JANUARY 9, 2026

This week’s policy update begins with information about a state legislative hearing on nonprofit property tax exemption. We share news (good news for a change) about Congress’s progress in funding the federal government and news (not so good news) about state legislative hearings looking at the impact of last year’s One Big Beautiful Bill Act on SNAP and Medicaid benefits in North Carolina. We also include reminders about two free webinars on nonprofit engagement in the 2026 election and on two surveys that will help guide the Center’s policy priorities and public policy and advocacy programming in 2026.

The NC House of Representatives Select Committee on Property Tax Reduction and Reforms met for the second time on Wednesday and spent much of the meeting discussing nonprofit property tax exemption. Many charitable nonprofits that own their property are exempt from paying property tax on it if they use their property (or distinct parts of it) “wholly and exclusively” for their nonprofit’s mission-related purposes. North Carolina’s nonprofit property tax exemption law is somewhat complicated, with seven different statutes that provide for property tax exemption for certain types of 501(c)(3) nonprofits. The North Carolina Constitution requires property tax exemptions to be enforced uniformly in all 100 counties of the state.

The committee’s goal is “to study options to reduce the property tax burden on taxpayers in North Carolina.” During this week’s meeting, committee members heard that about $222 billion in property value (about 12% of the overall property value in the state) is exempt from property tax. The five largest categories of exempt property are (in order of size) property owned by governments, property owned by religious nonprofits, property owned by educational nonprofits, property owned by nonprofit hospitals, and property owned by nonprofits providing low or moderate income housing.

The nonprofit low and moderate income housing property tax exemption received special scrutiny during the meeting. The use of that exemption has increased significantly over the past three years, leading to declining property tax revenue for many counties and municipalities around the state. Legislative staff explained to the committee that a 2013 NC Court of Appeals decision found that joint ventures between affordable housing nonprofits and for-profit businesses could be exempt from property tax, even if the nonprofit only had legal ownership of a very small percentage of the exempt property.

After the discussion of property tax exemption, some committee members expressed interest in legislation that would limit the amount of tax-exempt property in the state, potentially by:

The Center is opposed to any legislation that would limit or eliminate property tax exemption (or other forms of tax exemption) for 501(c)(3) organizations, including nonprofit hospital or educational institutions. New taxes on any charitable nonprofits ultimately harm the entire sector by diverting financial resources away from nonprofits’ purposes and by creating more competition for already limited philanthropic support for nonprofits. However, the Center is supportive of reforms to the statute providing property tax exemption for nonprofits providing low or moderate income housing that would help ensure that tax exemption is benefiting nonprofits’ charitable missions rather than private sector interests.

Some committee members also expressed concerns that increased property tax burdens are the result of excessive spending by local governments rather than problems with the state’s property tax system. At least one committee member hinted that an appropriate remedy could be legislation that would limit or eliminate local governments’ ability to make grants to nonprofits.

The committee’s next meeting will be on Wednesday, February 18. Later this winter or spring, the committee will likely make recommendations for changes to property tax legislation for the House (and potentially the Senate) to consider during the 2026 short session that begins in April.

With a partial shutdown of the federal government looming on January 30, Congress has been working over the past two weeks to approve appropriations legislation to fund parts of the federal government through the end of the current fiscal year (September 30). Yesterday, the U.S. Senate passed a package of three of the 12 spending bills needed to fund the federal government (H.R. 6938). This spending bill would provide funding for the remainder of the fiscal year for the U.S. Departments of Commerce, Interior, and Justice, and for the Environmental Protection Agency and the Army Corps of Engineers.

The U.S. House of Representatives approved these spending bills last week, so they now go to President Trump for his signature. Congress already approved three other spending bills in November, providing full-year funding for the U.S. Department of Agriculture, military construction, veterans’ services, and congressional staff. 

Yesterday, the U.S. House also approved legislation (H.R. 7006) to fund the U.S. Departments of the State and Treasury (including the Internal Revenue Services) for the remainder of the fiscal year. The Senate will likely vote on this legislation when it returns to Washington from a one-week break on January 26. If the Senate passes this bill, Congress will have only four appropriations bills pending prior to the expiration of its temporary funding measure on January 30. The potentially unfunded federal programs include funding for the U.S. Departments of Education, Health and Human Services, and Housing and Urban Development, all of which provide many federal grants to nonprofits and work closely with nonprofit organizations to provide a wide range of services in communities. The appropriations bill for the U.S. Department of Homeland Security will likely be the most difficult for Congress to pass, largely due to partisan differences about immigration enforcement. 

Late Tuesday night, the U.S. Substance Abuse and Mental Health Services Administration (SAMSHA) sent letters to hundreds of nonprofits serving people experiencing addiction, homelessness, and mental illness, including some organizations in North Carolina, terminating their federal grants, effective immediately. The letters indicated that the grants were being terminated because the nonprofits’ programs and services were not aligned with the Trump Administration’s policy priorities.

Yesterday, SAMSHA reversed course and rescinded the grant terminations after the news of the grant terminations, and its potential devastating impact on communities across the country, received widespread media attention. It is unclear whether SAMSHA had legal authority to terminate these grants and whether other federal agencies could attempt similar widespread grant terminations in the future.

Among other policy changes, the One Big Beautiful Bill Act (OBBBA) that Congress passed last summer makes significant changes to the Supplemental Nutrition Assistance Program (SNAP) and to Medicaid. On Tuesday, two legislative oversight committees discussed the impact of these changes on North Carolina.

The 2026 election in North Carolina officially began this week, as county boards of elections have started sending out absentee ballots to eligible voters who have requested them. In-person voting for the 2026 election begins in less than a month, with early voting for the primary election opening on Thursday, February 12.  

While 501(c)(3) nonprofits cannot support or oppose candidates for office or make campaign contributions, your nonprofit can (and should) engage in nonpartisan voter registration and voter education work. To help your nonprofit do this, the Center is offering two free webinars next month:

As a reader of these weekly policy updates, you are probably aware that the Center advocates on state and federal public policy issues that affect most or all 501(c)(3) nonprofits in North Carolina, and that we also provide information and training to nonprofits on public policy issues and effective advocacy. As we plan our 2026 public policy and advocacy work, we are seeking your input on both of these components. Please take a few minutes to complete two quick surveys to provide:

Thank you if you have already completed one or both of these short surveys!

In many ways, 2025 was an unprecedented year for public policy developments affecting nonprofits, with many new challenges (and a few good changes) coming from all three branches of the federal and state government nearly every week. As a result, these Nonprofit Policy Update emails have often been lengthy, so we know many readers haven’t been able to read them in their entirety. Make sure you didn’t miss any policy developments that might be important for your nonprofit by spending a few minutes reading the Center’s 2025 Nonprofit Policy Year in Review blog post to learn more about the (many) policy trends in the nonprofit sector last year and what to expect in 2026. 

Last month, bills were filed in the U.S. Senate (S.3554) and the U.S. House of Representatives (H.R. 6800) that would give the U.S. Treasury Secretary broad authority to revoke the tax-exempt status of “terrorist supporting organizations,” which are nonprofits that provide material support (such as funding or training) to entities that have been designated as terrorist organizations by the federal government. These bills are very similar to a 2024 bill (H.R. 9495) and a House provision in OBBBA, neither of which became law.

Under existing law, the Treasury Secretary can revoke the tax-exempt status of organizations that the federal government has designated as terrorist organizations without providing any due process to these entities. The new Senate and House bills would expand the Treasury Secretary’s ability to revoke the tax-exempt status of “terrorist supporting organizations,” which is a much broader and less clearly defined set of nonprofits than those that are covered by the current law. Because the designation of an organization as a “terrorist supporting organization” would be made by the Treasury Secretary and is somewhat subjective, the Center and other nonprofits are concerned that the provision could give the Treasury Secretary broad authority to revoke the tax-exempt status of a nonprofit largely because they disagreed with the organization’s mission or policy positions. The new bills would at least provide a little due process to accused nonprofits, but they would not require the Treasury Secretary to share their full evidence or reasoning with accused nonprofits and would place the burden of proof on accused organizations and only give these nonprofits 90 days to demonstrate their innocence.

Nonprofits that were registered as lobbyist principals in 2025 (and their staff or contractors who were registered as lobbyists) must file their final quarterly reports with the Secretary of State Lobbying Compliance Division by Friday, January 23. Lobbyist principals need to use the special fourth quarter expense reports (available online) that include the cumulative total payments to lobbyists for the year. To help you understand the basics of state lobbying laws affecting nonprofits, check out the Center's summary of NC lobbying laws for nonprofits.

Also, the NC Secretary of State has opened lobbying registration for 2026. Lobbyist principals (i.e. nonprofits that lobby) and lobbyists (i.e. nonprofit employees and contractors who lobby on behalf of nonprofits) must register annually with the Secretary of State. Lobbyists and lobbyist principals must register within a day after they begin lobbying.

Nonprofit Policy Update is the weekly newsletter on state and federal policy issues affecting 501(c)(3) nonprofits. Learn more about the Center's public policy agenda.
©2026 North Carolina Center for Nonprofits

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