November 19, 2021
In this issue...
State budget includes $745 million in new funding for nonprofits
State tax cuts and spending increases could create future challenges for nonprofits
Is your nonprofit experiencing delays with your state contracts or payments?
U.S. House of Representatives approves $1.75 trillion federal spending plan 
President Biden signs bipartisan infrastructure legislation into law
OSHA suspends implementation of vaccination requirement for large employers 
Nonprofits can help families access COVID-19 vaccinations for children
Lawsuit challenges new state legislative and congressional districts 
Share information about job vacancies at your nonprofit
Final version of high school athletics legislation removes language limiting nonprofit independence
NC House approves election law changes
Sign onto letter to support extension of universal charitable deduction
New report finds Census undercount in North Carolina
State Budget Includes $745 Million in New Funding for Nonprofits
This week, nearly four months after the beginning of the state’s fiscal year, both the NC Senate and NC House of Representatives approved the final version of the state budget for FY2021-23 (S.105). The budget, which was released on Monday, passed both chambers with overwhelming bipartisan support this week, and Governor Roy Cooper signed it into law yesterday. North Carolina was the last state to pass a budget this year.

Based on the Center’s analysis, the budget includes about $745 million in new funding for nonprofits, including $423 million in new investment in nonprofits’ operations and programs and $322 million in support for building projects at nonprofits. Some nonprofit highlights (and a few lowlights) of the budget include:
  • Total spending of $25.9 billion in FY 2021-22 and $27.0 billion in FY 2022-23;
  • Tax cuts, including the gradual lowering of the individual income tax from the current rate of 5.25% to 3.99% beginning in 2027, a significant increase in the state standard deduction (or zero tax bracket), and gradually phasing out the state corporate income tax through 2029;
  • Preservation of all nonprofit tax exemptions, including sales tax refunds;
  • No provision for Medicaid expansion, which would provide health coverage for more than half a million North Carolinians who are in the health coverage gap because they make too much to qualify for Medicaid but not enough to purchase subsidized health insurance plans;
  • $15 million in new funding for free and charitable clinics;
  • $20 million in new funding for Smart Starts;
  • $40 million in new funding for food banks;
  • $16 million in new funding for arts nonprofits and $7 million in new funding for science and children’s museums;
  • $7.5 million in one-time funding and $500,000 per year in new recurring funding for domestic violence agencies; 
  • $7.5 million in one-time funding and $500,000 per year in new recurring funding for sexual assault agencies;
  • $8.8 million in one-time funding for grants to nonprofits providing services to survivors of human trafficking;
  • $2 million in one-time funding to Habitat for Humanity for the production of affordable housing;
  • $11.4 million in one-time funding to YMCAs;
  • $51 million in one-time funding to help nonprofit private colleges and universities offset the effects of the COVID-19 pandemic, and $2.2 million per year in new funding for scholarships to private colleges and universities;
  • $5 million in one-time funding to the NC Rural Center for capacity building grants for community development financial institutions (CDFIs);
  • $29.25 million in one-time funding for trails, much of which will be distributed as grants to nonprofits;
  • More than $102 million in funding for statewide COVID-19 vaccination efforts; and
  • $1 billion in funding for expansion of rural broadband access.

To help you digest the more than 1,400 pages of budget documents, the Center has prepared a chart comparing the nonprofit appropriations and provisions in the final budget with those included in the versions passed by the Senate and House earlier this year. We’ll continue to update this chart as we identify other appropriations or provisions affecting nonprofits, so let us know if you see something that we missed.
State Tax Cuts and Spending Increases Could Create Future Challenges for Nonprofits
As noted above, the state budget includes significant tax cuts, some of which won’t be fully implemented until 2029. Overall, these cuts are likely to reduce state revenues by several billions of dollars per year later this decade and into the future. The state budget also includes many significant new recurring expenses, most notably 5% pay increases for most state employees and public school teachers. The combination of tax cuts and spending increases wasn’t a problem this year because the state currently has several billion dollars in surplus revenue and most of the tax increases don’t take effect for several years. However, later this decade, these tax cuts and spending increases could create challenges for lawmakers in passing a balanced budget (which is required by the state constitution). As a result, future legislatures may have to make difficult decisions about reducing or eliminating state funding for nonprofits or imposing new taxes on nonprofits.

In addition, legislators excluded five urban counties (Wake, Mecklenburg, Guilford, Durham, and Buncombe) from a significant portion of the state budget’s increased investment in public education. As a result, these counties will need to use local revenue – largely in the form of property tax collections – to pay for many of the expenses of their school systems. This could jeopardize local government funding for nonprofits in these counties (as county governments look to cut expenses elsewhere) or create incentives for these counties to impose new taxes, fees, or payments in lieu of taxes on local nonprofits.
Let Us Know: Is Your Nonprofit Experiencing Delays with Your State Contracts or Payments?
This summer, several nonprofits alerted the Center of recent problems they have experienced with state agencies being late in issuing contracts or making payments. The Center has begun discussions with state legislators and state agency officials to identify the sources of the problem and to come up with solutions. 

The Center plans to convene a group of nonprofits this winter to identify the scope of this problem and to work together to develop policy solutions. We hope that nonprofits, legislators, and state officials can collaborate in 2022 to limit state contracting and payment delays to nonprofits. Please let us know if your nonprofit has had challenges with late contracts or late payments from state agencies in the past two years.
U.S. House of Representatives Approves $1.75 Trillion Federal Spending Plan
This morning, the U.S. House of Representatives approved a $1.75 trillion spending plan to implement President Biden’s “Build Back Better” agenda. The Build Back Better plan would include a wide variety of investments in federal programs, including:
  • Continuing the expanded Child Tax Credit ($3,600 per child under age 6 and $3,000 per child aged 6-18) for one year, along with permanent refundability of the tax credit. 
  • Funding for universal pre-K for young children for the next six years.
  • Establishing four weeks of paid family and medical leave, which would be subsidized by the federal government, beginning in 2024. This provision was added last week.
  • Funding for Medicaid expansion in North Carolina and the other 10 states that have opted out of this provision of the Affordable Care Act. This would provide health coverage for more than half a million North Carolinians in the health care coverage gap (who make too much to qualify for Medicaid but not enough to receive health care subsidies).
  • Limiting child care costs for many families for the next six years.
  • Extending by one year the expanded earned income tax credit for childless workers. 
  • Providing $3.2 billion in additional funding for national service programs, as well as $600 million for AmeriCorps.
  • Expanding Medicaid home care services for seniors and people with disabilities. 
  • Providing $150 billion toward public housing, rental assistance, down payment support, and "building more than 1 million new affordable rental and single-family homes." 
  • Investing $555 billion for climate programs, including $320 billion expanded tax credits for clean energy. 

The National Council of Nonprofits has a useful synopsis of key provisions in the legislation for nonprofits.

The Senate could take up the bill later this month. The Senate may make changes to the bill (likely to reduce or eliminate certain programs) to ensure that all 50 Democratic Senators vote for it. Because the legislation is being passed using the budget reconciliation process, it only needs a simple majority vote in both the U.S. Senate and the U.S. House of Representatives, meaning it can pass with only Democrats in Congress voting for it.
President Biden Signs Bipartisan Infrastructure Legislation into Law
On Monday, President Biden signed the Infrastructure Investment and Jobs Act, a $1 trillion bipartisan bill into law. The legislation will provide about $8.7 billion of infrastructure funding for North Carolina, including $7.2 billion for highway projects, $457 million for bridge repairs, $911 million for public transit, $109 million for electric vehicle charging, and $100 million for broadband access. These infrastructure investments should improve transportation, Internet access, and availability of green energy resources for nonprofits and the communities they serve.

The bill also retroactively ends the Employee Retention Tax Credit (ERTC) on September 30, three months earlier than the scheduled expiration date under the American Rescue Plan Act. The early expiration of this refundable payroll tax credit could mean less financial relief for some nonprofits.
OSHA Suspends Implementation of Vaccination Requirement for Large Employers
Last Friday, a three-judge panel in a federal appellate court ordered the U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) to “take no steps to implement or enforce” its Emergency Temporary Standard on COVID-19 vaccinations. The rule would require employers with 100 or more employees – including many large nonprofits – to require their employees to be vaccinated for COVID-19 or to be tested at least once a week.

OSHA has suspended implementation of the employer vaccination rule until it is decided by the courts. Ultimately, the U.S. Supreme Court will likely decide the rule’s fate. If it is ultimately allowed to take effect, the OSHA rule would apply to employers with 100 or more employees, regardless of whether some of these employees are part-time or work offsite. The rule would require unvaccinated employees (e.g., those with medical or religious exemptions) to wear masks in the workplace and to be tested weekly (if they are regularly in the workplace or in contact with others for work) or within seven days of returning to the workplace or being in contact with others for work (if they regularly work remotely). Yesterday, the White House encouraged large employers to follow the rule despite the court ruling and OSHA’s suspension of the rule’s implementation and enforcement.

Regardless of the fate of the OSHA rule, individual nonprofits can still require their employees to be vaccinated for COVID-19. To help your nonprofit answer questions about vaccination policies, see the Center's analysis of vaccination considerations for nonprofits, including tips to help your organization develop a COVID-19 vaccination policy for your employees.
Nonprofits Can Help Encourage Children to Be Vaccinated for COVID-19
Nonprofits are trusted messengers, and many North Carolinians are more likely to take important public health actions if the message comes from a familiar nonprofit organization rather than a government official. Your nonprofit can make a big difference in fighting the COVID-19 pandemic by spreading information about the availability, safety, and importance of vaccines and about the continuing importance of wearing masks and social distancing when in public.

Last week, North Carolina opened vaccines to children between the ages of 5 and 11. Now is a great time for nonprofits that provide services to children and families to help encourage children to be vaccinated for COVID-19. The NC Department of Health and Human Services (DHHS) has developed tools that can help nonprofits spread the word about vaccines, including a search tool for local vaccination sites, talking points, and flyers.
Lawsuit Challenges New State Legislative and Congressional Districts
On Tuesday, a nonprofit and a group of mathematicians and other citizens filed a lawsuit in state court challenging the recently-approved maps that North Carolina will use for its congressional and state legislative districts for elections between 2022 and 2030. The House, Senate, and congressional maps were all approved in party-line votes earlier this month. The lawsuit alleges that the maps are impermissible as racial and partisan gerrymanders and asks the court to: (1) require lawmakers to redraw the maps; (2) use a new set of maps proposed by the mathematicians; and/or (3) delay the March 8, 2022 primary election, which has a filing deadline of December 6, 2021.

Redistricting analysts have noted that the vast majority of the new congressional and legislative districts will be non-competitive. In the past, the Center has expressed concerns that this type of gerrymandering (i.e., overly partisan redistricting plans) diminishes nonprofits’ influence on public policy because it tends to create non-competitive congressional and legislative districts and makes elected officials more responsive to their partisan political donors than to the nonpartisan nonprofits providing services in their districts.
Share Information About Job Vacancies at Your Nonprofit
In October 2021, the National Council of Nonprofits posted an online survey to gauge the scope of the workforce shortage problems for charitable organizations and determine the impact on their abilities to advance their missions. So far, only a few dozen North Carolina nonprofits have responded to the survey. It’s not too late for your nonprofit to take two minutes to complete the survey. Your response will help better understand the scope of workforce shortage problems among North Carolina nonprofits so we can develop policy solutions to help improve the nonprofit workforce. 

A preliminary analysis of the national survey results finds the biggest sources of job vacancy challenges at nonprofits stem from salary competition (80%), inability to find adequate childcare (23%), and vaccination policies (21%).
Final Version of High School Athletics Legislation Removes Language Limiting Nonprofit Independence
This week, the NC Senate and NC House of Representatives gave final approval to a bill (H.B. 91) on the governance and operations requirements on the nonprofit organization that administers interscholastic high school athletic activities in North Carolina. Unlike previous versions of the bill, the final version does not require the state’s memorandum of understanding with the nonprofit to impose strict terms that limit the organization’s board governance, contracting, and fundraising ability and does not make the nonprofit a quasi-governmental entity that is subject to state open meeting laws and public records laws. The bill now goes to Governor Cooper for his consideration.

As part of our policy agenda to support and strengthen North Carolina’s nonprofit sector, the Center opposes government policies that limit nonprofits’ governance as independent, nongovernmental corporations with control over their own organizational policies and practices. This summer, the Center expressed concerns that the original version of this legislation would have created a precedent of the state limiting the ability of a nonprofit organization to operate as an independent organization. The Center is pleased that legislators were able to agree to an arrangement that does not compromise nonprofit independence.
NC House Approves Election Law Changes
Yesterday, the NC House of Representatives approved three bills that would make changes to state election laws. Many of these changes could affect people served by nonprofits.
  1. One bill (S.725) would prohibit nonprofits from providing funding to the State Board of Elections or to county election boards. Legislators expressed concern that some organizations – including nonpartisan 501(c)(3) nonprofits – could provide funding to local elections boards to bolster support in communities with strong partisan leanings. The Senate approved the bill earlier this year, but the House changed the effective date, so it goes back to the Senate for a final vote next week.
  2. Another bill (S.326) would require mail-in absentee ballots to be received by Election Day. Currently, voters must mail their ballots by Election Day, but they have a three-day grace period for their county boards of elections to receive their absentee ballots. Some nonprofit advocates have expressed concerns that, under this bill, postal delays could cause some voters’ ballots to go uncounted. The Senate passed this bill in June, so it now goes to Governor Cooper for his consideration.
  3. A third bill (H.B. 259) would require county boards of election to compare citizenship records for jury duty exceptions with voting rolls and would set standards for post-election audits of voting records by county boards of elections. This bill now goes to the Senate for consideration.

All three bills were approved along party lines, and it is likely that Governor Cooper will veto them.
Sign onto Letter to Support Extension of Universal Charitable Deduction
The universal charitable (non-itemizer) deduction will expire at the end of the year unless Congress takes action to extend it. The giving incentive for individuals who take the standard deduction was created on a bipartisan basis in the early days of the pandemic to generate additional resources to support the work of charitable organizations. It was increased at the end of 2020 to the current level of $300 for individuals and $600 for married couples, but is set to expire on December 31, 2021. The Center has signed onto a letter from the Charitable Giving Coalition urging Congress to extend and expand the universal charitable deduction. We encourage you to take two minutes to sign your organization onto the letter.
New Report Finds Census Undercount in North Carolina
The 2020 U.S. Census may have undercounted the U.S. population by more than 1.6 million people, or 0.5% of the population, according to research from the Urban Institute released this month. The report estimates that North Carolina’s population was undercounted by 0.77% in the Census.

The analysis found that Black and Hispanic/Latinx people had a net undercount of more than 2.45% and 2.17%, respectively, and that young children, or those younger than age five, were likely net undercounted by 4.86%. The research also determined that households with a non-citizen present were probably undercounted by 3.36%, while, nationwide, renters were likely undercounted by 2.13%. Undercounts affect the distribution of federal funding across the country, depriving many communities of resources to which they would be eligible absent the inaccurate data.
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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.