Public Policy Update

February 10, 2017

1. Center opposes proposals to politicize 501(c)(3) nonprofits

2. New legislation would study shift to nonprofit sales tax exemption
3. Registration open for Public Policy Forum and NC Nonprofits Day
4. Congressional priorities and schedules coming into focus
5. Legislation filed to repeal HB2
6. State budget has significant surplus
7. Tax deduction bill could improve incentives for charitable giving
8. Legislation would extend revolving door period for legislators to become lobbyists

1. Center Opposes Proposals to Politicize 501(c)(3) Nonprofits

Following up on President Trump's recent pledge to "get rid of and totally destroy" the federal
tax law provision requiring 501(c)(3) nonprofits to be nonpartisan, Congress is considering
three bills that would politicize charitable nonprofits (S.264 in the U.S. Senate and H.R. 781 and
H.R. 172 in the U.S. House of Representatives). The Center and many other charitable nonprofits
strongly oppose efforts to eliminate nonprofit nonpartisanship. As we note in a new blog post,
these proposals would politicize the sector, subject nonprofits and foundations to demands for
campaign contributions (and thereby divert donors' money away from mission-related work to
benefit politicians), and damage public trust in the work of nonprofits. Furthermore, nonprofits
- and their individual staff, board members, and volunteers - already have many legal avenues
to freely express their views on a wide range of policy issues.

2. New Legislation Would Study Shift to Nonprofit Sales Tax Exemption

A bill (S.70) introduced yesterday in the N.C. Senate would direct the Revenue Laws Study
Committee to study the possibility of creating true sales tax exemption in North Carolina.
Currently, most 501(c)(3) nonprofits pay sales tax when they purchase goods and services and
can apply to the N.C. Department of Revenue for semi-annual refunds of the taxes they pay.
The Center has long advocated for North Carolina to move to a system of true sales tax
exemption. This change would reduce nonprofits' recordkeeping, filing, and reporting burdens,
and would enable nonprofits to keep more of their own money rather than "loaning" it to the
state for up to six months while refunds are being processed. If S.70 passes, the Revenue Laws
Study Committee could recommend legislation in 2018 to exempt nonprofits from paying sales
and use taxes.
 3. Registration Open for Public Policy Forum and NC Nonprofits Day
With the 2017-18 session of the General Assembly now officially underway and legislators likely
to consider many issues affecting the nonprofit sector, it's a critical time for nonprofits to make
our voices heard. Get the tools, training, and connections to help you speak out effectively for
your cause at the 2017 Public Policy Forum for NC's Nonprofit Sector on March 20. Then, on
NC Nonprofits Day (March 21), you will have the opportunity to build relationships with
legislators to help them understand your issues and concerns, and advocate on policies that
affect your mission. Register today.

4. Congressional Priorities and Schedules Coming Into Focus

Congressional leaders are beginning to lay out their plans for implementing the top items on
their 2017 agenda, including tax reform, major healthcare changes, and changes in federal
spending priorities. Some highlights include:

ttees are expected to begin the process of repealing and replacing the Affordable Care Act (also known as
e House are still working out details of a replacement health care system. Ideas that have been discussed could
ofits that provide health care services. Other possible components of a health care overhaul, such as proposals
es to pool together to negotiate more affordable health coverage, could affect nonprofits as employers.
his budget proposal in March. The President and Congressional leaders have indicated a preference for
ng significant reductions to domestic spending. This could mean fewer and smaller grants and contracts for
in partnership with the federal government, a reduction in state funding (since much of the state's budget
ectation that nonprofits provide more services that have traditionally been offered by government agencies.
n the budget later in the spring.
ensive tax reform plan as part of its budget reconciliation process. Among other things, tax reform plans will
tax rates, cut down on the number of tax brackets, increase the standard deduction, and repeal the federal
ng will also be a major topic of discussion. It is possible that Congress could use a 2014 tax reform proposal as
of that proposal found that it would likely lead to fewer and smaller donations to nonprofits and would make
d affect nonprofits' finances and operations.

5. Legislation Filed to Repeal and Replace HB2

Two House bills (H.B. 78 and H.B. 82) filed yesterday would repeal the Public Facilities Privacy
and Security Act (also known as HB2) that the General Assembly passed in a one-day special
session last March. Among other things, HB2 sets a statewide nondiscrimination policy that
doesn't cover discrimination based on sexual orientation, gender identity, or veteran status, and
it prevents local governments from passing a variety of employment and contracting
ordinances. Both bills filed this week would add several new classifications to the state's
nondiscrimination laws, including marital status, sexual orientation, gender identity, military or
veteran status, and genetic information. In addition, H.B. 78 would increase criminal penalties
for certain offenses in bathrooms and changing facilities to address one of the underlying
concerns of proponents of HB2.

Although HB2 generally does not prescribe nondiscrimination policies or other rules for private
nonprofits, many nonprofit organizations have expressed concerns about the impacts of HB2
on the people they serve and on the state as a whole. It is unclear when or if legislators will
vote on a repeal this year.

6. State Budget Has Significant Surplus

State budget officials announced yesterday that the state currently has a budget surplus of
about $552 million. If this surplus continues through the end of the fiscal year on June 30,
Governor Roy Cooper and state legislators could use it to increase state spending (potentially
including increases to state grants and contracts with nonprofits), reduce taxes, or increase the
state's savings reserve.

7. Tax Deduction Bill Could Improve Incentives for Charitable Giving

Legislation (H.B. 54) introduced in the N.C. House of Representatives on Tuesday would remove
an existing cap on itemized deductions for mortgage interest and property taxes paid. This bill
could help charitable giving in two ways. First, it would lead more taxpayers to use itemized
deductions instead of the standard deduction on their state taxes, meaning that more
taxpayers would benefit from the state charitable deduction. Second, it would set a precedent
of removing caps on itemized deductions in the tax code. In recent years, some state legislators
have proposed imposing a cap on the charitable deduction.

8. Legislation Would Extend Revolving Door Period for Legislators to Become

Lobbyists
A bill (H.B. 48) filed on Tuesday in the N.C. House of Representatives would extend the
"revolving door" period for former legislators to become lobbyists to one year. Under current
law, legislators can't register as lobbyists for six months after they resign from office.

Public Policy Update is a service for current Members of the North Carolina Center for
Nonprofits. We track state and federal policy issues that affect all 501(c)(3) nonprofits.

View summaries of the Center's public policy priorities and public policy agenda. For more
information, contact David Heinen, Vice President for Public Policy and Advocacy.

Not a Member of the North Carolina Center for Nonprofits? Join now to receive our full range
of advocacy, technical assistance, and money-savings programs for your nonprofit.
 North Carolina Center for Nonprofits,
1110 Navaho Drive, Suite 200, Raleigh, NC 27609