September 17, 2021
In this issue...
Take 5 minutes on Monday to ask Congress to extend Employee Retention Tax Credit
NC House and NC Senate make progress on state budget negotiations 
Make your voice heard on state spending priorities
New federal requirements push more nonprofits to consider COVID-19 vaccination policies
NC House of Representatives sends nonprofit remote meeting legislation to governor
New law allows employers to offer exclusive provider benefit plans
Congress works on details of $3.5 trillion budget reconciliation legislation
Nonprofits can help maximize participation in 2021 municipal elections
Governor Cooper vetoes school diversity instruction legislation 
Free recording about local government ARP funding for nonprofits
North Carolina to end waiver of penalties for employment tax filing noncompliance
Take 5 Minutes on Monday to Ask Congress to Extend the Employee Retention Tax Credit
Many nonprofits have benefitted this year from the expanded Employee Retention Tax Credit (ERTC), a federal COVID-19 relief program that will expire on September 30. The ERTC is a refundable tax credit (translation: nonprofits are eligible for it) that organizations can take if they had a 20% drop in gross revenue for the first, second, or third quarters of 2021 compared to the same quarter in 2019. Under the ERTC, nonprofits can receive tax credits of up to $7,000 per employee per quarter. Congress could provide significant ongoing support by extending nonprofit eligibility for the ERTC through the fourth quarter of 2021 and through 2022.

Your voice can make a big difference in providing this important federal support for nonprofits. Please take three minutes on Monday to tweet your U.S. Senator and U.S. Representative asking them to:
  1. Allow charitable nonprofits to access the ERTC during the fourth quarter of 2021;
  2. Extend nonprofit eligibility for the ERTC through 2022 to help ensure a strong economic recovery from the pandemic; and
  3. Amend the definition of nonprofit “gross receipts” for the ERTC program to better reflect revenue available to support the work of nonprofits amid the pandemic.

You can use this sample tweet:
The Employee Retention Tax Credit has been a true lifeline for nonprofits. We urge Congress to extend the ERTC to the 4th quarter of 2021 and through 2022 to help nonprofits bring employees back on the payroll and serve our communities. #Relief4Charities

You can find Twitter handles for your two U.S. Senators and one U.S. Representative here. If you need to look up your U.S. Representative, you can do that here.

Not on Twitter? Not a problem – email them instead. You can use the numbered talking points above in your email and link to this national nonprofit letter with more details on the importance of extending the ERTC for nonprofits:
NC House and NC Senate Make Progress on State Budget Negotiations
The NC Senate and NC House of Representatives are continuing to negotiate a final version of the state budget for FY2021-23 (S.105) in hope of reaching an agreement by the end of next week. Once legislators have finalized their version of the budget, they plan to share it with Governor Cooper and then negotiate with him on final spending and provisions before voting on it next month. 

Both chambers’ budgets included significant new funding for nonprofits (about $709 million in the House budget and about $300 million in the Senate budget), and a variety of other provisions that would affect the work of some or all charitable nonprofits in North Carolina. To help your nonprofit understand the differences between the two versions of the budget, the Center has updated its chart comparing various appropriations and provisions affecting nonprofits in the House-approved budget and the Senate-approved version. 

The Center continues to advocate with legislators and the Governor’s Office to include favorable nonprofit provisions in the final version of the budget. Specifically, the Center is asking that the final budget include:
  1. The Senate’s JOBS grant program, which would provide automatic grants to nonprofits that received Paycheck Protection Program (PPP) loans and other forms of COVID-19 economic relief. Based on our analysis of PPP data, the Center estimates that nonprofits would receive about $40 million in JOBS grants, but that nonprofits would receive no benefits from the House’s alternative proposal to provide tax deductibility for PPP loan amounts for businesses. 
  2. A provision to allow counties and municipalities to invest some of their American Rescue Plan Act (ARP) funding in grants to nonprofits and economic assistance to nonprofits. The ARP and U.S. Treasury Department guidance implementing the ARP clearly allow local governments to use funds for grants or aid to nonprofits, but the Center has heard from local governments with concerns that existing state law limits their ability to provide economic assistance to nonprofits and to make some grants to nonprofits to provide services that would benefit communities. 
  3. Provisions to allow North Carolinians to use temporary heightened incentives for charitable giving on their state taxes in 2021 by conforming to federal tax laws. The Senate budget includes these charitable giving incentives, which would likely increase donations to North Carolina nonprofits this year.
  4. Requirements that certain state agencies report on late payments or late contracts with nonprofits that provide public services through state grants and contracts. The Center has recently heard from several nonprofits about problems with late contracts and late payments on state grants. Having state agencies report on these late contracts and late payments could be a first step in identifying the source of these delays and developing solutions.
Make Your Voice Heard on State Spending Priorities
With legislators negotiating the details of the final state budget, now is a great time to find your state House and Senate members and call them to let them know what types of state funding would help your organization and your community. Before you get started, take a few minutes to read the blog post from friend of the Center Lisa Hazirjian with tips on how to call your elected officials with confidence – complete with an easy-to-use worksheet to ensure that your call is effective and relatively stress-free.
New Federal Requirements Push More Nonprofits to Consider COVID-19 Vaccination Policies
Last week, President Joe Biden issued an executive order requiring all federal contractors and subcontractors – including nonprofits that contract with the federal government – to be vaccinated for COVID-19. The executive order only applies to nonprofits that are federal contractors or subcontractors, not those that receive federal grants. In additional, two federal agencies are developing regulations that will require more nonprofit employees to be vaccinated for COVID-19:
  1. The U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) will soon issue an emergency rule requiring employers with more than 100 employees – including many large nonprofits – to: (a) require their employees to be vaccinated for COVID-19 or to be tested at least once a week; and (b) provide paid time off for workers to get vaccinated or recovery from vaccinations; and
  2. The Centers for Medicare & Medicaid Services (CMS) will soon issue a rule requiring workers in most Medicaid and Medicare reimbursed health care facilities, including hospitals, to be vaccinated for COVID-19. 

The Center will provide more details on the OSHA and CMS regulations once the regulations have been published. With these new federal requirements, more nonprofits are asking whether they can or should require their staff to get vaccinations. 

To answer the first question: It is legal for nonprofits to require their employees to be vaccinated. To help with the second question, the Center posted an analysis of pros and cons of nonprofit vaccination requirements (spoiler: the pros probably outweigh the cons for most nonprofits). We have also included tips for your organization to implement an employee vaccination requirement in a way that is fair and effective and that minimizes potential liability for your nonprofit. To protect its employees and the community and to serve as an example for other nonprofits, the Center has adopted a policy requiring its employees to be vaccinated for COVID-19.
NC House of Representatives Sends Nonprofit Remote Meeting Legislation to Governor
On Wednesday, the NC House of Representatives unanimously approved a bill (H.B 320) that would make several changes to the NC Nonprofit Corporation Act to make it easier for nonprofits with members to conduct meetings remotely and for nonprofit board members to use email to take action by unanimous written consent. Under current law, nonprofits with members must conduct meetings in person, and nonprofits need board approval (typically in a provision in the nonprofit’s bylaws) to use email or other means of electronic communication for unanimous written consent votes of boards. The bill would enable nonprofits to hold membership meetings remotely and would create a default rule that nonprofit boards can use email to take action by unanimous consent outside of a meeting.

The proposed changes are based on recommendations from the Center, thanks to input we received from nonprofits during the COVID-19 pandemic. The bill now goes to Governor Cooper for his consideration. He is likely to sign it into law in the next week.
New Law Allows Employers to Offer Exclusive Provider Benefit Plans
Last Friday, Governor Cooper signed into law a bill (S.228) that will allow North Carolina nonprofits and small businesses to offer exclusive provider benefit (EPO benefit) plans for their employees. EPO benefit plans are typically about 15% less expensive than other health insurance plans and allow participants to use a limited network of local health care providers while paying the full cost for any out-of-network health services other than emergency care. Potentially, this legislation could provide a meaningful and affordable health coverage option for some small and mid-sized nonprofits. The new law takes effect on October 1.
Congress Works on Details of $3.5 Trillion Budget Reconciliation Legislation
This week, several U.S. House of Representatives committees approved the text of portions of the $3.5 trillion budget reconciliation plan that congressional Democrats hope to pass this fall. Among (many) other things, the spending plan would:
  1. Expand the child tax credit through 2025 and permanently expand the earned income tax credit and child and dependent care tax credit. The American Rescue Plan Act temporarily expanded these tax credits for this year. Many people receiving services from nonprofits have benefitted from the temporary increase in these tax credits. 
  2. Increase federal revenue by restructuring the corporate income tax and increasing the individual income tax on high-income taxpayers. The proposal would replace the current 21% corporate income tax rate with a graduate rate of 18% on the first $400,000 of income, 21% on income of up to $5 million, and 26.5% on income above $5 million. While this would represent a tax increase on many larger businesses, it would mean lower taxes on unrelated business income for many nonprofits (since the majority of nonprofits that pay unrelated business income tax have less than $400,000 in taxable income per year). It would increase the highest individual income tax rate from 37% to 39.6%.
  3. Require nonprofits and businesses without employer-sponsored retirement plans to automatically enroll their employees in individual retirement accounts or 401(k)-type retirement plans.
  4. Provide 12 weeks of paid family and medical leave for all workers.
  5. Provide health insurance assistance for people in the health insurance coverage gap (i.e. those making too much to qualify for Medicaid but not enough to receive health insurance subsidies under the Affordable Care Act). North Carolina is one of 12 states that still has this health insurance coverage gap because it declined the Affordable Care Act’s option to expand Medicaid coverage to people making up to 138% of the federal poverty level.

In the coming weeks, congressional Democrats will try to pass a budget reconciliation bill to send to President Biden for his signature.
Nonprofits Can Help Maximize Participation in 2021 Municipal Elections
With dozens of cities and towns around North Carolina holding municipal elections this fall, now is a great time for nonprofits to help ensure their staff, volunteers, and the people they serve are registered to vote and show up during Early Voting or on Election Day. Voter turnout is typically much lower in years when there are no national or statewide races on the ballot, so it is particularly important for nonprofits to promote the 2021 election (if there is one in the municipality where you provide services). Here are three easy (and nonpartisan) steps your nonprofit can take today:
  1. Check on what municipal elections are coming up in October or November in the regions you serve by searching the NC State Board of Elections 2021 Municipal Voter Tool
  2. Sign on as a partner for National Voter Registration Day on September 28. As a partner, your organization will receive tools and messaging you can use to promote voter registration.
  3. Check out the local elections resources from You Can Vote to learn more about what’s on your ballot, messaging for nonpartisan voter engagement, and ways you can get involved.
Governor Cooper Vetoes School Diversity Instruction Legislation
Last Friday, Governor Cooper vetoed a bill (H.B. 324) that would have limited the way that public schools in North Carolina teach about race, sex, racism, and sexism. Among other things, the bill would have made it harder to contract with nonprofits that provide training on topics related to racism, diversity, and discrimination.
Free Recording about Local Government ARP Funding for Nonprofits
Earlier this month, the Center offered a free webinar on ways that local governments across North Carolina can partner with nonprofits to use ARP funds to assist communities in their continued recovery from the COVID-19 pandemic. The webinar includes information from the NC Pandemic Recovery Office as well as insights on nonprofit-local government partnerships from a county official, NC Child, and the Center. Check out the recording and materials that were shared during the presentation.
North Carolina to End Waiver of Penalties for Employment Tax Filing Noncompliance
Last month, the NC Department of Revenue announced that it will end its policy of waiving penalties for employers – including nonprofits – that fail to file Form NC-3 (annual withholding reconciliation), along with the state’s copy of W-2 or 1099 statements electronically. Beginning on January 1, 2022, nonprofits that don’t file these employment tax forms electronically will be fined $200 penalties. The NC Department of Revenue has developed a resource page to help nonprofits and businesses comply with employment tax filing requirements.
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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.