FEBRUARY 20, 2026

Property tax reforms are likely to be a hot topic for the NC General Assembly during this year’s short session. The first two items in today’s policy update focus on this week’s meeting of the NC House property tax committee and how its discussion could impact nonprofits. We provide information about the U.S. Department of Homeland Security shutdown and how that could (and couldn’t) affect nonprofits. And we remind you to continue to spread the word about early voting during the ongoing primary election.

The NC House of Representatives Select Committee on Property Tax Reduction and Reforms held its third meeting on Wednesday. For the second consecutive meeting, the committee spent time discussing nonprofit tax exemption, this time focusing on both property tax exemption and sales tax refunds by nonprofit hospitals and health systems. The presentation from legislative staff on nonprofit tax exemption focused on foregone local government revenue from property tax exemption and sales tax refunds from nonprofit hospitals and nonprofit health systems and hinted at proposals to limit state and local tax exemption for large nonprofits. During the discussion, several committee members noted that nonprofit hospitals and other charitable organizations provide important services to communities and would be harmed by legislation to limit or eliminate their state and local tax exemption.

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.

In addition to the discussion of nonprofit hospital tax exemption, Wednesday’s committee meeting focused on two other topics:

The presentation on federal cost shifts focused on changes to Medicaid and the Supplemental Nutrition Assistance Program (SNAP) in last year’s One Big Beautiful Bill Act (OBBBA) that mean the state of North Carolina and all 100 counties of the state will bear a greater share of the administrative and programmatic costs of these programs. The implication of the presentation is that counties (and the state) will soon need to come up with significant new revenue and/or cuts to other programs and services to pay for these federal costs shifts.

The presentation on state legislation aimed at limiting property tax increases focused on levy limits, which are laws that prevent local governments from increasing property tax collections more than the rate of inflation unless voters approve higher property taxes. Levy limits could force many counties and municipalities to make budget cuts if local needs outpaced inflation, particularly as more of the costs of Medicaid, SNAP, and public education are being shifted to local governments.

During last month’s meeting, the committee had a lengthy discussion about the nonprofit low and moderate income housing property tax exemption. 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. Committee members appeared interested in legislation that would require nonprofits to own all or most of the low or moderate income housing that is exempt from property tax.

The committee’s next meeting will be on Wednesday, March 18. During that meeting, the committee could consider recommendations for legislation during the 2026 short session, which begins in April. The committee’s proposed 2026 legislation could include:

Several members of the NC Senate are also exploring ideas for property tax reforms during the short session. Unlike the House committee, the Senators considering property tax law changes are not meeting publicly, so it is less clear what their priorities may be.

The House Select Committee on Property Tax Reduction and Reforms is expected to continue meeting for the remainder of the year, and it could come up with additional recommendations for property tax reforms for lawmakers to consider during the 2027 legislative session.

As we mentioned in the previous item, it is possible that state lawmakers could consider proposals this year to limit sales tax refunds and/or property tax exemption for nonprofit hospitals in North Carolina. Challenges to the tax exemption of some charitable nonprofits – even very large ones – can set precedents that could undermine tax exemption for other 501(c)(3)s in the future. Limitations on some nonprofits’ state and local tax exemption also can create greater competition for limited philanthropic support for the nonprofit sector and can force large tax-exempt institutions to cut back on their financial and in-kind support for other nonprofits in their communities.

As the Center continues to make the case to elected officials about the importance of maintaining tax exemption for all charitable nonprofits in North Carolina, it is helpful for us to have examples of ways that organizations are partnering with nonprofit hospitals and health systems in their communities. Let us know any ways that your organization partners with nonprofit hospitals and health systems. Note: The Center will not share your input with elected officials without your permission.

In-person early voting for the March 3 primary election in North Carolina began last week and continues through Saturday, February 28.

Now is a great time for nonprofits to encourage their staff, volunteers, and the people they serve to make a plan to vote early in the primary election. Early voting is a great option for many North Carolinians for several reasons:

For more on ways that nonprofits can engage in the 2026 election in nonpartisan ways, check out the recording of the Center’s webinar on (Almost) Everything Your Nonprofit Needs to Know about the 2026 Election from last week.

Temporary funding for the U.S. Department of Homeland Security (DHS) expired last Saturday, meaning that DHS is technically shut down until Congress agrees either to fund it for the remainder of the fiscal year (through September 30) or through a temporary continuing resolution. Congress has been unable to agree to the details of DHS appropriations legislation because of concerns about immigration enforcement, which is operated by DHS. Relatively few nonprofits have grants through DHS, and the majority of DHS staff are still working because they are considered “essential” employees. However, it is possible that there could be disruptions to services from the Transportation Security Administration (TSA) and/or Federal Emergency Management Agency (FEMA) if the DHS shutdown continues past next Friday, since some TSA and/or FEMA workers could stop showing up for work if they miss paychecks.

Congress has approved funding for the remainder of the federal government – including most federal agencies that provide grant funding for nonprofits – for the rest of the fiscal year. This means that most federal services and federal grants to nonprofits should be unaffected by the current DHS shutdown.

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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