December 3, 2021
In this issue...
NC General Assembly approves bill to prevent conflicts of interest in local funding of nonprofits
Legislators approve minor changes to state budget, bringing new nonprofit funding to $752 million 
2021 legislative session (finally) comes to an end
Is your nonprofit experiencing delays with your state contracts or payments?
Federal vaccination requirements on hold pending court decisions
Congress averts potential shutdown of federal government
Payment due for deferred payroll taxes
Share information about job vacancies at your nonprofit
NC Senate approves bill to prohibit nonprofits from funding election boards
Secretary of State report finds significant reduction in donations through licensed fundraisers
NC General Assembly Approves Bill to Prevent Conflicts of Interest in Local Funding of Nonprofits
On Monday, the NC House of Representatives and the NC Senate both gave final approval to a bill (S.473) that would require local government elected officials who serve on nonprofit boards to recuse themself from decisions to provide government funding to those organizations. Essentially, this would mean that most local officials who serve on nonprofit boards won’t be allowed to vote on local government budgets that include funding for the nonprofits on whose boards they serve.

Over the past seven months, the Center has worked with the bill sponsor and other legislators to improve the bill by minimizing unintended consequences that could jeopardize nonprofit funding and/or board recruitment and retention. The original version of the bill was problematic for nonprofits because it would have prevented county and municipal governments from engaging in grants and contracts with nonprofits that had local government employees and elected officials serving on their boards. The Senate largely addressed this issue in May by adopting a Center-recommended amendment to allow these nonprofits to receive local funding as long as any local elected officials with potential conflicts of interest recuse themselves from the funding decision. An amendment passed by the House on Monday further improved the bill by making two important changes, both of which were recommended by the Center:
  1. It limits the applicability of the nonprofit funding provision in the bill to “knowing” actions by local elected officials. This means that it won’t apply to many instances where nonprofits receive subgrants or subcontracts from other organizations that receive local funding. For example, it would enable local arts organizations that receive arts council funding (some of which may initiate from county or municipal grants) to continue to receive these funds, even if a board member of the funded arts organization serves on city council or as a county commissioner.
  2. It clarifies that the bill does not apply to local government staff or contractors. This means that nonprofit funding is not in jeopardy if a county or municipal employee or contractor serves on the nonprofit’s board of directors. 

The nonprofit funding provision in the bill only applies to cities, towns, or villages with more than 15,000 residents and to counties that have municipalities with 15,000 or more residents. This means that it will only apply in about 60 of the 100 counties in North Carolina. 

The Center remains concerned that the bill could create challenges that would make it difficult for some local governments to pass budgets with nonprofit funding if a majority of the members of a city council or county board of commissioners serve on boards of nonprofits that would likely receive local government funding. In those instances, so many local elected officials may have to recuse themselves that there would not be a quorum to vote on a budget without eliminating funding for some nonprofits. The Center continues to work with lawmakers, state officials, and local government advocates for a solution to this potential issue.

Governor Roy Cooper has until next Friday to decide whether to sign the bill into law, veto it, or allow it to become law without his signature.
Legislators Approve Minor Changes to State Budget, Bringing New Nonprofit Funding to $752 Million
On Monday, the NC Senate and NC House of Representatives both approved a bill (H.B. 334) that makes a variety of technical changes to the recently-enacted state budget for FY2021-23 (S.105). The budget technical corrections bill, which Governor Cooper is expected to sign into law within the next week, corrects several appropriations where the recipient nonprofit was misidentified in the original version of the budget. With the changes in this new bill, the Center estimates that the state budget includes $752 million in new funding for nonprofits.

To help you digest the more than 1,400 pages of budget documents (now spread over two separate bills), the Center has developed an 11-page synopsis of nonprofit provisions and appropriations in the budget. The Center also has updated its chart comparing the nonprofit appropriations and provisions in the final budget with those included in the versions passed by the Senate and House earlier this year. We’ll continue to update this chart as we identify other appropriations or provisions affecting nonprofits, so let us know if you see something that we missed.
2021 Legislative Session (Finally) Comes to an End
The NC General Assembly wrapped up its 2021 legislative session by passing an adjournment resolution (H.J.R. 979). Legislators will officially end their session next Friday after Governor Cooper has had 10 days to decide what action to take on bills that were approved earlier this week, but the House and Senate will not have voting sessions or committee meetings next week. Legislators are scheduled to return to Raleigh on December 30 to consider any bills vetoed by Governor Cooper and to make changes to the recently redrawn congressional and state legislative districts if a court rules that the districts are impermissible racial or partisan gerrymanders. Legislative leaders have said that the House and Senate won’t take any votes (if votes are needed) during that session until the first week of January 2022.
Let Us Know: Is Your Nonprofit Experiencing Delays with Your State Contracts or Payments?
This summer, several nonprofits alerted the Center of recent problems they have experienced with state agencies being late in issuing contracts or making payments. The Center has begun discussions with state legislators and state agency officials to identify the sources of the problem and to find solutions.

The Center plans to convene a group of nonprofits this winter to identify the scope of this problem and to work together to develop policy solutions. We hope that nonprofits, legislators, and state officials can collaborate in 2022 to limit state contracting and payment delays to nonprofits. Please let us know if your nonprofit has had challenges with late contracts or late payments from state agencies in the past two years.
Federal Vaccination Requirements on Hold Pending Court Decisions
The future of three federal rules requiring certain workers – including many nonprofit employees – to be vaccinated for COVID-19 remains uncertain as a variety of federal courts weigh in on their constitutionality. Here is the latest on each rule:
  1. The U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) Emergency Temporary Standard on COVID-19 vaccinations remains uncertain as federal courts determine whether it is constitutional. The rule would require employers with 100 or more employees – including many large nonprofits – to require their employees to be vaccinated for COVID-19 or to be tested at least once a week. Last month, a three-judge panel in a federal appellate court ordered OSHA to “take no steps to implement or enforce” this rule. For now, OSHA has suspended implementation of the employer vaccination rule until it is decided by the courts. 
  2. This week, two federal court rulings blocked the implementation and enforcement of the Centers for Medicare & Medicaid Services (CMS) Emergency Temporary Standard. That rule would require workers in most Medicaid and Medicare reimbursed health care facilities, including at hospitals and other nonprofit healthcare providers, to be vaccinated for COVID-19. 
  3. Also this week, a federal judge in Kentucky blocked the implementation of President Joe Biden’s September executive order requiring all federal contractors and subcontractors – including nonprofits that contract with the federal government – to be vaccinated for COVID-19. The latest court ruling only applies to federal contractors in Kentucky, Tennessee, or Ohio, so North Carolina nonprofits with federal contracts are still subject to the COVID-19 vaccination requirements. Note that the executive order only applies to nonprofits that are federal contractors or subcontractors, not those that receive federal grants.

Regardless of the ultimate fate of the OSHA and CMS rules and the federal contractor executive order, individual nonprofits can still require their employees to be vaccinated for COVID-19. To help your nonprofit answer questions about vaccination policies, the Center has published an analysis of vaccination considerations for nonprofits, including tips to help your organization develop a COVID-19 vaccination policy for your employees.
Congress Averts Potential Shutdown of Federal Government
Yesterday, both the U.S. House of Representatives and U.S. Senate approved a continuing resolution that will fund the federal government through February 18, 2022. President Biden is expected to sign it into law today. Without the passage of this continuing resolution, parts of the federal government would have shut down tomorrow. Historically, federal government shutdowns have caused delays in payments from federal agencies to nonprofits and disruptions in the delivery of federal benefits.
Payment Due for Deferred Payroll Taxes
The Internal Revenue Service is reminding employers they need to pay off part of the deferral of payroll taxes permitted last year under the CARES Act. That provision allowed employers to defer the deposit and payment of the employer's share of Social Security taxes during the "payroll tax deferral period" that began on March 27, 2020 and ended December 31, 2020. Fifty percent of the deferred payments must now be deposited by December 31, 2021, to be treated as timely and avoid a failure to deposit penalty. The IRS website provides more information on how to pay the CARES Act deferral amount.
Take 2 Minutes to Share Information About Job Vacancies at Your Nonprofit
In October 2021, the National Council of Nonprofits opened an online survey to gauge the scope of the workforce shortage problems for charitable organizations and determine the impact on their abilities to advance their missions. So far, only a few dozen North Carolina nonprofits have responded. Please take two minutes to complete the survey to help us better understand the scope of workforce shortage problems among North Carolina nonprofits so we can develop policy solutions to help improve the nonprofit workforce. 

A preliminary analysis of the national survey results finds the biggest sources of job vacancy challenges at nonprofits stem from salary competition (80%), inability to find adequate childcare (23%), and vaccination policies (21%).
NC Senate Approves Bill to Prohibit Nonprofits from Funding Election Boards
On Monday, the NC Senate gave final approval to a bill (S.725) that would prohibit nonprofits from providing funding to the State Board of Elections or to county election boards. Legislators have expressed concern that some organizations – including nonpartisan 501(c)(3) nonprofits – could provide funding to local elections boards to bolster support in communities with strong partisan leanings. The House approved the bill two weeks ago, so it now goes to Governor Cooper for his consideration. It passed both chambers in party-line votes, and there is a good chance that Governor Cooper will veto it.

Yesterday, Governor Cooper vetoed another bill (S.326) that would have required mail-in absentee ballots to be received by Election Day. Currently, voters must mail their ballots by Election Day, but they have a three-day grace period for their county boards of elections to receive their absentee ballots. Some nonprofit advocates have expressed concerns that, under this bill, postal delays could cause some voters’ ballots to go uncounted.
Secretary of State Report Finds Significant Reduction in Donations Through Licensed Fundraisers
Last week, the NC Secretary of State released its annual report on charitable solicitation in North Carolina. The report found that donations to North Carolina nonprofits made through licensed fundraising professionals dropped from $45 million in FY2019-20 to $34 million in FY2020-21. While this apparent reduction in contributions to nonprofits is dramatic, it is important to remember that contributions through licensed professional fundraisers reflects only a small percentage of the overall revenue for nonprofits – and only a small percentage of overall donations to nonprofits. Overall, North Carolina nonprofits have total revenue of more than $50 billion per year, so donations raised through licensed professional fundraisers only account for less than 0.1% of total funding for nonprofit organizations. It is quite possible that fewer nonprofits hired contract fundraisers during the pandemic and that many nonprofits may have experienced increases in direct contributions over the past year. 

The report also found that about 78% of the amount of contributions made through licensed fundraisers went to support the work of nonprofits (with the remaining 22% presumably being retained by these contract fundraisers). Secretary of State Elaine Marshall noted that there was a wide discrepancy between individual nonprofits: “As we have seen every year, there are individual campaigns where nearly 100% of donations went directly to the charities... However, there are also cases where most of the money raised went to professional fundraising costs and administrative overhead. There may be many reasons for the low percentages – in some cases fundraising campaigns may have just gotten underway near the end of the reporting period, so this year’s report doesn’t capture the full impact for the charities.”
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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.