Nonprofit Policy Update - November 15, 2024

Nonprofit Policy Update of the North Carolina Center for Nonprofits

DNovember 15, 2024

In this week's issue...

This week’s update provides a preview of next week’s state legislative session and shares information about a bill that narrowly failed in the U.S. House of Representatives that could have jeopardized some nonprofits’ tax-exempt status. We also seek your input on newly-elected state and federal officials with nonprofit connections and on nonprofit sector policy priorities for next year.

State Legislators Set to Return to Raleigh in Next Week

Members of the NC General Assembly will return to Raleigh for their next mini-session next week. Unlike the past two mini-sessions, which focused exclusively on Hurricane Helene relief, next week’s session could include votes on a variety of proposals from the 2023-24 legislative session that have not yet become law. The results of this fall’s election will make it more difficult for the NC House of Representatives to override gubernatorial vetoes over the next two years. Because of this change in the dynamic between the General Assembly and the Governor, it is possible that lawmakers may take up some bills that are expected to have party-line votes this month, since it may be easier for legislators to override vetoes this fall than in 2025.

Lawmakers also could vote next week to override Governor Roy Cooper’s veto of a bill (H.B. 10) that makes several adjustments to the state budget for FY2024-25, which began on July 1. The bill includes funding for several priorities, including:

More than $463 million in additional funding for the Opportunity Scholarship program. Last year, legislators greatly expanded eligibility for this voucher program for families with students attending (mostly nonprofit) private schools, and about 55,000 families are currently on the waitlist for the Opportunity Scholarship program. The funding in the bill would clear the waitlist for the current school year and provide significantly more funding for the program in future years. The bill also would require private schools to reimburse families for tuition payments they have already made this school year that will be covered by Opportunity Scholarships.
About $25 million in additional funding to clear the waitlist for the Education Savings Account program that provides support for families of children with special needs.
Additional funding for public K-12 schools and community colleges to cover their expenses from higher enrollment this school year. The bill that passed this week did not provide additional pay raises for public school teachers or state employees beyond the raises they already received on July 1.
$377 million in additional funding ($277 million in recurring funds and $100 million in one-time funds) for Medicaid to cover increased enrollment and other costs of providing services. This funding was about $81 million less than the NC Department of Health and Human Services indicated was necessary to cover Medicaid expenses for the current fiscal year.
Up to $190 million in additional funding for broadband access in rural counties.

A separate provision of that bill would require local sheriffs to notify Immigration and Customs Enforcement (ICE) every time a North Carolinian who is undocumented is in their custody.

U.S. House (Barely) Fails to Pass Bill Targeting Some Nonprofits’ Tax-Exempt Status

Congress returned to Washington this week, and the U.S. House of Representatives quickly got to work considering legislation that could affect nonprofits. On Tuesday, the House voted on a bill (H.R. 9495) that would have given the U.S. Treasury Secretary broad authority to revoke the tax-exempt status of “terrorist supporting organizations” (see the next paragraph for more details about why this could have been problematic for some nonprofits). Because of procedural rules, the bill required a two-thirds supermajority to pass the House. Despite some bipartisan support, the bill narrowly failed with 256 members voting for it and 145 voting against it. While it is unlikely that the bill will become law this year, it is quite possible that Congress will consider the provision in tax legislation next year.

Additional background information: Under existing law, the Treasury Secretary can revoke the tax-exempt status of organizations that the federal government has designated as terrorist organizations. Only nine organizations (none of which is based in North Carolina) have currently lost their tax-exempt status under the existing statute. The bill that failed in the House this week would have expanded the Treasury Secretary’s ability to revoke the tax-exempt status of “terrorist supporting organizations,” which is a much broader and less clearly defined set of nonprofits than those that are covered by the current law. Because the designation of an organization as a “terrorist supporting organization” would be made by the Treasury Secretary and is somewhat subjective, the Center and other nonprofits are concerned that the bill could have given a future Treasury Secretary broad authority to revoke the tax-exempt status of a nonprofit largely because they disagreed with the organization’s mission or policy positions.

Let Us Know: Who Do You Know Among Our Newly-Elected Leaders?

As a result of last week’s election, seven of the 10 members of the Council of State (the Governor and the other nine statewide elected offices) will be new in 2025, and North Carolina will have five new faces among our 14 U.S. House representatives next year. The 2025 NC General Assembly will probably include six new Senators (out of 50 total) and 18 new House members (out of 120 total). Many of our newly-elected leaders have experience working for, and volunteering with, charitable nonprofits. As the Center advocates next year for state and policy solutions that help nonprofits operate more effectively, it is extremely helpful to know who in our network has connections with our federal and state elected officials. Please take a moment to drop us a line to let us know which newly-elected (or newly re-elected) members of the Council of State, Congress, or the NC General Assembly you know personally.

Let Us Know: What Policy Issues are Important for Your Nonprofit?

As a regular reader of our Nonprofit Policy Updates, you are likely aware that the Center advocates on a wide range of state and federal public policy issues that affect all or most 501(c)(3) nonprofits operating in North Carolina. Many of the issues on the Center’s 2024 public policy agenda are included because of input from your organization and other nonprofits around the state. Right now, the Center is in the process of developing its policy agenda for 2025. Let us know if there are any nonprofit sector issues that are important for your organization that we should consider adding to (or keeping in) our policy agenda for 2025.

Center Asks Lawmakers to Support (and Listen to) Western NC Nonprofits

Last month, the NC General Assembly approved two bills providing support for communities that were affected by Hurricane Helene. Legislators will return to Raleigh next week to consider additional hurricane relief proposals. The Center remains in contact with state legislators to share ways that they can engage with and provide assistance to nonprofits as they direct state aid to hurricane relief and recovery. Among other things, the Center is asking legislators to:

Listen to the input from nonprofits in affected communities and nonprofit organizations that are helping with relief and recovery efforts – both now and throughout the long recovery period.
Consider establishing a nonprofit relief and recovery fund to provide state assistance to western NC nonprofits that may not receive sufficient federal support or private funding to fully recover from the effects of Hurricane Helene.
Ensure that nonprofits are eligible for any and all state support – including funding and regulatory relief – that is provided to businesses that have been affected by the hurricane.
Help minimize western NC nonprofits’ expenses so that they can use their resources for recovery and providing services in their communities.
Hold western North Carolina nonprofits harmless for unemployment insurance liability if they have to furlough or lay off staff because of the impacts of Hurricane Helene. The Center continues to advocate for legislators to maintain or strengthen the protections in Governor Cooper's executive order if they make any further changes to unemployment laws because of the impacts of Hurricane Helene.
Encourage North Carolinians to give generously to help in relief and recovery efforts in western NC. And help ensure that donors don’t forget other nonprofits as they increase their contributions to organizations doing essential disaster relief work and those that have suffered the harshest impacts from Hurricane Helene.

If you and/or your nonprofit was directly harmed by the hurricane, serves people and communities that were affected, or is providing relief and recovery services, please share with the Center any types of legislative assistance that would be helpful for your nonprofit and the people and community you serve. The Center will communicate your needs to state lawmakers working on hurricane relief and recovery legislation and encourages you to reach out to your state legislators directly as well.

Federal Court Could Decide Fate of DOL Overtime Rule Later This Year

On July 1, the first phase of the U.S. Department of Labor (DOL) final rule on overtime pay under the Fair Labor Standards Act (FLSA) took effect. This means that most nonprofit employees making less than $43,888 per year are now eligible for overtime pay when they work more than 40 hours in a workweek.

The second phase of the overtime rule is currently set to take effect on January 1, 2025. At that time, the salary threshold is scheduled to go up to $58,656 per year ($1,128 per week). However, three lawsuits challenging the legality of the overtime rule are pending in two federal courts in Texas, and the courts are likely to issue rulings on some or all of these cases before the end of the year. Apart from these three cases, a September ruling from the U.S. Court of Appeals for the Fifth Circuit held that DOL has the authority to set a salary threshold. This ruling will make it difficult for courts to roll back the July 1 increase in the salary threshold, and it eliminates one (but not all) of the plaintiffs’ arguments for preventing the scheduled January 1 increase from taking effect. For more on the current status of litigation challenging the overtime rule, check out the Center’s updated analysis.

The result of last week’s presidential election increases the likelihood that a court decision could stop the January 1 increase in the salary threshold. If a court issues an injunction that stops the rule from taking effect, it is unlikely that DOL in the Trump Administration will defend the rule, effectively stopping it from taking effect. If the courts allow the January 1 increase in the salary threshold to take effect, it is unclear how DOL will enforce the new rule.

The Center's analysis of the final overtime rule helps nonprofits better understand the overtime rule, its potential impact on North Carolina nonprofits, and compliance options for nonprofit organizations. We continue to update this analysis with information on pending litigation on the rule.

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Nonprofit Policy Update is North Carolina Center for Nonprofits' weekly newsletter of state and federal policy issues that affect all 501(c)(3) nonprofits. Learn about the Center's public policy agenda or contact David Heinen, Vice President for Public Policy and Advocacy, for more information.