After the NC Senate passed a variety of bills last week, this week was the NC House’s turn to finish its summer legislative work. Today’s policy update highlights several bills that the House passed that could affect nonprofits. We also share details of the U.S. Senate’s plan to delay the implementation of changes to federal grant rules and provide information about ways that nonprofits can engage on the three constitutional amendments on the ballot this fall. |
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Join Two Free Webinars on Nonpartisan Voter Engagement for Nonprofits |
With mail-in absentee voting for this fall’s election starting next month, now is a great time for your nonprofit to plan for nonpartisan voter engagement. To help with your planning, the Center is offering two free webinars on nonpartisan voter engagement for nonprofits this month: |
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You Can Vote Resources for Nonprofits (August 20 from 10-11 a.m.). You Can Vote will share resources for nonprofits on nonpartisan voter registration, voter education activities, and on becoming a 2026 Voting Rights Champion.
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(Almost) Everything Your Nonprofit Needs to Know About the 2026 Election (August 28 from 10-11:30 a.m.). Learn about what 501(c)(3) nonprofits can and can’t do in an election year, ways nonprofit staff, board members, and volunteers can (legally) engage in campaigns, and common questions (and possibly some answers!) about tricky election-year situations for nonprofits. With three state constitutional amendments on the ballot this fall, we'll include a refresher about ways nonprofits can legally engage in ballot initiative advocacy. We'll also discuss recent changes to state election laws that might affect nonprofits and the people you serve, and tips to protect your nonprofit's reputation and avoid legal trouble when partnering with other organizations in an election year.
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U.S. Senate Continuing Resolution Would Delay Major Changes to Federal Grant Rules |
On Monday, the U.S. Senate agreed to vote on a continuing resolution that would provide temporary funding for the federal government from October 1 through December 11. With both the Senate and the U.S. House of Representatives out of session until next month, it is unlikely that there will be time for Congress to pass a full budget bill before the start of the next federal fiscal year on October 1. The Senate could vote on the continuing resolution, which has broad bipartisan support, later today or this weekend.
With the Senate planning to start its August recess shortly and the U.S. House of Representatives out of session until next month, the Senate continuing resolution includes a provision (Section 157) that would prevent the U.S. Office of Management and Budget (OMB) from issuing a final rule making changes to the OMB Uniform Guidance, the rules that govern federal grants to nonprofits, until December 11. This spring, OMB had issued proposed changes to the OMB Uniform Guidance, and it had planned to issue a final rule early next month with an October 1 implementation date. The Center submitted public comments on the proposed rule, highlighting its potential impacts (most of them negative) on North Carolina nonprofits. Among other things, the OMB proposal would modify federal grant rules to:
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- Establish a new pre-issuance review of grant applications by political appointees;
- Require federal grant programs and grant applicants to be aligned with the policies and priorities of the President;
- Create a preference for grant applicants with lower indirect cost rates;
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Significantly expand the ability of federal agencies to terminate and/or suspend federal grants, including those that are deemed contrary to “the national interest” without an opportunity for nonprofits to contest or appeal their grant terminations or suspensions;
- Eliminate fixed-amount grant awards, which could create more red tape and payment delays for nonprofits;
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Expand the current prohibition on the use of federal grant awards for lobbying activities to also prohibit federal grants from being used for voter registration, state regulatory advocacy, and public messaging activities; and
- Require nonprofits to receive prior approval from federal agencies to use grant funds to attend conferences and other training programs.
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The House approved a different continuing resolution to provide temporary funding for the federal government last month. The House version would not prevent OMB from issuing a final rule on federal grants next month. Once the Senate passes its continuing resolution, the House and Senate will need to agree on a compromise continuing resolution by September 30 to prevent a shutdown of the federal government. |
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NC House Approves State Budget Adjustments |
This week, the NC House of Representatives approved two bills (H.B. 268 and H.B. 562) making a variety of adjustments to the state budget for FY 2025-27 (S.257). Among other things, the budget adjustment bills make changes to several of the directed grants to nonprofits in the budget and provide full funding for the NC Secretary of State’s implementation of the new annual reporting requirement for nonprofit corporations in 2027. The NC Senate passed both bills last week, and they now go to Governor Josh Stein for his consideration. The Center will update its chart of nonprofit appropriations in the state budget if and when the budget adjustment legislation becomes law.
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Regulatory Reform Bill Includes Changes to Administrative and Healthcare Laws
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On Tuesday, the NC House of Representatives approved the final version of this year’s regulatory reform bill (S.445), which makes 52 changes to a wide variety of state laws. Two provisions of the bill could have implications for nonprofits: |
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A provision that codifies the NC Supreme Court ‘s ruling in the 2025 Mitchell v. UNC Board of Governors decision, which gives state courts broad authority to implement their own judgment in interpreting state regulations rather than deferring to the expertise of state agencies. The Mitchell decision is essentially the state equivalent of the U.S. Supreme Court’s 2024 ruling in Loper Bright v. Raimondi, which significantly limited the rulemaking authority of federal agencies.
- A provision that enables employers, including nonprofits, to offer voluntary portable benefits plans for their independent contractors. Essentially, this would enable nonprofits and businesses to choose to voluntarily contribute funds into their independent contractors’ health, retirement, or life insurance benefits while ensuring that these contributions do not cause the contractors to be treated as employees for the purposes of a variety of labor laws.
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The Senate unanimously approved the bill last week, and it now goes to Governor Stein for his consideration. |
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NC General Assembly Set to Return to Raleigh after November Election |
On Wednesday, the NC House of Representatives passed an adjournment resolution (S.J.R. 1091) that sets the legislative schedule for the remainder of 2026. The Senate passed the adjournment resolution last week. Under the adjournment resolution, the NC General Assembly returns to Raleigh for limited sessions on: |
- August 31-September 2
- September 28-30
- October 26-28
- November 16-19
- November 30-December 18
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Unless there is a natural disaster or other unexpected urgent need for legislative action, the first three (and possibly four) of these mini-sessions are expected to be non-voting sessions. Lawmakers are planning to return to Raleigh for a voting session after the November election.
During the post-election legislative session, lawmakers could vote on any of the 14 bills currently in House-Senate conference committees, although some of those bills could be transformed into legislation that is unrelated to the subject matter of the original bills. Legislators also could vote to override Governor Stein’s vetoes of two bills with implications for nonprofits:
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A bill (H.B. 171) seeking to eliminate diversity, equity, and inclusion (DEI) initiatives in state and local government in North Carolina. The bill would prohibit state agencies, local governments, and public schools from promoting, supporting, funding, implementing, or maintaining DEI programs, policies, or initiatives and from applying for, accepting, or using federal funds, grants, or financial assistance that require compliance with DEI policies, initiatives, or mandates. If the bill becomes law, the biggest practical impact for nonprofits will likely be that local governments will no longer be permitted to provide DEI-related grants to nonprofits. Under the bill, state agencies and local governments also would be prohibited from federal grants that support DEI initiatives, but federal agencies are not currently funding DEI because of Trump Administration policies. However, by establishing a state law that prohibits state agencies and local governments from receiving federal grants related to DEI, the bill would continue to prevent state agencies and local governments in North Carolina from receiving federal grants supporting DEI initiatives – including pass-through grants that might have gone to nonprofits – even if a future administration were to revoke President Trump’s anti-DEI Executive Orders and related federal executive actions.
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A bill (H.B. 437) that would establish a drug-free zone within 100 feet of any facility (including a nonprofit) that receives government funding to provide housing or temporary shelter for people experiencing homelessness. The bill would create a criminal penalty for nonprofits that operate facilities to provide housing or temporary shelter for people who are experiencing homelessness if they intentionally allow the manufacture, sale, or distribution of illegal drugs at their facilities (with a limited exception for small quantities of marijuana). The bill would only apply to nonprofits that provide housing or temporary shelter for people experiencing homelessness and not to organizations that primarily provide other types of services to people experiencing homelessness. If the bill becomes law, affected nonprofits providing housing or temporary shelter for people experiencing homelessness also would be required to post at least one permanent sign at their facilities identifying them as drug-free zones.
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Nonprofits Can Advocate For or Against Constitutional Amendments |
The NC General Assembly has placed three state constitutional amendments on the November 2026 ballot: |
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An amendment that would lower the constitutional cap on state income tax rates from 7% to 3.5%. The Center is opposed to this constitutional amendment because it would be harmful to nonprofits by limiting state revenue options. The NC Budget and Tax Center has a helpful fact sheet explaining the potential harm of the tax cap constitutional amendment.
- An amendment 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.
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An amendment that would require all voters to provide photo ID when voting. North Carolina currently has a voter ID statute, so the amendment would have little practical impact on elections.
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Each amendment would be added to the state constitution if a majority of voters approve it in this fall’s election.
As the Center has explained in a blog post, charitable nonprofits can take positions on state constitutional amendments and other ballot measures. Efforts by 501(c)(3) nonprofits to advocate for citizens to vote for or against constitutional amendments is treated as direct lobbying for federal tax purposes, which is a legal activity for charitable organizations. With at least three (and possibly more) constitutional amendments on the ballot this fall, nonprofits may want to consider whether it makes sense to take a position on these ballot measures.
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NC Senate Approves Election Law Changes |
On Tuesday, the NC House of Representatives approved a bill (H.B. 958) that makes a variety of changes to state election laws. Notably, the Senate-approved bill would reduce the early voting period for primary elections and runoff elections from 17 days to 10 days but would maintain the 17-day early voting period for general elections. Many nonprofits encourage their staff, volunteers, and the people they serve to vote during the early voting period. The House approved a different version of the bill last month that did not include changes to the length of the early voting period for certain elections. The Senate approved the bill last week. Governor Stein has indicated that he plans to veto the bill.
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