billion for highway projects, $457 million for bridge repairs, $911 million for public transit, $109 million for electric vehicle charging, and $100 million for broadband access. A few provisions in the infrastructure bill could affect nonprofits, including:
  • Ending the Employee Retention Tax Credit (ERTC) on October 1, 2021. The American Rescue Plan Act had extended this refundable payroll tax credit through the end of the year, so the early expiration could mean less financial relief for some nonprofits.
  • Establishing a $50 million pilot program to support nonprofits that are retrofitting their buildings to be more energy efficient. 

The U.S. House of Representatives isn’t schedule to take up the bill until next month.
U.S. Senate Approves $3.5 Trillion Budget Resolution
On Wednesday, the U.S. Senate approved a $3.5 trillion budget resolution that provides instructions for a variety of committees to develop the details of a federal budget next month. As expected, the budget resolution passed in a party-line vote (50-49) with both North Carolina Senators voting against it. The budget resolution is the first step in the congressional budget reconciliation process, which enables the Senate to approve a federal budget and other policy changes by a simple majority vote rather than the 60-vote requirement normally necessary to take action. Senate Democrats plan to include a wide variety of major policy changes in the budget reconciliation bill including universal Pre-K, extension of the expanded child tax credit, free community college, healthcare insurance expansion, immigration reform (including a path to citizenship), counter-climate change initiatives, and tax increases for corporations and high-income Americans.
New IRS Guidance Could Make More Nonprofits Eligible for the Employee Retention Tax Credit
On Wednesday, the Internal Revenue Service issued new guidance on the Employee Retention Tax Credit (ERTC). The new guidance clarifies that nonprofits and other employers don’t need to include the amount of their forgivable PPP loans, Shuttered Venue Operators Grants, or Restaurant Revitalization Grants in calculating their gross receipts for purposes of the ERTC. To be eligible for the ERTC, nonprofits must demonstrate a decline in gross receipts (the current threshold is a 20% decline in gross receipts for a calendar quarter), so this clarification should mean that more organizations are eligible for the ERTC.
Center Offers Tips as Nonprofits Consider COVID-19 Vaccination Requirements for Employees
With North Carolina’s COVID-19 vaccination rates stagnating and positive cases surging due to the Delta variant, many nonprofits are beginning to ask whether they can or should mandate COVID-19 vaccinations for their staff.

To answer the first question: It is legal for nonprofits to require their employees to be vaccinated. To help with the second question, the Center posted an analysis of the pros and cons of nonprofit vaccination mandates (spoiler alert: the pros probably outweigh the cons for most nonprofits). We have also included some tips for ways your organization can implement an employee vaccination requirement in a way that is fair and effective and that minimizes potential liability for your nonprofit.
Coalition Asks U.S. Department of Labor to Provide Nonprofit Jobs Data
Last week, the Center joined a large coalition of nonprofits and researchers in a letter to the U.S. Secretary of Labor asking the Department of Labor (DOL) to “release accurate and accessible data on nonprofit employment and wage trends on a quarterly basis, on par with other major industries in the country.” Even though nonprofits represent more than 10% of the nation’s private sector workforce, DOL doesn’t compile data on nonprofit employment. The letter was submitted in response to the request for comments to the Labor Department’s draft 2022–2026 Strategic and Evidence-Building plans.
General Assembly Approves Bill that Would Create Penalties for Nonprofits That Ignore State Audits
On Wednesday, the House of Representatives approved a bill (H.B. 461) approved a bill that includes an amendment setting forth that nonprofits with state grants or contracts that don’t provide the State Auditor with requested information as part of a state verification audit are presumed to have “failed to meet any condition precedent, classification, or other eligibility or qualifying standard subject to the verification audit.” This could create penalties for nonprofits that don’t comply with state verification audits. The bill now goes to Governor Cooper for his consideration.
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Nonprofit Policy Update is a weekly newsletter for current members of the North Carolina Center for Nonprofits. We track state and federal policy issues that affect all 501(c)(3) nonprofits. Learn about the Center's public policy priorities. For more information, contact David Heinen, Vice President for Public Policy and Advocacy.