With many North Carolinians distracted by March Madness today, this week’s policy update highlights some of the latest craziness from Raleigh and Washington. We share information on state property tax proposals that could have significant implications for nonprofits and on the U.S. Senate’s debate of election legislation that could affect nonprofit voter registration work. And we provide information on the Center’s upcoming Nonprofit Policy Conversations and legal compliance webinars.
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NC House Property Tax Committee Considers Four Bills that Could Impact Nonprofits
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With property tax reform likely to be a major priority for the NC General Assembly during its 2026 short session, the NC House of Representatives Select Committee on Property Tax Reduction and Reforms met on Wednesday to discuss four legislative proposals for changes to state tax laws, all of which could have implications for 501(c)(3) nonprofits: |
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Levy limits. A proposed constitutional amendment on the November 2026 ballot to require the NC General Assembly to establish limits on how much counties and municipalities may increase property tax levies. If the constitutional amendment were to pass, legislators would then work on the details of these levy limits next year. Proposals to limit local governments’ ability to increase property tax collections could help keep lease prices down for nonprofits that rent their property but also could force many counties and municipalities to cut back on expenses, potentially meaning fewer local government grants for nonprofits.
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Hospital property tax exemption limits. This bill would limit property tax exemption for nonprofit hospitals at 50% of the appraised value of their property, beginning on July 1, 2026. Currently, nonprofit hospitals, like most other nonprofits, are eligible for property tax exemption for the full value of the property that they own and use for charitable purposes. Limiting property tax exemptions for nonprofit hospitals would significantly increase operating costs for these organizations, which could force them to cut back on community investments, including support for other nonprofits in their communities. The proposal also sets a troubling precedent by suggesting that taxing nonprofits can be a solution to local government revenue shortfalls.
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Nonprofit sales tax refund changes. This proposal would make two changes to the nonprofit sales tax refund system. First, it would lower the annual cap on individual nonprofits’ sales tax refunds from $45 million (including $31.7 million in state taxes and $13.3 million in local taxes) to $14.4 million (including $10 million in state taxes and $4.2 million in local taxes). Second, it would treat affiliated nonprofit hospitals as a single entity for the purposes of the cap on sales tax refunds further limiting sales tax refunds for some nonprofit hospitals and health systems. In addition to creating financial challenges for nonprofit hospitals, this proposal sets two troubling precedents that could ultimately affect other nonprofits: (1) lowering the cap on nonprofit sales tax refunds as a way to generate state and local government revenue; and (2) providing less favorable tax treatment for nonprofits that are affiliated with other organizations.
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Affordable housing property tax exemption changes. This bill would make changes to property tax exemption for affordable housing purposes. Currently, joint ventures between affordable housing nonprofits and for-profit businesses that own affordable housing units are exempt from property tax exemption, regardless of how the joint ventures are funded, how much of the property is owned by the nonprofit, and whether the joint venture intends to develop new affordable housing. The use of the affordable housing property tax exemption has increased significantly over the past three years, leading to declining property tax revenue for many counties and municipalities around the state. Under the proposed legislation, there would essentially be two types of affordable housing property that would be eligible for property tax exemption: (1) property that was 100% owned and managed by a nonprofit providing affordable housing services, regardless of how it was financed; or (2) property that was financed through federal Low-Income Housing Tax Credits (LIHTC) or other government funding like bonds, even if it is owned by a joint venture where a nonprofit only has partial ownership.
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The committee plans to vote on all four proposals at its meeting next month. If the committee approves the proposals, they will be introduced as legislation for the 2026 short session. The Center has written a blog post to help your organization better understand what is at stake for nonprofits in property tax reform.
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U.S. Senate Begins Debate on SAVE America Act
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On Tuesday, the U.S. Senate began debate on the Safeguard American Voter Eligibility Act or SAVE America Act (S.1383), which would amend federal election laws to require in-person, documentary proof of U.S. citizenship for voter registration for federal elections. The SAVE America Act also would make voting by mail more difficult by requiring most voters to provide their photo ID in person before voting by mail and would require photo ID for voting throughout the country (note that voter ID is already required in North Carolina). Nonprofit VOTE and other advocates have expressed concerns that the documentary proof of citizenship requirement in the SAVE America Act would effectively end nonpartisan, nonprofit voter registration drives.
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The U.S. House of Representatives passed the SAVE America Act last month. The Senate could continue debate of the SAVE America Act at least through next week. The bill is unlikely to pass the Senate, since Senate rules require 60 votes for most legislation to pass. The Senate debate of the SAVE America Act could prevent Congress from taking up other legislation. President Trump has said that he will not sign any other bills passed by Congress until (or unless) the Senate passes the SAVE America Act. Senator Thom Tillis (R-NC) described the Senate’s debate of the bill by noting that “circular firing squads never end well.”
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Center Releases 2026 Public Policy Agenda for NC’s Nonprofit Sector |
As a reader of these weekly policy updates, you are probably aware that the Center takes positions on – and lobbies on – state and federal public policy issues that affect most or all 501(c)(3) nonprofits in North Carolina. The Center’s Board of Directors recently approved the 2026 Public Policy Agenda for North Carolina’s Nonprofit Sector, which describes the Center’s current positions on state and federal public policy issues affecting nonprofits. Many of the public policy solutions and challenges identified on the Center’s 2026 public policy agenda are included because of your input and the input of other nonprofits. For readers who don’t have the time to read through eight pages of policy positions, we have included a “cheat sheet” at the beginning of the document, highlighting the Center’s top five state and federal policy priorities for the year.
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Center Offering Nonprofit Policy Conversations This Spring |
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Monday, March 23 from 10 a.m. – 12 noon in Asheville in collaboration with WNC Nonprofit Pathways (Register Now); and
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Monday, April 27 from 10 a.m. – 12 noon at Foundation For The Carolinas in Charlotte in collaboration with Foundation For The Carolinas (Register Now); and
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Monday, May 11 from 10 a.m. – 12 noon in collaboration with Cumberland Community Foundation at the Community Room in Fayetteville (Register Now).
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At each policy conversation, the Center will provide a public policy briefing that includes the latest information about recent federal executive actions that could affect nonprofits and a preview of what nonprofits can expect during the 2026 short session of the NC General Assembly. We will also have a discussion for participants to share their insights about important state and federal policy issues for 2026.
The Center is planning additional policy conversations for the Triad (in collaboration with Guilford Nonprofit Consortium and HandsOn Northwest North Carolina) and other regions of the state. Details and registration information will be available soon. |
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Register for Nonprofit Legal Compliance Workshop Series |
These weekly policy updates provide information on policy issues that could become laws in the future. Of course, nonprofit staff and board members need to be aware of a wide range of existing laws and regulations that affect their organizations’ operations. To help you better understand these laws, the Center is offering a two-part workshop series on legal compliance for nonprofits. The online workshops will be held on April 17 and April 24 from 10:00-11:30 a.m. The first part on April 17 will cover nonprofit corporate governance, charitable solicitation, fundraising laws, and employment laws. The second part on April 24 will cover federal and state tax compliance issues for 501(c)(3) nonprofits as well as laws and regulations related to federal and state grants and contracts. The Center plans to offer three hours of CLE credit for attorneys who attend the live online workshops (pending approval). Register today!
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New Report Suggests OBBBA Tax Changes Could Lead to Reduced Charitable Giving
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A new report from the Lilly Family School of Philanthropy at Indiana University estimates that the tax changes in the One Big Beautiful Bill Act (OBBBA) could reduce charitable giving by about $5.69 billion per year. OBBBA included four significant changes to tax incentives for charitable giving, all of which take effect in 2026: |
- A new universal charitable deduction, capped at $1,000 annually for individual taxpayers and $2,000 annually for married couples, starting in 2026. The Lilly report estimates that the universal charitable deduction will increase charitable giving by more than $4 billion per year.
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A new 0.5% of adjusted gross income floor on tax-deductible contributions for individuals who itemize their taxes. The Lilly report estimates that the 0.5% floor will reduce charitable giving by itemizers by about $2.4 billion per year.
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Limiting the value of tax deductions to 35% for taxpayers in the 37% marginal tax bracket. The Lilly report estimates that this change will reduce charitable giving by high-income itemizers by more than $6 billion per year.
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A new 1% floor on charitable deductions by corporations, which could mean that corporations may treat more of their charitable contributions as business expenses for tax purposes. The Lilly report estimates that the corporate charitable deduction floor will reduce corporate giving by about $1.5 billion per year.
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IRS and FBI Reportedly Investigating Nonprofits Linked to Domestic Terrorism
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A news report on Wednesday indicated that the Federal Bureau of Investigation (FBI) and Internal Revenue Service (IRS) are working together to investigate nonprofits that have links to domestic terrorism. The joint FBI-IRS investigations of nonprofits are following up on a December 4 memorandum from the U.S. Department of Justice (DOJ) to federal prosecutors prioritizing enforcement of domestic terrorism and providing guidance on how federal prosecutors and law enforcement officials can work to “dismantle domestic terrorism organizations and activities.”
The December 4 memo defines “domestic terrorism” as “criminal conduct that occurs primarily inside the territory of the United States and that involves acts dangerous to human life that appear to be intended to intimidate a civilian population; influence the policy of government by intimidation or coercion; or affect the conduct of government by mass destruction, assassination, or kidnapping.” Potentially, this definition could include some advocacy nonprofits including those that are engaged in (quoting the memo) “opposition to law and immigration enforcement; extreme views in favor of mass migration and open borders; adherence to radical gender ideology, anti-Americanism, anti-capitalism, or anti-Christianity; support for the overthrow of the United States Government; hostility towards traditional views on family, religion, and morality; and an elevation of violence to achieve policy outcomes, such as political assassinations.”
The memo identifies 25 federal crimes that prosecutors may consider as “the most serious, readily provable offenses” when investigating nonprofits or foundations that may be deemed to be domestic terrorist organizations. It is unclear at this time which of these crimes the FBI and IRS intend to use to prosecute nonprofits and their staff and board members with alleged ties to domestic terrorism. |
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Reminder: GSA Accepting Public Comments on Proposed Anti-DEI Certification Requirements for Nonprofits with Federal Grants |
On January 28, the U.S. General Services Administration (GSA) posted a notice on the Federal Register indicating that it intends to amend the certification requirements in the System for Award Management (SAM) registration system for nonprofits with federal grants to “align with updated executive branch guidance” on discrimination. The posting specifically references the June 2025 U.S. Department of Justice (DOJ) memo with guidance on the types of policies and practices that are deemed “unlawful discrimination” for recipients of federal funds, including nonprofits with federal grants or contracts. Among other things, the memo asserts that diversity, equity, and inclusion (DEI) policies and practices are unlawful discrimination and asserts that “unlawful proxy discrimination” is unlawful discrimination. The memo gives several examples of “proxy discrimination” in hiring and promotion decisions and determinations about program recipients for nonprofits receiving federal funding. These examples include the use of criteria like “cultural competence,” “lived experience,” “overcoming obstacles” narratives, and targeting programs and services to specific geographic areas based on their racial or ethnic composition. The memo implies that federal agencies could freeze or discontinue grant funding for nonprofits that are engaged in practices or policies that DOJ deems discriminatory, either directly or through proxy criteria.
GSA also has posted on the Federal Register a draft of its proposed certification requirement (click “Download File” on the link to access the draft certification). Because the proposed certification requirement is broad and vague, the Center and other nonprofits are concerned that many nonprofits with federal grants and contracts may not be comfortable signing the certification since it may not be clear whether their policies, procedures, and operations are consistent with the terms of the certification. This concern is heightened by DOJ’s recent increase in investigations and prosecutions of federal contractors for alleged violations of the False Claims Act. Nonprofits that are unwilling or unable to make required certifications on SAM.gov can lose their federal funding.
GSA is accepting public comments on the proposal for the amended SAM certification requirements through March 30. Nonprofits with concerns about the proposed certification requirements may want to consider submitting public comments. Nonprofits also can join on a national sign-on letter to GSA expressing concerns about the proposed certification requirements.
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