May 28, 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 committees approve bill to make grants to nonprofits that have received COVID relief
NC Senate committees recommend significant state tax cuts
Governor Cooper signs legislation to begin process of allocating American Rescue Plan funds
What type of COVID relief fund would help your nonprofit?
What resources would help you advocate more effectively with lawmakers? 
Center offers updated “halftime report” on state legislation affecting nonprofits
NC House could consider bill to protect student borrowers
NC House to start work on state budget next week
NC Senate committee approves bill to provide bonus payments to workers coming off unemployment
NC Senate committee approves bill to delay 2021 municipal elections
NC Senate Committees Approve Bill to Make Grants to Nonprofits that Have Received COVID Relief
This week, the Senate Finance and Appropriations Committees both approved a bill (H.B. 334) that would make automatic grants to nonprofits and businesses that received Paycheck Protection Program loans, Economic Injury Disaster Loan advances, Job Retention Program grants, Shuttered Venue Operators Grants, or Restaurant Revitalization Fund support. Under the proposal, called the Job Opportunity and Business Saving Grant Program (JOBS Program), 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).

If this proposal were enacted, about $1 billion of North Carolina’s $5.7 billion in aid from the American Rescue Plan Act (ARP) would be allocated on automatic grants to businesses and nonprofits. Legislators could still provide additional relief for nonprofits and small businesses that suffered economic hardships due to the pandemic with some of the remaining funds.

The full Senate could vote on this proposal – which is part of the Senate tax relief legislation (see the next item) – as soon as next week. It is unclear whether the House will give it serious consideration.
NC Senate Committees Recommend Significant State Tax Cuts
The proposal (H.B. 334) approved by the Senate Finance and Appropriations Committees this week also includes a variety of changes to state taxes:
  • Cutting the state individual income tax rate from 5.25% to 4.99%.
  • Raising the state standard deduction from $21,500 to $25,500 for married couples (and $10,750 to $12,750 for single filers) and raising the maximum child tax deduction from $2,500 to $3,000.
  • Phasing out the state corporate income tax (current 2.5%), starting in 2024. For nonprofits, this would eliminate state tax on unrelated business income.
  • Reducing the state franchise tax (nonprofits are already fully exempt, even if they have unrelated business income).
  • Conforming to the IRC on the universal charitable deduction for 2021 (meaning North Carolinians would get to deduct the same $300/$600 in contributions on their state taxes that they can deduct on their federal taxes. In 2020, North Carolina decoupled from federal tax law (i.e. taxed these charitable contributions).

These proposed tax law changes would likely mean tax cuts for businesses (through the cuts to the franchise tax and corporate income tax), low-income North Carolinians (through the higher standard deduction and increased child tax deduction), and wealthy North Carolinians (through the reduction in the individual income tax rate). Collectively, these tax law changes would reduce state revenue by about $1.4 billion in FY2022-23 and by about $2 billion per year once they are fully implemented four years from now. This revenue reduction could create challenges for future state investment in the work of nonprofits through grants, contracts, and appropriations.
Governor Cooper Signs Legislation to Begin Process of Allocating American Rescue Plan Funds
On Monday, Governor Roy Cooper signed into law a bill (S.172) that would formally create a State Fiscal Recovery Fund to spend the state’s $5.7 billion in aid from the ARP, as well as create a Local Fiscal Recovery Fund for $3.8 billion in ARP funding for local government in North Carolina. The bill, which also formally appropriates other pass-through funding from ARP, is the first step in appropriating the state’s ARP funding.
What Type of COVID Recovery Fund Would Help Your Nonprofit?
The Center is advocating for legislators to use some of the state’s ARP funds to create a nonprofit relief fund in the next state COVID-19 response package. Your input is essential in coming up with a plan to provide meaningful relief for nonprofits. Specifically, it would be helpful to know what type of economic hardships your nonprofit has experienced due to COVID-19 so we can advocate for a grant program with appropriate eligibility criteria. Examples of possible criteria could include:
  • 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.

Let us know what type of eligibility criteria for a nonprofit relief fund would make the most sense for your nonprofit and other organizations in your community. Thank you if your nonprofit has already provided input. The Center has included input we have received in the information sheet on the need for a nonprofit recovery fund and the example of the structure of a nonprofit relief fund that we have shared with legislators.
What Resources Would Help You Advocate More Effectively with Lawmakers?
The Center wants to learn more about who among our Nonprofit Policy Update readers has an interest in speaking directly with lawmakers and legislative assistants, and what resources would help you feel more confident in your ability to do so effectively. Please take 4 minutes to take a quick survey to let us know. The results will help us prioritize the resources we develop to help your nonprofit advocate on policy issues.
Center Offers Updated “Halftime Report” on State Legislation Affecting Nonprofits
With the NC General Assembly roughly mid-way through it 2021 legislative session, the Center has prepared a “halftime report” on the status of dozens of bills affecting the work of charitable nonprofits. The Center continues to update this report to reflect new bills and changes to existing legislation.
NC House Could Consider Bill to Protect Student Borrowers
A bill (H.B. 707) introduced in the NC House of Representatives earlier this month 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 for 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 that the Student Borrowers’ Bill of Rights could help North Carolinians with student debt. A House committee could consider this bill as soon as next week.
NC House to Start Work on State Budget Next Week
One of the main roles of the state legislature is to approve a state budget to set spending levels and priorities for state government. The state budget typically includes funding for a wide variety of appropriations, grants, and contracts for nonprofits that provide public services and for state agencies that work in partnership with nonprofit organizations. This year, legislators need to approve a budget for the period from July 1, 2021 through June 30, 2023, although they can revise the second year of this budget next spring.

Governor Cooper released his proposal for the state budget in March, recommending a total of $27.3 billion in state spending for FY2021-22 and $28.6 billion for FY2022-23. Leaders in the NC Senate and NC House of Representatives are still negotiating the size of the budget, but it will likely include considerably less spending than Governor Cooper’s proposal. The Senate is supposed to start the legislative budget process this year, but it has not yet begun to hold committee meetings on a budget proposal. Since the Senate’s delay limits time for the two legislative chambers to agree on a final budget (and get Governor Cooper to sign it into law) by June 30, the House will begin working on its version of the budget next Tuesday. 

If legislators are unable to reach an agreement on the budget by June 30, current state spending levels will remain in place.
NC Senate Committee Approves Bill to Provide Bonus Payments to Workers Coming Off Unemployment
Yesterday, the Senate Commerce and Insurance Committee approved a bill (H.B. 128) that would provide $1,500 payments to workers on unemployment who find jobs within 30 days and $800 payments to workers on unemployment who find employment within 60 days. These proposed bonus payments are intended to respond to concerns about labor shortages by offering incentives for North Carolinians to return to work. In 24 other states, Governors have announced plans to cancel some or all of the federal unemployment benefits. These federal benefits including: $300 weekly supplemental payments to unemployed workers; 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.

Separately, Governor Cooper issued Executive Order No. 216 last Friday. This executive order reinstates work search requirements for North Carolinians receiving unemployment benefits. Under state law, individuals must certify that they have made three job contacts with potential employers each week they are receiving unemployment benefits. Governor Cooper had temporarily lifted this work search requirement last March.
NC Senate Committee Approves Bill to Delay 2021 Municipal Elections
Yesterday, the NC Senate Redistricting and Elections Committee approved a bill (S.722) that would delay many municipal elections scheduled for this fall until March 2022. Earlier this year, the U.S. Census Bureau announced that Census data used for redistricting will not be available until September 30, 2021. Overall, 62 municipalities throughout North Carolina are scheduled to have elections this fall. Cities and towns where officials are elected to represent districts will need to redraw those districts before the election. The Senate bill would postpone those elections until next spring and require affected municipalities to review and revise their districts once Census data is available this fall. The full Senate could vote on the bill next week.
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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.