May 20, 2022
In this issue...
Has your nonprofit lost board members because of new conflict-of-interest law?
NC Child highlights ways legislators can improve child care in North Carolina
Legislators could consider several nonprofit priorities during 2022 short session
Let us know: What state agencies are models of strong partnerships with nonprofits?
It's not too late to claim Employee Retention Tax Credit for 2020 or 2021
Phase 2 of Business Recovery Grants open through June 1
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 discussions or votes on grants, appropriations, or contracts with nonprofits on whose boards they serve. The law doesn’t actually prohibit local elected officials from serving on nonprofit boards. Nonetheless, earlier this year, several nonprofits told the Center that they have had city council members and/or county commissioners resign from their boards as a result of the law. This week, the Center learned that some counties and municipalities are changing their procedures for funding nonprofits to ensure that local elected officials continue serving on nonprofit boards.

If the new law is still causing problems for nonprofits, the Center will need to work with legislators in the next couple of weeks to develop a solution that can be considered during the 2022 short session. To inform our advocacy efforts, it is important for us to understand whether this remains an issue for nonprofits and, if so, what types of organizations are at risk of losing board members because of the new law. 

If your nonprofit has local elected officials on your board – or if county commissioners or city council members have recently resigned from your board – please send us a quick email letting us know:
  1. Whether your nonprofit has heard from local elected officials who serve on your board with concerns about the new law.
  2. Whether any of these elected officials have resigned from your board or have indicated that they may need to do so.
  3. Which county, city, or town has elected officials who serve or served on your board.

As we hear from nonprofits, we’ll keep you posted about possible changes to the law and ways your nonprofit can engage in advocacy efforts.
NC Child Highlights Ways Legislators Can Improve Child Care in North Carolina
The recent National Council of Nonprofits report on nonprofit workforce shortages identified issues related to access to child care as the second biggest reason that nonprofits are struggling to hire and retain staff. This week, NC Child published an excellent blog post explaining three things the NC General Assembly can do during the short session to improve access to child care and early childhood education:
  1. Improving accessibility for working families by funding a new child care subsidy rate structure;
  2. Increasing staffing for early childhood education by providing funding to expand the Child Care WAGE$ program statewide; and
  3. Making child care more affordable through increased investments in Smart Start, NC Pre-K, and Child Care Subsidy Assistance.

If your nonprofit wants to stay in the loop in child care and early childhood education issues, sign up for NC Child’s communications.
Legislators Could Consider Several Nonprofit Priorities During 2022 Short Session
The NC General Assembly officially began its 2022 short session on Wednesday. During the short session, legislators will consider changes to the state budget for FY 2022-23. Lawmakers may also consider other bills that passed one chamber during the 2021 session, that were recommended by legislative study committees, or that make changes to the state constitution or election laws.

The NC Senate and NC House of Representatives will begin to hold committee meetings and vote on bills next week. Legislative leaders have said that they hope that this year’s short session will conclude by the first week of July. Unlike most other states, the North Carolina’s state constitution doesn’t limit the number of days the state legislature can be in session each year, so it’s possible that the short session could continue later into the summer.

This year, the Center is advocating for the General Assembly to enact three major policy solutions that would help nonprofits:
  1. Making any necessary changes to the new state law that has caused some local elected officials to resign from nonprofit boards. See the first item in today’s policy update for more information and to share your nonprofit’s current experiences.
  2. Modernizing state charitable solicitation laws. For several years, nonprofits have told the Center about several concerns they have with the charitable solicitation licensing process. These include: (a) a lack of alignment between the automatic extension period for charitable solicitation renewals and Form 990 extensions, which causes some nonprofits to appear to have expired charitable solicitation licenses for a couple of months each year; (b) an unnecessary notarization requirement that makes it harder for nonprofits to complete their renewal forms; and (c) a requirement that many nonprofits that file Form 990-N with the IRS complete a much more complicated financial form for purposes of state charitable solicitation licensure. Last year, Representative Brandon Lofton (D-Mecklenburg) introduced legislation to fix these issues (H.B. 695), and the NC House of Representatives passed the bill unanimously. The Center has been working with legislators from both chambers to help get the Senate to also pass this bill.
  3. Addressing several challenges that nonprofits face when they provide public services through state grants and contracts. For years, nonprofits have told the Center about a variety of issues they have with state grants and contracts including late contracts, late payments, underpayment for indirect costs, and overly complex application and reporting requirements. Thanks to nonprofits' input – and particularly your responses to our recent action alert – the Center is working with legislators and executive branch officials on possible solutions to these issues. Some of these solutions could be included in this year’s state budget. In addition, Governor Roy Cooper has proposed creating a Living Wage for Contracts Reserve fund that would help ensure that state contractors, including some nonprofits, get increased state funding so they can pay workers at least $15 per hour.
  4. Improving access to affordable, high quality child care. See the second item in today’s policy update for more information from NC Child about three specific ways that legislators can improve child care in North Carolina.
  5. Expanding Medicaid to provide health coverage for about 600,000 North Carolinians whose incomes are too much to qualify for Medicaid currently but not enough to receive health care subsidies in the Affordable Care Act health marketplace. The Center supports Medicaid expansion for two reasons. First, it would complement the work of many nonprofits that provide services to North Carolinians who don’t currently have adequate health coverage. Second, it would provide health coverage for some employees of nonprofits that don’t offer group health plans and whose salaries leave them in the health care coverage gap. Legislators are unlikely to consider Medicaid expansion during the short session, but there is a good chance that they will vote on Medicaid expansion and other health care policy changes during a special legislative session this fall.

We will keep you posted on the progress of these issues – and of any opportunities for you to make your voice heard on them – in these weekly policy updates. We’ll also let you know if other legislative issues of interest to nonprofits arise during the short session.
Let Us Know: What State Agencies Are Models of Strong Partnerships with Nonprofits?
Two weeks ago, the Center asked you about challenges your nonprofit is experiencing with state agencies with which your organization has grants or contracts. More than 40 nonprofits responded with examples of challenges they have experienced including late contracts, late payments, underpayment for indirect costs, burdensome application and reporting requirements, midstream changes to contract outcomes and deliverables, and lack of clear communication. Even though we didn’t ask about positive experiences, a few responses also noted state agencies that are particularly good partners with nonprofits.

State agencies partner with nonprofits in many important ways, sometimes through contractual relationships and often through other types of collaborations that benefit communities throughout the state. As we work to strengthen nonprofit partnerships with state government to help in our shared goals of serving communities, it is helpful to learn more about state agencies that work well with nonprofits. These positive examples can serve as models for effective nonprofit-government partnerships.

Please share with us examples of state agencies that have been strong partners with your nonprofit. This could include agencies that generally delivery contracts on time, make timely payments to nonprofits, strive to pay nonprofits for the actual cost of providing services, have clear communication with nonprofits, set appropriate and consistent expectations for contract deliverables and outcomes, and/or collaborate with nonprofits in other ways to ensure that they provide the best possible services for communities. It would be helpful if you can let us know the state agency/division with which your nonprofit has a contract.
It's Not Too Late to Claim Employee Retention Tax Credit for 2020 or 2021
Although the Employee Retention Tax Credit (ERTC) expired at the end of September 2021, there is still time for eligible nonprofits to claim this refundable payroll tax credit (translation: it’s essentially a grant for nonprofits) if their operations were shut down because of government closure orders or they suffered revenue losses in 2020 or 2021. Steven Woolf of the National Council of Nonprofits explains the basics of how nonprofits can still claim the ERTC retroactively for 2020 and 2021. The blog post also provides real-life examples of nonprofits that have used the ERTC to maintain employees and hire new staff, and answers common questions nonprofits are asking about the ERTC.
Phase 2 of Business Recovery Grants Open Through June 1
Earlier this month, the NC Department of Revenue (DOR) opened Phase 2 of the Business Recovery Grant program. Some nonprofits are eligible to apply for financial support through this program. The Business Recovery Grant 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. 

DOR is accepting applications from eligible businesses and nonprofits through June 1. Grants will be awarded for up to 10% of lost revenue for organizations that 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. Some nonprofits that received less than $500,000 in Phase 1 Business Recovery Grants may be eligible for an additional grant in Phase 2 (although the total amount of their grants can’t exceed $500,000). Additional information and applications are available at the DOR Business Recovery Grant program website.
The Center 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. Don’t miss out – become a member to ensure you continue receiving these updates along with many other valuable benefits.
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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.