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In this week's issue...
Perhaps in an attempt to avoid the sweltering heat and humidity, state lawmakers are mostly staying away from Raleigh this month. But that hasn’t prevented several bills affecting nonprofits from becoming laws. This week’s Nonprofit Policy Update highlights several of the new laws that were enacted in the last week and a half. We also share information about other legislative proposals of interest to nonprofits that could be resurrected when (or if?) lawmakers return to Raleigh later this summer or fall.
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Several New State Laws Will Affect Nonprofits
Over the past week, Governor Roy Cooper signed into law several pieces of legislation that could affect the work of charitable nonprofits:
- On Monday, Governor Cooper signed into law a bill (S.357) to temporarily delay the looming “child care cliff” by providing an additional $67.5 million in one-time funding for child care stabilization grants, which should cover about two months of services for child care providers (meaning that additional funding will be needed to prevent a significant drop in child care funding in September). The new law also extends the date when many one-time appropriations to nonprofits must be spent from June 30, 2024 through December 31, 2024.
- Last Wednesday, Governor Cooper signed the 2024 farm bill (S.355) into law. The farm bill includes a provision to reinstate the state tax credit for contributions of real property for a variety of conservation purposes. A similar tax credit, along with virtually all other state tax credits, was repealed in 2013 as part of the General Assembly’s overhaul of the North Carolina tax code. The change to the tax code in the farm bill, which applies to contributions made in 2025 and 2026, could encourage more contributions of land to nonprofits engaged in conservation and historic preservation. Governor Cooper highlighted the reinstatement of the conservation tax credit as an important component of the bill.
- Last Monday, Governor Cooper signed into law a tax bill (H.B. 228) that would, among other things, provides for automatic extension of state income tax returns when the Internal Revenue Service (IRS) grants an extension of the corresponding federal returns. For nonprofits that have unrelated business income and file Form 990-T with the IRS, this change means that any extension of their 990-T filing deadline now automatically apply to their state corporate income tax filing.
- Last Wednesday, Governor Cooper signed into law an insurance bill (S.319) that, among other things, enables nonprofits (and other employers) that offer employer-provided health plans to agree to have all of their employees receive plan documents electronically rather than in hard copies, effective October 1, 2024. Individual employees will still have the right to opt out of receiving documents electronically.
In addition to signing these bills (and eight others) into law, Governor Cooper allowed a regulatory reform bill (S.607) to become law without his signature. The bill includes a provision on transparency of ticket prices for entertainment and live events. The provision, which was included thanks to the advocacy of ARTS North Carolina and other groups, will require tickets to “clearly and conspicuously” list the total price of admission to an event, along with any mandatory fees and limits the ability of organizations selling tickets online to add other fees during the checkout process, starting on January 1, 2025.
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Lawmakers Could Consider Several Proposals Affecting Nonprofits Later This Year
In addition to signing several bills into law, Governor Cooper vetoed five other bills over the past week. Legislators did not take action on any of the vetoed bills during their one-day, non-voting session this Tuesday. However, the House has scheduled votes to override three of the vetoed bills on Monday, July 29, the next day that the General Assembly will be in session. It is possible, but not certain, that legislators could vote on veto overrides and other legislation when they are in Raleigh that week.
After the July 29-August 1 mini-session, legislators are scheduled be in session four other times this year: September 9-11; October 9; November 19-22; and December 11-23. Legislators are expected to take action on a variety of legislation during the November mini-session, but it is unclear whether they will have votes or committee meetings during the other ones. During the upcoming mini-sessions, legislators could take up a variety of legislation, including:
- Extending child care stabilization grants to stave off the “child care cliff” through the fall or winter. The forthcoming drop in funding for child care programs could affect nonprofits as both service providers (since many child care providers are nonprofits) and employers (since many nonprofit staff need reliable child care to be available to work).
- Providing funding for the 54,800 families that are currently on the waitlist for the Opportunity Scholarship program. Last year, legislators greatly expanded eligibility for this voucher program for families with students attending (mostly nonprofit) private schools. Legislators’ decision on providing funding for families on the waitlist could have significant impacts on enrollment in and finances of nonprofit K-12 schools.
- Approving other adjustments to the state budget for FY2024-25 (which began on July 1). While both the NC House of Representatives (H.B. 263) and NC Senate (H.B. 317) have passed their proposals for adjustments to the state budget, the two versions have enough differences – most notably on pay increases for state employees and public school teachers – that legislators haven’t been able to reach agreement on the bill. A budget adjustment bill could include earmarked appropriations for some nonprofits, and could include other funding and policy provisions that could affect the work of charitable nonprofits.
- Passing a Center-recommended bill to modernize the NC Nonprofit Corporation Act to better align it with nonprofit best practices and with nonprofit laws in other states. The House approved the bill by a 112-1 margin last year, but the Senate still needs to vote on it for the changes to become law.
- Expanding the ability of nonprofits to conduct raffles as fundraising events. A provision in the budget adjustments (H.B. 263) that the House approved last month would allow nonprofits to conduct an unlimited number of raffles every year and would eliminate the caps on the value of cash prizes or real estate offered in raffles.
- Cutting red tape for nonprofits by exempting nonprofits from paying sales tax on their purchases instead of forcing them to pay sales taxes and applying for refunds twice a year. A large, bipartisan group of House members proposed legislation (H.B. 882) to make this change last year, but neither chamber has acted on it yet.
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Reminder: Overtime Salary Threshold is Now $43,888 Per Year
Last Monday (July 1), the first phase of the U.S. Department of Labor 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 set to take effect on January 1, 2025. At that time, the salary threshold is schedule to go up to $58,656 per year ($1,128 per week). It remains possible that a federal court could prevent or delay the second phase from taking effect.
The Center continues to hear from (many) nonprofits with questions about how the U.S. Department of Labor final rule on overtime pay under the Fair Labor Standards Act (FLSA) will affect their organizations. To help answer those questions, the Center has offered two resources to help nonprofits better understand this new rule, its potential impact on North Carolina nonprofits, and compliance options for nonprofit organizations:
- An analysis of the final overtime rule and its likely impact on North Carolina nonprofits, concluding with 15 compliance options and eight next steps for nonprofits to take now to be ready to adapt to the significantly higher salary threshold in eight months. The Center recently updated this analysis with information on the status pending litigation on the rule.
- A webinar recording that provides more information on FLSA and the new overtime rule and to answer nonprofits’ questions.
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Second Quarter Lobbying Reports Due by July 22
Nonprofits that are registered as lobbyist principals (and their staff or contractors who were registered as lobbyists) must file their second quarterly reports of 2024 with the Secretary of State Lobbying Compliance Division by Monday, July 22. All reports must be filed electronically. To help your organization understand the basics of state lobbying laws affecting nonprofits, check out the Center's summary of NC lobbying laws for nonprofits.
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