A new law (H.B. 791) that took effect on July 15 addresses many of the issues that nonprofits have experienced with their grants and contracts with the NC Department of Health and Human Services (DHHS). Specifically, the new law makes four reforms to DHHS grants and contracts with nonprofits:

1. It establishes a de minimis 10% indirect cost rate for nonprofit grants/contracts with DHHS, regardless of whether funding initiates from federal or state funds. Many nonprofits currently have contracts that provide for much lower indirect cost rates or that make no allowance for nonprofits’ indirect costs.
2. It requires DHHS to provide most nonprofits with multi-year contracts rather than one-year contracts that are renegotiated every year. This change should reduce much of the red tape and contracting delays that nonprofits experience during the contract renewal process.
3. It provides three-month contract extensions for most nonprofits to ensure continuity of services – and of payments to nonprofits – after the end of nonprofits’ multi-year contracts with DHHS. This change is intended to help prevent many of nonprofits’ payment delays that have resulted from understaffing at DHHS.
4. It requires legislative staff to provide nonprofit contact information for nonprofits receiving directed grants in the state budget to DHHS in a timely manner. DHHS has identified the lack of clear communication about nonprofit contact information as a cause of some of its contract and payment delays.

This new law is based on input from dozens of nonprofits that have shared their stories about late payments, late contracts, underpayment for indirect costs, and red tape in their grants and contracts with DHHS. Now that the law has been in effect for two months, the Center is trying to gauge whether it is having its intended effect of improving the contracting process for nonprofits that work with DHHS. If your nonprofit has a grant or contract with DHHS, let us know whether the law has had an impact on your organization’s indirect cost rate, contract extension, or timeliness of payments. If the law is not having its intended impact, the Center plans to work with DHHS on clarifying guidance and, if necessary, with lawmakers on additional changes to contracting laws in 2023.

On Wednesday, Governor Roy Cooper called on the NC General Assembly to change a state law that will require North Carolinians receiving student loan forgiveness – including many nonprofit employees – to pay state income tax on the amount of their loans that are forgiven. A provision of the 2021 American Rescue Plan Act excludes student loan forgiveness from income for federal tax purposes, meaning borrowers – including nonprofit employees – who receive loan forgiveness through the Public Service Loan Forgiveness (PSLF) program or the new U.S. Department of Education student debt cancellation program will not need to pay federal income tax on the amount of their student loans that are forgiven. However, the NC Department of Revenue recently clarified that student loan forgiveness is taxable income for the purposes of state income taxes, so borrowers will need to pay state income tax on the amount of their student loans that are forgiven. Unless the NC General Assembly changes this law next year, North Carolina will be one of only seven states to tax borrowers’ student loan forgiveness.

The Center supports a change in the state law since the current tax on forgiven student loans will result in a tax increase for many nonprofit employees. The Center also recognizes that it would be particularly beneficial if this change could be made retroactive to January 1, 2022 since many nonprofit employees have received loan forgiveness through PSLF this year. Realistically, however, it may be difficult to convince the General Assembly to change the law since many state lawmakers are opposed to student loan forgiveness and since the tax on forgiven student loans could generate more than $500 billion in state revenue, which could help offset potential declines in state tax collections resulting from upcoming tax rate cuts and possible economic challenges.

Nonprofit employees have just a month and a half left to take advantage of the temporary Public Service Loan Forgiveness (PSLF) waiver. This temporary waiver makes it possible for many nonprofit workers to receive credit for past periods of repayment that would otherwise not qualify for the PSLF program, thereby reducing or potentially eliminating student loan debt.  

The PSLF program forgives the balance of most federal student loans after ten years working for charitable nonprofits and governments. Many nonprofit workers with student debt may not be aware of the benefits of the PSLF program or realize that the temporary waiver can provide immediate forgiveness for some borrowers. So far, borrowers from North Carolina have been approved for more than $246 million in student loan forgiveness under the waiver.

Here are three things your nonprofit can (and should) do today to help ensure that your eligible employees take advantage of the temporary PSLF wavier:

1. Remind your employees about the temporary PSLF waiver and the October 31 deadline in any upcoming staff meetings or communications with your employees. You can share the U.S. Department of Education’s free resources about the waiver (note that the website has had some delays recently due to the high level of interest in the waiver).
2. Make it easier for your employees to apply for the waiver by ensuring they know your nonprofit’s employer identification number (EIN) and the contact information for the person on your staff to direct PSLF forms and related questions.
3. Encourage your employees to check out The Institute of Student Loan Advisors (TISLA), a nonprofit with free information about PSLF, how you might qualify, and all things student loans.

National Voter Registration Day (September 20) is just four days away! This nationwide celebration of democracy is a great opportunity for nonprofits to ensure that their staff, volunteers, and community members are registered to vote. Sign up today to join the nationwide effort to register hundreds of thousands of voters on September 20.

One of the easiest ways nonprofits can help promote elections is by giving your staff paid time off to vote during Early Voting or on Election Day. To help ensure that nonprofits show leadership when it comes to empowering the millions who work daily to create a more equitable society, Nonprofit VOTE, the National Council of Nonprofits, and several other national organizations have launched the Nonprofit Staff Vote campaign.

The Center has proudly signed on to the Nonprofit Staff Vote campaign, and we encourage your nonprofit to join also. To model best practices, the Center is sharing its policy (below) allowing staff to take time off to vote or to volunteer as nonpartisan poll workers. Feel free to borrow and adapt this language to fit into your organization’s personnel policies.

“Voting and Election Day. The Center encourages all employees who are eligible to vote to participate fully in the electoral process. Any Center employee may take paid time off work on Election Day or during the Early Voting period to vote in any primary, general, or run-off election. Employees should notify their supervisors of the time they plan to take off for voting.

“Center employees also may take up to one day per year of paid time off to volunteer in a nonpartisan role as a poll worker on Election Day or during the Early Voting period. Employees must get prior written approval of their supervisors (which shall not unreasonably be denied) before taking this paid time off. Employees volunteering for political parties or campaigns on Election Day or during the Early Voting period may not be paid for their time engaging in partisan political activities, but they may take annual leave for any time spent volunteering for candidates or political parties.

“Paid time off for voting and nonpartisan election volunteer work is in addition to annual leave, sick leave, and personal leave that employees have accrued. Employees are not required to use annual leave, sick leave, or personal leave when they take paid time off to vote or to volunteer as a nonpartisan poll worker pursuant to this policy.”

The NC Senate and NC House of Representatives will be in session next Tuesday, but lawmakers are unlikely to vote on any legislation next week. Notably for nonprofits, legislators are not expected to take action until after the election on legislation to expand Medicaid coverage to adults with incomes up to 133% of the federal poverty level. Both the Senate and the House passed versions of Medicaid expansion this summer, but leaders in the two chambers have been unable to agree on final details of the legislation. Over the past two weeks, Governor Cooper and the NC Department of Health and Human Services have encouraged legislators to pass Medicaid expansion this month, noting that the state loses about $500 million per month in federal revenue for each month that goes by without Medicaid expansion.

As we explained in a Care4Carolina blog post this summer, the Center strongly supports Medicaid expansion because it would support the work of charitable nonprofits in three ways:

1. Complementing the work of many nonprofits that provide services to North Carolinians who don’t currently have adequate health coverage;
2. Providing 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; and 
3. Providing payment for some types of Medicaid-eligible services that nonprofits currently provide to clients for free.

The Center continues to work with our partners to advocate for legislators to come to an agreement and pass Medicaid expansion this year. We will let you know when there is a need for your nonprofit to take action.

Last week, the NC State Board of Elections (NCSBE) began mailing out absentee ballots for the November 8 election to thousands of North Carolinians who have already requested to vote by mail. Now is a great time for your nonprofit to remind your staff, volunteers, and the people you serve that they should request an absentee ballot soon if they plan to vote by mail this fall. Voters can request absentee ballots either through the NCSBE online absentee ballot portal or by completing a print form (available in English and Spanish) and mailing it or hand delivering it to their county board of elections. The deadline to request an absentee ballot is November 1, but it is better to request it sooner so there is sufficient time to receive it by mail and submit it to the county board of elections. Voters who use absentee ballots can now track the status of their ballots online.

Census data released this week showed that child poverty dropped sharply in 2021, reaching a record low of 5.2%, down from 13.7% in 2018. A report from the Center on Budget and Policy Priorities (CBPP) explains that the expanded child tax credit was the most significant reason for this drop in child poverty. The American Rescue Plan Act (ARPA) expanded and improved the child tax credit in three important ways:

1. It increased the amount of the tax credit from $2,000 per child to $3,600 for children under the age of six and $3,000 for children ages 6-17.
2. It made the credit fully refundable, providing financial assistance to many low-income families who don’t normally pay income taxes.
3. It provided advance payments of the credit for the final six months of 2021, providing immediate cash assistance to millions of families in the form of monthly checks.

The expanded and prepaid child tax credit complemented the work of many nonprofits by helping families pay for child care, food, home and car repairs, and medical expenses last year. Congress allowed these improvements to the child tax credit to expire at the end of last year. The CBPP report projects that child poverty will increase significantly this year unless Congress acts to restore the expanded child tax credit. The Center will let you know if there are opportunities to take action to advocate for the restoration of the enhanced and expanded child tax credit.

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.