After filing hundreds of new bills and passing significant Medicaid legislation during the first two weeks of the 2026 short session, state legislators had a slightly slower pace this week. Today’s policy update includes information on a few bills that legislators considered this week that could have implications for nonprofits. We also share details of a new report from a U.S. Department of Justice task force looking into IRS investigations of Johnson Amendment violations of religious nonprofits.
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| Legislators Begin Consideration of Property Tax Law Changes |
Property tax reform is a major priority for the NC General Assembly during its 2026 short session. Next Tuesday, the NC House Finance Committee will consider two bills that could have implications for nonprofits: |
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A bill (H.B. 1089) that would place a constitutional amendment on the November 2026 ballot that would 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 and reductions to local government investment in other community priorities that are important to many nonprofits. The House Select Committee on Property Tax Reduction and Reform recommended this bill last month, and it is expected to be a House priority during the short session.
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A bill (H.B. 1042) that 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 is 100% owned and managed by a nonprofit providing affordable housing services, regardless of how it was financed; or (2) property that is 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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Both of the bills being considered next week were recommended by the House Select Committee on Property Tax Reduction and Reform.
The Senate is also focusing on property tax changes. On Wednesday, the Senate gave final approval to a bill (S.889) that would impose a moratorium on several counties reappraising the value of properties for the purpose of property taxes. The bill, which would apply to Davidson, Guilford, Bladen, Buncombe, Harnett, Onslow, Pender, and Scotland counties, is intended to freeze property tax payments this year so that legislators can consider other property tax changes next year. The bill now moves to the House for consideration.
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New Report Alleges Selective Enforcement of Johnson Amendment by Biden Administration |
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Last Thursday, the U.S. Department of Justice Task Force to Eradicate Anti-Christian Bias released its report on Eradicating Anti-Christian Bias in the Federal Government. The task force was established by a February 2025 Executive Order from President Trump (EO 14202).
Among other things, the task force’s 565-page report addresses Internal Revenue Service enforcement of the Johnson Amendment, the provision in Section 501(c)(3) of the Internal Revenue Code that prohibits charitable nonprofits and churches from engaging in partisan politics. The report notes that “in practice, the Johnson Amendment has been sporadically enforced across administrations” but that “the Biden IRS took a different course, opening multiple investigations into Christian churches focused on the content of their sermons.” The report provides details about:
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- The IRS’s 2021 denial of the application for tax-exempt status as a 501(c)(3) public charity for a faith-based nonprofit organized in part to make political endorsements;
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The IRS’s imposition of excise taxes on a church whose pastor endorsed Republican candidates in a sermon; and
- The IRS’s investigations into Johnson Amendment violations by two other churches that endorsed candidates for office in 2022 and the harm that these investigations created for the churches’ reputations and operations.
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The report alleges that the IRS did not investigate potential Johnson Amendment violations by churches and charitable nonprofits that endorsed Democratic candidates during the Biden Administration. The report asserts that “at a minimum, there are questions with respect to the evenhandedness of the enforcement of the Johnson Amendment against particular viewpoints under the Biden IRS, which creates the appearance of disfavoring congregations and pastors whose doctrinal beliefs and related policy views did not align with the Democratic Party.” The report uses this assertion to support the recent IRS position that – despite clear language in Section 501(c)(3) of the Internal Revenue Code to the contrary – the Johnson Amendment has a narrow exemption for communications from churches and other houses of worship to their congregations “through [their] customary channels of communication on matters of faith in connection with religious services.”
Because the Johnson Amendment is critical to protecting charitable nonprofits’ reputations, funding, and operations, the Center has serious concerns about both the lack of IRS enforcement of the provision and allegations that the IRS has engaged in viewpoint discrimination in its enforcement of the law.
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U.S. House Bill Would Require Nonprofits to Include Information on Refugees Served on 990s |
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A bill (H.R. 8329) introduced in the U.S. House of Representatives last month would require tax-exempt nonprofits to include on their IRS Forms 990 information about the aggregate number of non-citizens who the organizations assist in “lawful resettlement or relocation” to the United States. The bill would require nonprofits to report on the aggregate number of refugees that they assisted in enrollment or participation in federal benefit programs. The bill would not require nonprofits serving refugees to include personal information about any individuals they serve on their Forms 990.
Separate from the legislation, the U.S. Department of the Treasury recently announced that the IRS will propose changes to the Form 990 later this year. The Treasury Department announcement explains that the proposed changes to Form 990 are intended to “improve transparency, strengthen tax administration, and provide clearer reporting on certain activities of tax-exempt organizations described in section 501(c)(3) of the Internal Revenue Code, including government contracts, government grants, and fiscal sponsorship arrangements.” The additional information about public funding and fiscal sponsorships intended to help identify and reduce “fraud, abuse, and extremist activities” in tax-exempt nonprofits. The Treasury Department and IRS plan to release proposed regulations with potential changes to Form 990 filing requirements. The Center will likely seek feedback from North Carolina nonprofits and submit public comments once the proposed regulations are released.
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NC House Committee Approves Bill to Allow More Raffles for State Universities and Related Nonprofits |
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On Wednesday, the NC House Higher Education Committee approved a college athletics bill (S.229) that, among other things, would revise state raffle laws to enable colleges and universities that are part of the University of North Carolina system and nonprofits affiliated with these institutions to conduct an unlimited number of raffles without prize limits. Currently, nonprofits may only conduct up to five raffles in a year and prizes are limited to $125,000 in cash for any raffle, a total of $250,000 in cash for all raffles conducted during the year, and $2.25 million in appraised value for real estate. The bill would not change raffle limits for other charitable nonprofits, although separate legislation (H.B. 921) that could be considered this year would eliminate raffle limits and prize caps for all 501(c)(3) nonprofits.
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Join Nonprofit Policy Conversations This Spring |
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The Center is hosting a series of Nonprofit Policy Conversations this spring. Each event includes a briefing on the latest federal executive actions that could affect nonprofits and an update on nonprofit issues 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 this year. Registration is open for the next two policy conversations:
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Monday, May 11 from 10 a.m.-12 noon at the CCF Community Room in Fayetteville in collaboration with Cumberland Community Foundation (Register Now); and
- Monday, June 15 from 10 a.m.-12 noon at Centennial Station Arts Center in High Point in collaboration with Guilford Nonprofit Consortium, HandsOn NWNC, High Point Arts Council, and One Sector, One Voice Triad (Register Now).
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