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In this week's issue...
With the NC General Assembly taking a prolonged break and Congress in recess this week, this week’s update highlights two new federal court decisions of interest to nonprofits. We start by explaining why last Friday’s court ruling on the DOL overtime rule does not affect your nonprofit (at least for now) and why another court ruling involving a commercial fishery may have a big impact on many nonprofits’ programs and advocacy. We also recap some of the key developments in the final week of the state legislature’s short session last week.
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Federal Court Stops Implementation of DOL Overtime Rule...But Only for Employees of State of Texas
Last Friday, a federal judge in Texas issued an initial ruling in a lawsuit filed by the State of Texas challenging the U.S. Department of Labor final rule on overtime pay under the Fair Labor Standards Act (FLSA). The Texas court issued an injunction in the case, but it only stopped the July 1 increase in the salary threshold from taking effect for state government employees in Texas. On Monday, another court denied the plaintiffs request for relief in a separate case involving a marketing firm, explaining that the firm would not suffer “irreparable harm.” Translation: Courts allowed the first phase of the overtime rule, raising the salary threshold to $43,888 per year, to take effect for all employers (including North Carolina nonprofits) other than the State of Texas on July 1, 2024.
As a reminder, the new overtime rule raises the salary threshold for white-collar exemptions from overtime pay requirements in a two-step process:
- The salary threshold went up from the previous level of $35,568 per year to $43,888 per year ($844 per week) on Monday, July 1, 2024. This is essentially adjusting the salary threshold from the 2019 rule for inflation since it maintains the current methodology of setting the threshold at the 20th percentile of weekly earnings of full-time non-hourly workers in the lowest-wage Census Region (currently the South).
- The salary threshold then goes up to $58,656 per year ($1,128 per week) on January 1, 2025, which is the 35th percentile of weekly earnings of full-time non-hourly workers in the lowest-wage Census Region (currently the South).
The Center continues to hear from many nonprofits with questions about how the U.S. Department of Labor final rule on overtime pay under FLSA will affect their organizations. Two Center resources can help nonprofits better understand this new rule, its potential impact on North Carolina nonprofits, and compliance options for nonprofit organizations:
- An updated analysis of the final overtime rule and its likely impact on North Carolina nonprofits, concluding with 15 compliance options and eight next steps for nonprofits to take now to be ready to adapt to the significantly higher salary threshold in eight months.
- A webinar recording on FLSA and the new overtime rule and answers to nonprofits’ questions.
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U.S. Supreme Court Decision Limits Rulemaking Authority of Federal Agencies
Last Friday, the U.S. Supreme Court issued a decision in the Loper Bright Enterprises v. Raimondi case overruling Chevron U.S.A. v. Natural Resources Defense Council, a 1984 decision that provided broad rulemaking authority to federal agencies. In the Loper Bright case, the court found that the National Marine Fisheries Services of the U.S. Department of Commerce exceeded its authority in its regulation of commercial fisheries. The Loper Bright decision overrules Chevron, which had required courts to defer to federal agencies’ reasonable interpretations of statutes (i.e., laws passed by Congress) in their development of regulations interpreting federal laws. Over the past 40 years, the Chevron deference has enabled federal agencies to establish a variety of environmental, safety, and labor regulations that are important to the missions and operations of many nonprofits. Under the Loper Bright decision, federal courts now use their “independent judgement” to determine whether these federal rules are permissible.
Practically, the Loper Bright decision makes it harder for federal agencies to make significant substantive policy changes through the regulatory process. Nonprofits that advocate on federal rules may now need to focus some of their advocacy on Congress (to be more explicit in the laws it passes) and/or courts (to interpret federal rules in an appropriate way). The ruling’s impact was felt almost immediately; just a few hours after the Supreme Court issued the Loper Bright decision, a federal judge cited it in a case involving the DOL overtime rule (see the first item in today’s update for more details).
Another Supreme Court ruling issued on Monday could create new legal challenges to older rules. In Corner Post v. Federal Reserve, the court ruled that the six year statute of limitations for challenging federal rules starts when a business, nonprofit, or individual experiences harm from the rule, not when the rule is implemented. This ruling could open the door to court challenges of longstanding federal environmental, health and safety, and labor rules.
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Governor Cooper Set to Act on Several Bills Affecting Nonprofits
Last week, the NC General Assembly sent 22 bills to Governor Roy Cooper for his consideration. This legislation includes:
- A bill (S.357) to temporarily delay the looming “child care cliff” by providing an additional $67.5 million in one-time funding for child care stabilization grants. This bill would provide about two months of temporary funding to cover the loss of federal funds for child care providers.
- The 2024 farm bill (S.355), which includes a provision to reinstate the state tax credit for contributions of real property for a variety of conservation purposes. A similar tax credit, along with virtually all other state tax credits, was repealed in 2013 as part of the General Assembly’s overhaul of the North Carolina tax code. The change to the tax code in the farm bill could encourage more contributions of land to nonprofits engaged in conservation and historic preservation.
- A tax bill (H.B. 228) that would, among other things, provide for automatic extension of state income tax returns when the Internal Revenue Service (IRS) grants an extension of the corresponding federal returns. Under current state law, individuals, businesses, and nonprofits are required to ask the NC Department of Revenue (DOR) for extension of their tax filing deadlines. For nonprofits that have unrelated business income and file Form 990-T with the IRS, this change would mean that any extension of their 990-T filing deadline would automatically apply to their state corporate income tax filing.
- An insurance bill (S.319) that, among other things, would enable nonprofits (and other employers) that offer employer-provided health plans to agree to have all of their employees receive plan documents electronically rather than in hard copies. Individual employees would still have the right to opt out of receiving documents electronically.
- A regulatory reform bill (S.607) that includes a provision on transparency of ticket prices for entertainment and live events. The provision, which was included thanks to the advocacy of ARTS North Carolina and other groups, requires the tickets to “clearly and conspicuously” list the total price of admission to an event, along with any mandatory fees and limits the ability of organizations selling tickets online to add other fees during the checkout process.
Governor Cooper has until next week to decide whether to sign these bills, veto them, or allow them to become law without his signature.
Legislators are scheduled to return to Raleigh for six mini-sessions this summer and fall on the following dates: July 10; July 29-August 1; September 9-11; October 9; November 19-22; and December 11-13. Legislators are expected to take action on a variety of legislation during the November mini-session, but it is unclear whether they will have votes or committee meetings during the other ones.
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Legislators Put Citizen Voting Constitutional Amendment on 2024 Ballot
Last week, both the NC House of Representatives and NC Senate gave final approval to a bill (H.B. 1074) that would clarify that only U.S. citizens may vote in North Carolina elections. While the citizen voting amendment would change the wording of the state constitution, it does not appear to make any substantive changes since the constitution already prohibits non-citizens from voting.
More than 60% of members of both chambers approved the resolution (it passed with broad bipartisan support), so it now goes onto the ballot this fall and will become a part of the state constitution if a majority of voters approve it. Because voters ultimately determine whether to make constitutional amendments, legislation proposing constitutional amendments does not require the Governor’s approval.
Charitable nonprofits are permitted to advocate on ballot measures, including state constitutional amendments. That means that 501(c)(3) nonprofits with an interest in this proposed constitutional amendment are permitted to encourage voters to vote for or against it. The Center will provide additional guidance for nonprofits on advocating for or against constitutional amendments and other ballot measures later this summer and this fall.
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Governor Cooper and DHHS Announce Program to Ease Medical Debt
On Monday, Governor Cooper and the NC Department of Health and Human Services (DHHS) announced a plan to help ease medical debt for about two million low and middle income North Carolinians. The proposal would use Medicaid funding to provide additional funding to hospitals, including many nonprofit hospitals, if they agree to relieve existing medical debt for low and middle income patients and implement policies to minimize future medical debt.
NC Health News has reported that North Carolina hospitals are still reviewing the proposal and assessing whether they will take advantage of the enhanced funding. The NC Health News report provides more details about the specific steps hospitals would need to implement to receive additional funding. The report notes that “medical debt disproportionately affects Black and Hispanic patients, as well as people living in rural areas.”
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Charitable Giving Dropped (Again) in 2023
The latest data from Giving USA on charitable giving in 2023 show that all four sources of giving – individuals, foundations, bequests, and corporations – remained flat or declined when adjusted for inflation. Overall charitable giving dropped 2.1% in 2023. This follows the 13.4% decline in individual giving in 2022. Total giving has not yet surpassed the all-time inflation-adjusted high set in 2021, the last year of the non-itemizer deduction.
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Nearly 480,000 North Carolinians Have Health Coverage Through Medicaid Expansion
According to the most recent data from the NC Department of Health and Human Services (DHHS), more than 479,000 North Carolinians have enrolled in health care through Medicaid expansion since it became available in December. DHHS estimates that about 120,000 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.
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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