February 11, 2022
In this issue...
State legislators will redraw 2022 election maps next week
Additional federal COVID-19 relief should include support for struggling nonprofits
Help make nonprofit sector’s case to policymakers: complete State of the Sector Survey
U.S. Senate bill would restore ERTC for fourth quarter of 2021
Congress poised to fund federal government through March 11
New report highlights local ARPA investments in North Carolina
U.S. House bill would make changes to donor advised fund laws
Free webinar on nonprofit voter engagement in changing electoral landscape
Registration open for training course on nonprofit management
State Legislators Will Redraw 2022 Election Maps Next Week
Last Friday, the NC Supreme Court issued an order finding that the House, Senate, and congressional maps that the NC General Assembly approved for elections between 2022 and 2030 are unconstitutional. The court gave legislators until next Friday, February 18 to submit new legislative maps to a three-judge panel, which will work with an independent “special master” (an outside expert who advises the court) to assess whether the new maps constitute an unconstitutional partisan gerrymander. If the court finds the new maps legal, they will be used for this year’s election and could be used for other elections through 2030. Otherwise, the court will choose the maps to use for the 2022 election.

Redistricting analysts and state courts have noted that the vast majority of the congressional and legislative districts that were just rejected by the NC Supreme Court would have been non-competitive. In the past, the Center has expressed concerns that this type of gerrymandering (i.e., overly partisan redistricting plans) diminishes nonprofits’ influence on public policy because it tends to create non-competitive congressional and legislative districts and makes elected officials more responsive to their partisan political donors than to the nonpartisan nonprofits providing services in their districts. 

While the legislative districts that the General Assembly will approve next week will almost certainly produce more partisan balance in the state legislature and North Carolina’s congressional delegation, they won’t necessarily create more competitive general elections (e.g., they could create partisan balance by establishing roughly equal numbers of safe Democratic and safe Republican districts throughout the state). Consequently, there is no guarantee that the redrawn maps will do much to help promote nonprofits’ influence on public policy. 
Additional Federal COVID-19 Relief Should Include Support for Struggling Nonprofits
As the COVID-19 pandemic nears its second anniversary in the United States, there is growing interest in Congress providing additional relief to businesses and nonprofits that continue to face pandemic-related challenges. To help communities recover more fully, it will be essential for Congress to address three major challenges facing nonprofits.
  1. Reduced Donations. Charitable giving has stagnated during the pandemic, and the three temporary incentives for charitable giving that Congress created to help bolster charitable contributions have all expired. Congress can help nonprofits’ finances by reinstating and expanding the universal charitable deduction and by restoring special incentives for charitable giving by corporations and high-income taxpayers.
  2. The Nonprofit Workforce Shortage. As the National Council of Nonprofits has documented in a recent report, nonprofits are struggling to fill vacant positions. The report identifies salary competition and lack of adequate child care as the two biggest causes of the nonprofit workforce shortage. This labor shortage is making it harder for nonprofits to provide necessary programs and services in their communities. Congress can help address the nonprofit workforce shortage by extending and improving the Employee Retention Tax Credit, investing significantly in high-quality and affordable child care options, enacting the WORK NOW nonprofit grants and jobs program, and making essential reforms to the Public Service Loan Forgiveness program to make it more accessible for nonprofit employees. These policy solutions would reduce barriers that currently make it difficult for many potential employees to accept and maintain jobs with nonprofit.
  3. The Decline in Volunteerism. Many North Carolina nonprofits have reported that they lost volunteers at the beginning of the pandemic and that most have not returned. Congress can help encourage people to re-engage in volunteerism by providing capacity building grants to assist in volunteer generation and management and by increasing the volunteer mileage rate so that volunteers are not under-compensated when they drive their vehicles while providing service.
Look for calls to action on these items in the next few weeks.
Help Make Nonprofit Sector’s Case to Policymakers: Complete State of the Sector Survey
The Nonprofit Finance Fund’s State of the Nonprofit Sector Survey is open through February 28. This national survey provides essential information about the financial health of nonprofits. In the past, policymakers and the media have found data from the survey on North Carolina nonprofits compelling, particularly information on the nonprofit sector’s finances, demand for services, and capacity to meet community needs. This is the first time the Nonprofit Finance Fund has conducted the survey since the start of the pandemic, so this year’s survey will be particularly important in assessing the current health of North Carolina’s nonprofit sector.

The Center strongly encourages you to take the time to complete this survey this month. The more North Carolina nonprofits that respond, the clearer picture we will have of the finances, capacity, and needs of nonprofit organizations throughout the state. Your responses to the survey will provide important data to support and inform the Center’s work to advocate with your nonprofit for policy solutions that will strengthen our organizations and communities.
U.S. Senate Bill Would Restore ERTC for Fourth Quarter of 2021
Last year, many nonprofits took advantage of the Employee Retention Tax Credit (ERTC), a refundable payroll tax credit that provided economic relief to organizations that were shut down or lost revenue during the pandemic. Unfortunately, in November 2021, Congress retroactively ended the ERTC on September 30, 2021. The early expiration of the ERTC created budget holes for some nonprofits that had planned to receive the tax credit for the fourth quarter of 2021.

Yesterday, a bipartisan group of U.S. Senators filed the Employee Retention Tax Credit Reinstatement Act to retroactively reinstate the ERTC for the fourth quarter of 2021. The Center has asked Senators Richard Burr (R-NC) and Thom Tillis (R-NC) to support this bill. Seven U.S. Representatives from North Carolina – Rep. Virginia Foxx (R-NC), Rep. Dan Bishop (R-NC), Rep. David Rouzer (R-NC), Rep. Richard Hudson (R-NC), Rep. Ted Budd (R-NC), Rep. Kathy Manning (D-NC), and Rep. Patrick McHenry (R-NC) – are co-sponsors of an identical bill in the U.S. House of Representatives (H.R. 6161).
Congress Poised to Fund Federal Government Through March 11
On Tuesday, the U.S. House of Representatives passed a continuing resolution (H.R. 6617) that will fund the federal government through March 11. The U.S. Senate will vote on the bill today, and then President Biden is expected to sign it into law. 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.
New Report Highlights Local ARPA Investments in North Carolina
This week, the Southern Economic Advancement Project (SEAP) released a report on investment of American Rescue Plan Act (ARPA) funds by North Carolina cities. The report, which covers ARPA spending plans for 27 cities across the state, found that cities have thus far allocated just 17% of their ARPA funds and that larger cities are further along in the ARPA spending plans than smaller cities. Among other things, local government ARPA funds can be used to help nonprofits provide a wide array of services in their community and to provide economic relief to nonprofits that have faced financial or operational challenges due to the pandemic. The data from the report is evidence that there is still time for nonprofits across the state to advocate with their local governments for the best ways to invest ARPA funds in their communities. The U.S. Treasury Department has tables that list the amount of ARPA funds available to each city and county in North Carolina (and the rest of the country).
U.S. House Bill Would Make Changes to Donor Advised Fund Laws
This week, four U.S. Representatives introduced the Accelerating Charitable Efforts Act (ACE Act) (H.R. 6595), which would make changes to federal tax laws related to donor advised funds (DAFs). Under current law, donors can set up DAFs at nonprofits, which allow donors to receive immediate tax benefits for contributions that will be made in the future to support nonprofits’ programs and services. Over the past decade, a growing percentage of overall charitable giving has come through contributions to DAFs. As a result, critics have expressed concerns that donors can use DAFs to get immediate tax benefits for contributions that aren’t providing immediate financial assistance to nonprofits serving communities.

The bill would replace existing DAFs with two new types of DAFs:
  1. 15-year DAFs, where donors would still receive immediate tax benefits but where DAF funds must be distributed (or donors would give up the right to advise on how the funds were spent) within 15 years of the donation.
  2. 50-Year DAFs, where donors would not receive income tax deductions for their contributions until the donated funds are distributed to a charitable nonprofit. Under this “aligned benefit rule,” donors to 50-year DAFs would continue to receive capital gains and estate tax benefits when they make their donations. All funds in 50-year DAFs would be required to be distributed outright to charitable organizations no later than 50 years after their donation.

In response to concerns raised by some donors and community foundations, the bill would provide special treatment for DAFs held by community foundations. Under these rules, donors could hold up to $1 million in DAF funds at a community foundation without being subject to the proposed payout rules. Donors could create DAFs of more than $1 million at community foundations (and still receive immediate tax benefits) as long as they paid out at least 5% of the value of the DAF each year.

The bill also includes changes to private foundation rules to try to ensure that private foundations distribute more of their assets to operating nonprofits. Specifically, the bill would prevent private foundations from meeting their 5% payout requirements by paying salaries or travel expenses to a donor’s family members or by making distributions to DAFs.

An identical bill (S.1981) was introduced in the U.S. Senate last year. The Center has not taken a position on the ACE Act.
Free Webinar on Nonprofit Voter Engagement in Changing Electoral Landscape
North Carolina is one of many states with evolving election laws and new congressional and state legislative maps for the 2022 election. To help nonprofits navigate this changing electoral landscape, Nonprofit VOTE is offering a free webinar on nonpartisan voter engagement in the 2022 midterm elections. The webinar will be held on Tuesday, February 22 at 2 p.m. Register today.
Registration Open for Training Course on Nonprofit Management
Registration is open for the Nonprofit Management Institute! Join this virtual cohort of nonprofit executives, managers, and board leaders to assess your organizations’ management practices, discuss successes and challenges, and build strategies to fill the gaps and create long-term sustainability. The six-session course will cover board governance, program design and evaluation, strategic planning, fundraising, financial management, and human resources. Participants graduate with a Nonprofit Management Institute certificate and can earn up to 15 credit hours as part of the Duke University Nonprofit Management Program. Discounts available for staff/board teams. Register now.
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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.