January 7, 2022
In this issue...
Has your nonprofit lost board members because of new conflict-of-interest law?
NC Business Recovery Grants open for many nonprofits that pay UBIT
U.S. Supreme Court to review federal vaccination requirements for employers
U.S. Treasury Department provides guidance on state and local investment of ARP funds in nonprofits
State court hears arguments challenging congressional and state legislative districts
Three key nonprofit tax provisions have expired
Final 2021 lobbying reports due January 21
Has Your Nonprofit Lost Board Members Because of New Conflict-of-Interest Law?
A new state law that took effect on January 1, 2022 requires local government elected officials who serve on nonprofit boards to recuse themselves from decisions to provide government funding to those organizations. The law means 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. 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. 

The Center has heard from a few nonprofits that some county and city attorneys are advising county commissioners and city council members to resign from nonprofit boards to ensure compliance with the new law. It is important to note that nothing in the law prohibits local elected officials from serving on nonprofit boards. However, the Center is concerned that the overly strict interpretation of the new law could force some public servants to resign from nonprofit boards. The Center continues to work with lawmakers, state officials, and local government advocates for a solution to this potential issue.

Let us know if local elected officials who serve on your nonprofit’s board have expressed concerns about continuing to serve your organization because of this new law.
NC Business Recovery Grants Open for Many Nonprofits that Pay UBIT
Some nonprofits are eligible to apply for financial support through the new Business Recovery Grant program. The program provides economic recovery grants to businesses in the entertainment and hospitality industries and to other businesses that have not previously received federal or state relief for economic harm from the COVID-19 pandemic. While the program is designed to provide support for businesses (and not to nonprofits), 501(c)(3) nonprofits that pay state unrelated business income tax (UBIT) are eligible for grants if they meet one of the following criteria:
  1. They are in the arts, entertainment, recreation, accommodations, or food services industries and had declines in revenue of at least 20% during the first year of the pandemic (compared to the previous 12 months); or
  2. They are in any other industry, had declines in revenue of at least 20% during the first year of the pandemic (compared to the previous 12 months), and did not receive funding from other relief programs including Paycheck Protection Program, COVID-19 Job Retention Grant, and EIDL Advance. 

The NC Department of Revenue (DOR) is accepting applications from eligible businesses and nonprofits through January 31. Grants will be awarded for up to 10% of lost revenue for organizations that have previously received federal or state COVID-19 support and 20% for organizations that have not received government COVID-19 aid. The maximum grant award is $500,000. Additional information and applications are available at the DOR Business Recovery Grant program website.

The Business Recovery Grant program is one of many sources of support for nonprofits in the state budget for FY2021-23 (S.105). Overall, state legislators included an unprecedented $849 million in new funding for nonprofits in the budget. To help you digest the more than 1,400 pages of budget documents, the Center has developed an 11-page synopsis of nonprofit provisions and appropriations in the budget.
U.S. Supreme Court to Review Federal Vaccination Requirements for Employers
The U.S. Supreme Court is scheduled to hear arguments today in cases challenging two federal regulations that would require many employers – including some nonprofits – to require their employees to be vaccinated against COVID-19 or to be tested at least once a week. The consolidated case will determine the fate of two vaccination rules:
  1. The U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) Emergency Temporary Standard on COVID-19 vaccinations would require employers with 100 or more employees – including many large nonprofits – to require their employees to be vaccinated against COVID-19 or to be tested at least once a week. 
  2. The Centers for Medicare & Medicaid Services (CMS) Emergency Temporary Standard would require health facilities that receive Medicaid or Medicare reimbursements to require their workers to be vaccinated against COVID-19.

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 against 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.
U.S. Treasury Department Provides Guidance on State and Local Investment of ARP Funds in Nonprofits
Yesterday, the U.S. Department of the Treasury issued a final rule with guidance on the ways that state and local governments can spend their American Rescue Plan (ARP) funds. The final rule addresses several of nonprofits’ concerns from the interim rule that was issued in May, including:
  1. Explicitly including nonprofits, along with small businesses, as eligible recipients of various types of economic assistance;
  2. Clarifying that state and local governments can use their ARP funds to support nonprofits in two ways: (a) providing direct economic support to nonprofits that experienced decreased revenues, increased demand for services, or operational challenges due to the pandemic; and (b) contracting with nonprofits to provide assistance to others in their communities; and
  3. Providing several nonprofit-specific examples of ways that state and local governments can invest their ARP funds.

The Treasury Department also published an overview of the final rule with a section dedicated to state and local government assistance to nonprofits. The improvements to the rule for nonprofits address many of the issues raised by the National Council of Nonprofits in its public comments this summer.
State Court Hears Arguments Challenging Congressional and State Legislative Districts
This week, a three-judge panel in Raleigh heard arguments in three lawsuits challenging the House, Senate, and congressional maps that are supposed to be used for elections between 2022 and 2030. The litigation alleges that the maps are impermissible as racial and partisan gerrymanders and asks the court to require lawmakers to redraw the maps. The judges will issue their ruling in the case by next Tuesday. Regardless of the outcome, the cases will almost certainly be appealed to the NC Supreme Court, which is expected to hear the cases soon. 

Because of the ongoing state court litigation surrounding redistricting, the NC Supreme Court issued an order last month delaying this year’s primary election from March 9 to May 17 in case new congressional, NC Senate, and/or NC House of Representatives districts need to be drawn. 

Redistricting analysts have noted that the vast majority of the new congressional and legislative districts being challenged in court would be 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.
Three Key Nonprofit Tax Provisions Have Expired
Because Congress failed to act on major tax and spending legislation at the end of December, several federal tax laws that help nonprofit organizations and individuals served by nonprofits expired at the end of 2021. These expired tax provisions include:
  1. The universal charitable deduction. In 2020 and 2021, taxpayers who used the standard deduction (which includes the vast majority of North Carolinians) were eligible for a special tax deduction for some of their charitable contributions. With the expiration of the universal charitable deduction, most North Carolinians no longer receive tax deductions for their charitable contributions.
  2. The lifting of the cap on charitable contributions. For wealthy donors who itemize their deductions, a federal tax law temporarily eliminated the 60% of adjusted gross income cap on deductible charitable contributions in 2020 and 2021. For example, a taxpayer with $1 million in adjusted gross income would normally only be able to deduct $600,000 in charitable contributions, but in the past two years, they could deduct $1 million in contributions. This means that these donors had a tax incentive to make significantly larger charitable contributions last year.
  3. The expanded and improved child tax credit. For much of 2021, many taxpayers with children received larger child tax credits and were able to receive monthly checks in the amount of their child tax credit. The expanded and prepaid child tax credit helped lift many families with children out of poverty. Its expiration could increase burdens on nonprofits that provide services to children and families, as more North Carolina families are likely to face economic challenges.

Congress could still act to reinstate any or all of these tax provisions this year. Nonprofits’ advocacy will likely be critical to efforts to bring back these beneficial tax laws.
Final 2021 Lobbying Reports Due by January 21
Nonprofits that were registered as lobbyist principals in 2021 (and their staff or contractors who were registered as lobbyists) must file their final quarterly reports with the Secretary of State Lobbying Compliance Division by January 21, 2022. Lobbyist principals need to use the special fourth quarter expense reports (available online) that include the cumulative total payments to lobbyists for their salaries and fees reasonably allocated for lobbying. To help you understand the basics of state lobbying laws affecting nonprofits, check out the Center's summary of NC lobbying laws for nonprofits

Also, the NC Secretary of State has opened lobbying registration for 2022. Lobbyist principals (i.e. nonprofits that lobby) and lobbyists (i.e. nonprofit employees and contractors who lobby on behalf of nonprofits) must register annually with the Secretary of State.
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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.