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In this Issue...
New Hampshire held the nation’s first primary election of the 2024 this week (you’ll have to read about that elsewhere!), and North Carolina won’t be far behind. With absentee voting underway and in-person Early Voting opening in less than three weeks, we offer our second (of many) tips for 501(c)(3) nonprofits on nonpartisan engagement in the election (hint: we’re focusing on absentee voting this week), along with other free resources on election engagement for nonprofits. . . . If your nonprofit sponsors donor advised funds, the fourth item (particularly the link to the clear and concise analysis of the IRS’s proposed regulations on donor advised funds) is a must-read. . . . We also update you on the latest on the bipartisan tax proposal in Congress that would improve the child tax credit (yay!) but wouldn’t create new tax incentives for charitable giving (boo!). , , , And we try to raise your blood pressure with details of a federal court case that could set a precedent of subjecting 501(c)(3) nonprofits to lots of federal laws and regulations . . . but which probably doesn’t pose any immediate threats to your nonprofit.
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Join a Free Webinar on Nonprofits and the 2024 Election on February 7
The 2024 election is officially underway in North Carolina, as county boards of elections have begun sending out absentee ballots to eligible voters who have requested them. In-person voting for the 2024 election begins in less than a month, with Early Voting for the primary election opening on Thursday, February 15. While 501(c)(3) nonprofits cannot support or oppose candidates for office or make campaign contributions, your nonprofit can (and should) engage in nonpartisan voter registration and voter education work. The Center is offering a free webinar on Wednesday, February 7 from 10:00-11:30 a.m. to help answer your questions about the ways nonprofits can safely, legally, and effectively engage in the 2024 election.
In the webinar, you'll learn the basics about what 501(c)(3) nonprofits can and can’t do in an election year, ways nonprofit staff, board members, and volunteers can (legally) engage in campaigns, and common questions (and possibly some answers!) about tricky election-year situations for nonprofits. You will also find out about new election laws and changes to the election process in North Carolina in 2024 that might affect nonprofits and the people they serve. And we will offer tips on ways 501(c)(3) nonprofits can protect their reputations and avoid legal trouble when partnering with other organizations in an election year. Register today!
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2024 Election Tip of the Week: If You Plan to Vote by Mail, Request Your Absentee Ballot Today!
Leading up to the 2024 primary election this spring and the general election this fall, the Center will offer a variety of tips for nonprofits about nonpartisan voter registration and voter education. We encourage you to share these tips with your staff, board, and the people you serve. This week’s tip: Now is the time to request your absentee ballot.
For many North Carolinians, absentee voting – also known as mail-in voting – is the easiest and most convenient way to vote in elections. With the COVID-19 pandemic, a record number of North Carolinians voted by absentee ballot in 2020. For the 2024 election, the NC State Board of Elections (NCSBE) has an online portal that you can use to request an absentee ballot. The online application process only takes about three minutes to complete, but it can take a few weeks to receive your ballot. Last Friday, county boards of elections began mailing absentee ballots to eligible voters who have already requested them.
The deadline to request an absentee ballot for this year’s primary election is Tuesday, February 27 at 5 p.m., but nonprofits should encourage people planning to vote by mail to request their absentee ballot early so they receive it in time to return it before Election Day. Absentee ballots need to be returned by 5 p.m. on Election Day and can be returned by mail (as long as they are postmarked by Election Day AND received by Election Day) or in-person at the county board of elections or any Early Voting site. Note that a new law eliminated the three-day grace period for receipt of mailed-in absentee ballots, so practically, voters need to put their ballots in the mail several days ahead of Election Day.
One-sentence executive summary of the 2024 Election Tip of the Week: If your nonprofit has staff, volunteers, or clients who may be thinking about using absentee voting in the 2024 primary election (hint: you probably do!), please encourage them to go to the NCSBE online portal and request an absentee ballot today.
Note: If you missed last week’s 2024 Election Tip of the Week (checking your voter registration) or want a refresher, feel free to click the link to (re)read it now.
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Bonus 2024 Election Tip of the Week (or Actually 33 of Them!)
Have you been wondering what types of election-related activities your nonprofit can and cannot do between now and the primary election? Or perhaps you are already thinking ahead to this fall’s general election. You are not alone. The Center has been fielding questions about what types of election-related activities are legal and advisable for charitable nonprofits, and we have posted answers to 33 of the most common questions we are hearing. We have included information on several new state election laws that could affect your nonprofit and the people you serve, including the new requirement to show a photo ID when voting. Let us know of other questions you have about your nonprofit’s engagement in the 2024 election.
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IRS Deadline for Public Comments on Donor Advised Fund Proposed Regulations
In November, the U.S. Treasury Department and Internal Revenue Service issued proposed regulations to provide clarity on donor advised funds (DAFs). The proposed regulations would establish definitions of donor advised funds, donors, and donor-advisors. The proposals would create better clarity about the legal structure of DAFs and could impact the way that nonprofits administer their DAFs. Chapel Hill law firm Schell Bray has an excellent analysis of the proposed regulations, explaining why they could create challenges for nonprofits that sponsor DAFs. We encourage any nonprofit with a DAF to read this clear and succinct analysis.
The IRS recently extended the deadline for public comments on the proposed rule through February 15. Please let us know if your nonprofit has feedback on the proposed rules. The Center will consider submitting public comments if there appears to be significant interest (positive or negative) in the proposed rule from North Carolina nonprofits.
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U.S. House Committee Approves Tax Plan Includes Good and Bad News for Nonprofits
Last Friday, the U.S. House of Representatives Ways and Means Committee approved the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024), which would:
- restore three expired business tax deductions related to research and development spending, purchases of assets that lose value over time, and interest expenses; and
- reinstate parts of the expanded child tax credit that expired in 2022. Congress could include tax changes as part of appropriations legislation or pass them as a separate bill.
The expansion of the child tax credit could particularly benefit people served by nonprofits. The proposal would reinstate parts of the 2021 expansion of the child tax credit by making it refundable in 2023, 2024, and 2025. This would provide significant financial assistance to many low-income families who don’t normally pay income taxes. The expanded child tax credit helped lift many North Carolina families with children out of poverty in 2021, but child poverty levels rose sharply in 2022 and 2023 after the expanded child tax credit ended.
Unfortunately, the version of the bill approved by the House Ways and Means Committee does not include any new or improved tax incentives for charitable giving. With donations to nonprofits declining last year, the Center and other nonprofits continue to advocate for Congress to add a universal charitable deduction to the tax package to encourage people to give more generously to support the work of charitable nonprofits.
The bill also would end new applications for the Employee Retention Tax Credit (ERTC) after January 31, 2024, both in response to the growing number of ERTC scams and fraudulent claims and to raise revenue to offset some of the costs of business tax deduction and child tax credit changes. Currently, nonprofits and businesses have until April 15, 2025, to claim the ERTC.
The House Ways and Means Committee approved the bill in a 40-3 vote that had broad bipartisan support. The full House and the Senate could vote on the tax plan in the next couple of weeks. Congress needs to pass it soon since several of the provisions could affect individuals’ and businesses’ 2023 tax filings.
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Federal Appeals Court Hears Case That Could Make Nonprofits Subject to More Federal Rules
Yesterday, the U.S. Court of Appeals for the Fourth Circuit held oral arguments in a case involving a nonprofit private school in Maryland. The Fourth Circuit covers a five-state region that includes North Carolina., so its rulings are binding law in North Carolina. The case involves allegations that the school violated Title IX of the Education Amendments Act of 1972, which prohibits sex-based discrimination in schools that receive “federal financial assistance.” Even though the school receives no federal funding, the trial court ruled that it was subject to Title IX because its “501(c)(3) status [is] a form of Congressional subsidy and the equivalent of a cash grant.”
Historically, the tax benefits that 501(c)(3) nonprofits receive through the Internal Revenue Code – namely exemption from federal income tax and the ability to receive tax-deductible contributions – have not been considered to be “federal financial assistance.” That means that tax-exempt nonprofits are generally not subject to many federal laws and regulations (other than tax laws) that apply to governmental entities or organizations receiving direct federal funding. If the Fourth Circuit were to rule that federal tax-exemption constitutes “federal financial assistance” that makes the school subject to Title IX, it would also mean that other 501(c)(3) private schools in North Carolina would be covered by Title IX, regardless of whether they receive federal funding. It also could mean that a variety of other existing or future federal laws and regulations applicable to entities receiving “federal financial assistance” could be applicable to any 501(c)(3) nonprofit in North Carolina.
In response to this case and other similar litigation against nonprofit schools elsewhere in the country, several members of the U.S. Senate and U.S. House of Representatives recently filed bills in Congress that would expressly provide that federal tax exemption is not “federal financial assistance” for purpose of coverage under other federal laws and rules. It is unlikely that a divided Congress would pass those bills since they only have Republican sponsors and co-sponsors (at least so far).
While the Fourth Circuit case does not pose any immediate new threats or legal liability to most 501(c)(3) nonprofits, the Center will continue to track it and keep you posted on the court’s decision, potential ramifications for other nonprofits, and any need for your nonprofit to take action.
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DHHS Offers Resources to Help Nonprofits Provide Outreach on Medicaid Expansion
Medicaid expansion began in North Carolina last month. According to the new Medicaid expansion dashboard from the NC Department of Health and Human Services (DHHS), more than 314,000 North Carolinians enrolled in health care through Medicaid expansion last month. DHHS estimates that more than 300,000 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.
DHHS has launched a new website to help nonprofits and others with community outreach on Medicaid expansion. 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!
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Coming This Spring: Nonprofit Policy Conversations
This spring, the Center will host 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 will provide a briefing on trends in the nonprofit sector and potential public policy solutions and challenges for nonprofits in 2024 and beyond. The Conversations also will include discussions about state and federal public policy issues of particular interest to local nonprofits and ways nonprofits can engage in the 2024 election while remaining nonpartisan. We will share dates, locations, and registration information soon.
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