June 25, 2021
Note: The North Carolina Center for Nonprofits typically provides Nonprofit Policy Update each week as a benefit to its nonprofit members. However, to help all North Carolina nonprofits respond to the COVID-19 pandemic, we're temporarily providing this newsletter to non-member nonprofits.
In this issue...
NC Senate approves state budget with minimal investment in nonprofits
NC House committee approves bill to prevent conflicts of interest in local funding of nonprofits
State legislators pass bill to withdraw North Carolina from federal unemployment benefits
IRS provides new resources to help low-income families register for Child Tax Credit 
NC House committee approves bill to create retirement benefit program for some nonprofit employees
NC House committee approves bill to protect student borrowers
NC Senate Approves State Budget with Minimal Investment in Nonprofits
This morning, the NC Senate gave final approval to its version of the state budget for FY2021-23 (S.105). The Senate budget appropriates most of the state’s $5.7 billion in federal COVID-19 aid from the American Rescue Plan Act (ARP) and uses much of the state’s large revenue surplus ($6 million in extra revenue in FY2020-21 and an anticipated $4.5 billion in more revenue over the next two years) for large tax cuts. Some nonprofit highlights in the Senate budget include:
  • Overall, the Senate budget includes about $262 million in new funding for nonprofits. However, the vast majority of this funding is one-time support and is earmarked for specific nonprofits. About $128 million of this new funding would be allocated to 24 nonprofits to construct or renovate their buildings. Notably, the Senate budget does not use ARP funds or any of the state’s revenue surplus to create a nonprofit relief fund to help organizations that have experienced economic hardship due to the COVID-19 pandemic.
  • The Senate budget uses about $1 billion of the state’s ARP funds to create a new Job Opportunity and Business Saving Grant Program (JOBS Program) to make automatic grants to many nonprofits that have received Paycheck Protection Program (PPP) loans, Economic Injury Disaster Loan (EIDL) advances, Job Retention Program grants, Shuttered Venue Operators Grants (SVOG), or Restaurant Revitalization Fund support. Under the proposal, nonprofits and businesses that received any of these sources of federal or state COVID-19 relief would receive additional state grants valued at 7.5% of the amount of their federal or state relief. The maximum grant awards would be $18,750 per entity (for nonprofits that received $250,000 or more from the PPP, EIDL, SVOG, Job Retention Program, and/or Restaurant Revitalization Fund). The budget also uses about $500 million of the state’s ARP funds to provide similar grants to businesses (but not nonprofits) that didn’t qualify for federal or state COVID-19 relief and had reductions in sales of at least 20% last year. 
  • The tax cuts included in the Senate’s budget would reduce state revenue by about $13.9 billion over the next five years. Depending on the overall economy, this could lead to state spending cuts in future years, including less investment in the work of nonprofits providing services in North Carolina communities. The Senate tax plan would gradually reduce the state individual income tax rate from 5.25% (the current rate) to 3.99% after 2025. It would gradually reduce the corporate income tax rate from 2.5% (the current rate) to 0% after 2027 (meaning a tax cut for nonprofits that pay state tax on unrelated business income) and would reduce franchise tax rates for businesses (from which nonprofits are already fully exempt). It also would increase the standard deduction on state taxes by 5.5%.

The NC House of Representatives will begin the formal process of developing a state budget next week. The House plans to take several weeks working on its version of the budget. Once the House approves its version of the budget, the House and Senate will negotiate on a final legislative budget to send to Governor Roy Cooper for consideration. Negotiations between the Senate, the House, and Governor Cooper could continue through the summer and into the fall. 

As the House begins its budget process, the Center is asking House leaders to use some of the state’s ARP funds to create a $75 million nonprofit relief fund. Based on input from many nonprofits, the Center is seeking a grant program that would provide support to nonprofits that have experienced: 
  • Revenue losses during some period of the pandemic;
  • Shut-downs of operations due to COVID limitations;
  • Loss of volunteers during the pandemic;
  • Costs incurred by changing the way programs and services are provided as a result of social distancing; or
  • Increase in services to meet community needs during the pandemic.

The Center has prepared a chart highlighting the appropriations and provisions in the Senate budget that affect nonprofits. The Center will update this chart once the House approves its version of the budget and once legislators agree on a final version of the budget to send to Governor Cooper.
The new state budget is set to take effect next Thursday, July 1. Because the budget won’t be finalized by then (in fact, it won’t be close), current state spending levels will remain in effect for the beginning of the new fiscal year, meaning that state funding won’t be increased or revised to adapt to changing needs in the state.
NC House Committee Approves Bill to Prevent Conflicts of Interest in Local Funding of Nonprofits
On Tuesday, the NC House Judiciary 1 Committee approved a bill (S.473) that would require a local government elected official who serves on a nonprofit board to recuse themself from the decision to provide government funding to that organization. The Center supports this bill since it would protect the public’s trust in the work of nonprofits by helping to prevent conflicts of interest between local elected officials and nonprofits with which they are affiliated. The Senate approved the bill last month after adopting a Center-recommended amendment to remove a problematic provision in the original version that could have prevented county and municipal governments from engaging in grants and contracts with many nonprofits. The House State Government Committee will consider the bill next week.
State Legislators Pass Bill to Withdraw North Carolina from Federal Unemployment Benefits
On Wednesday, both the NC House of Representatives and NC Senate approved a final version of a bill (S.116) that would withdraw North Carolina from the Federal Pandemic Unemployment Compensation (FPUC) program that provides $300 weekly supplemental payments to unemployed workers. The final version of the bill also would withdraw North Carolina from the Mixed Earner Unemployment Compensation (MEUC) program. The bill was passed in response to concerns about labor market shortages in North Carolina.  

The American Rescue Plan Act (ARP) had extended the FPUC and MEUC programs through September 6, 2021. If this bill is enacted, North Carolina would withdraw from these programs about a month early (specifically, 30 days after the bill is enacted). While North Carolina appears to be the first state to consider legislation to withdraw from the FPUC and MEUC programs, governors in 26 other states have announced plans to withdraw from federal unemployment benefit programs. 

Unlike the executive actions in other states, the bill passed by the NC House would not withdraw North Carolina from the other four federal unemployment programs that were extended through September 6 by ARP. These include programs that provide 31-week extensions of state unemployment benefits, unemployment coverage for self-employed workers and employees of small and religious nonprofits, and partial coverage of unemployment expenses for reimbursing nonprofits.

The bill also would appropriate $250 million in one-time ARP funds to provide child care subsidies for North Carolina families. It is unclear whether Governor Roy Cooper will sign the bill, veto it, or allow it to become law without his signature.
IRS Provides New Resources to Help Low-Income Families Register for Child Tax Credit
This week, the Internal Revenue Service released a new resource page on Advance Child Tax Credit payments, which are scheduled to begin on July 15. The page includes a link to the new online non-filer sign-up tool designed to help eligible families who don’t normally file tax returns register for the advance payments. Under the ARP, the maximum Child Tax Credit was increased to $3,000 per child (up from $2,000 per child) and to $3,600 for children under the age of six. To help working families access this support sooner, the ARP authorized the IRS to issue the Child Tax Credit as advance monthly payments rather than having taxpayers wait to claim the credit on their tax returns. The IRS anticipates that about 88% of families with children will receive the advance payments automatically. The IRS is encouraging community-based nonprofits to spread the word about the new non-filer sign-up tool and other resources on the Child Tax Credit to help more families with children access these advance payments.
NC House Committee Approves Bill to Create Retirement Benefit Program for Some Nonprofit Employees
On Tuesday, the NC House Commerce Committee approved a bill (H.B. 899) that would create a new state-run retirement program for workers at small businesses and nonprofits that do not offer employer-provided retirement benefits. The NC Work and Save Program would make it easier for many nonprofit employees to create individual retirement accounts (IRAs) to plan for retirement savings, and to make regular contributions to their IRAs. The Center supports this bill since it could help many small nonprofits offer retirement benefits to their staff for the first time. Two more committees would need to approve the bill before the full House votes on it.
NC House Committee Approves Bill to Protect Student Borrowers
Yesterday, the NC House Committee on Education-Universities approved a bill (H.B. 707) that would establish a Student Borrowers' Bill of Rights in North Carolina. This proposal would create several new protections for student borrowers and add new regulation of student lenders. The Center supports this bill since it could help more North Carolinians – including many nonprofit workers – access the Public Service Loan Forgiveness (PSLF) Program. The PSLF Program helps make nonprofit careers sustainable for many workers with college debt. The Center for Responsible Lending has prepared a useful fact sheet on the ways the Student Borrowers’ Bill of Rights could help North Carolinians with student debt. Two more committees would need to approve the bill before the full House votes on it.
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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.