As you may have heard, there was an election this week. Today’s policy update focuses on some of the outcomes of the election – inviting you to a free webinar next Friday on election implications for nonprofits, seeking your input on newly elected (or re-elected) legislators who you know, and sharing insights on the potential impact of the newly-passed state constitutional amendments on nonprofits. We provide information about a free webinar on advocating with elected officials and share details of a new federal lawsuit challenging the U.S. Department of Education’s administration of the Public Student Loan Forgiveness program. The policy update also includes more details about public comments on the IRS’s proposed rule on nondiscrimination in private schools and the Census Bureau’s proposed rule to make major changes to the 2030 Census.
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Join a Free Webinar on November 13 to Learn How 2026 Election Results Could Affect Nonprofits
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The Center is hosting a free webinar next Friday, November 13 from 10:00-11:30 a.m. to provide a preview of what's in store for public policy issues affecting North Carolina nonprofits after the 2026 election. We'll start by highlighting some key election results that could impact nonprofits' advocacy with the NC General Assembly and Congress in 2027 and 2028. We'll also share information about the ways that the election results could shape the policy landscape at the state and federal level for the remainder of 2026 and in 2027. And we'll provide the latest on recent executive branch proposals to politicize federal grants to nonprofits, to make fundamental changes to the U.S. Census, and to empower the IRS to revoke the 501(c)(3) status of nonprofit schools that have race-based policies and practices. Register today.
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Let Us Know Who You Know Among Our Newly-Elected Leaders |
As a result of this week’s election, North Carolina will likely have a new U.S. Senator and six new faces among our 14 U.S. House representatives next year. The 2027 NC General Assembly will probably include five new Senators (out of 50 total) and 33 new House members (out of 120 total), and both chambers will have new leaders next year. Many of our newly-elected lawmakers (along with many others who won re-election this week) have experience working for, and volunteering with, charitable nonprofits. As the Center advocates for state and policy solutions that help nonprofits operate more effectively next year, it is extremely helpful to know who in our network has connections with our federal and state elected officials. Please take a moment to drop us a line to let us know which newly elected or re-elected members of Congress or the NC General Assembly you know personally. And if you are one of the readers of these policy updates who was elected or re-elected this week, congratulations and thank you for your service to both the nonprofit sector and our state!
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Voters Approve Constitutional Amendment to Lower Income Tax Cap to 3.5% |
In this fall’s election, voters overwhelmingly approved three amendments to the North Carolina constitution, which will: |
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Require all voters to provide photo ID when voting;
- Cap the state income tax rate at 3.5%; and
- Limit the ability of local governments to set property tax rates in the future.
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The Center is particularly concerned that the 3.5% income tax cap will create long-term challenges for nonprofits and the communities they serve. While the 3.5% cap is higher than the current 2% corporate income tax rate (which is scheduled to phase out altogether by 2030), it is below the 2026 individual income tax rate of 3.99%. The individual income tax rate has historically been much higher than 3.5%; it was 5.25% as recently as 2021.
Income taxes are the largest source of revenue to fund state government in North Carolina. Because income tax rates below 3.5% would be new to North Carolina, it remains unclear how these lower rates will affect long-term revenue for the state, particularly during or after an economic recession. With a 3.5% income tax cap, future state legislators will now have limited ability to raise needed revenue from income taxes (even temporary tax increases on high-income North Carolinians). This is likely to create pressure to increase revenue from sales tax and governmental fees and to cut state government spending. Ultimately, the 3.5% income tax cap could lead to significant cuts to state grants and contracts with nonprofits that provide public services and could create the need for state and local governments to offload certain programs and services onto the nonprofit sector without compensating nonprofits for the full cost of providing these services.
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Join a Free Online Panel Discussion on Advocacy with Elected Officials on November 19 |
Building relationships with elected officials is an important part of nonprofit advocacy and community engagement. These relationships help legislators better understand the essential work nonprofits do in their communities, the needs of the people they serve, and the challenges and opportunities facing local organizations.
Connecting with elected officials and their staff can also help nonprofits share information about community needs, highlight gaps in services, and ensure that the voices of the people they serve are represented in policy discussions.
To help your nonprofits hear about effective ways to advocate with elected officials, the Center and the Dan River Nonprofit Network are hosting a free online panel discussion on Thursday, November 19 from 1:30-3:00 p.m. Panelists will share practical advice on how to make connections, communicate effectively, stay informed, and identify opportunities for engagement. Register today.
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Center Submits Public Comments on IRS Proposed Rule on Nondiscrimination in Private Schools
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Last Friday, the Center submitted public comments on a proposed rule from the Internal Revenue Service that would allow the IRS to revoke the 501(c)(3) status of any nonprofit private school that “discriminates on the basis of race, color, or national or ethnic origin in administration of its educational, admissions, scholarship, athletic, or other policies, based on the fundamental public policy of the United States against such practices.” The IRS explanation of the proposed rule specifies that it “would further define race-based action for the purpose of ameliorating societal discrimination as a form of discrimination” (translation of the phrase from legalese to English: nonprofit schools with diversity, equity, and inclusion (DEI) policies and practices would lose their 501(c)(3) status if the rule is finalized).
While the proposed rule would only directly apply to nonprofit K-12 schools and nonprofit private colleges and universities, it could affect other nonprofits that support, or collaborate with, private schools. It also could create a precedent that could lead to future challenges to the tax-exempt status of other 501(c)(3) nonprofits with race-based policies, programs, or services.
The Center’s comments address several legal and practical problems with the proposed rule and note that many nonprofits other than private schools would be impacted by the proposal. The Center’s comments recommend that the IRS withdraw the rule and, alternatively, provide a recommendation for (significantly) revised language if the IRS does move forward with a final rule. The Center is greatly appreciative of Josh Starin, an attorney with Schell Bray, for his work in helping the Center develop our public comments.
Overall, 2,619 organizations and individuals submitted public comments on the proposed rule. The IRS will now review all of these comments as it develops a final rule in the coming months. For more, see the Center’s analysis of the proposed rule. |
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Census Bureau Receives Nearly 150,000 Public Comments on Proposed Census Changes |
Last Friday, the Center submitted public comments on the U.S. Census Bureau proposed rule that would make three fundamental changes to the 2030 Census and future decennial censuses:
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It would change the way “usual residence” is determined from where people are living on April 1 to the place where “they have lawfully spent the greatest number of days” between January 3 and April 1, as evidenced by their tax records. This could create challenges and mistakes for many people who receive services from nonprofits, including people experiencing homelessness, people who do not file taxes, and college students.
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It would change the criteria that are used for counting residents of states for the purpose of the apportionment of U.S. House of Representatives districts among states. Specifically, the proposed rule would exclude many non-citizens from the count in this apportionment, despite language in the U.S. Constitution that provides that the decennial census is an enumeration of “persons” living in each state rather than U.S. citizens living in each state. The Census Bureau’s explanation of the proposed rule strongly hints that the change in residence criteria would require the 2030 U.S. Census to include a question about the citizenship status of U.S. residents.
- It would prohibit the decennial census from including questions about race, ethnicity, and sexual orientation. Every decennial census since 1790 has asked about race and ethnicity of U.S. residents, but the decennial census has never sought information about sexual orientation.
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The Center’s public comments emphasize that the proposed rule would harm North Carolina nonprofits in several ways, including: |
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Creating significant challenges in getting a complete and accurate count of communities served by nonprofits, including those with significant immigrant populations;
- Reducing North Carolina’s representation in Congress;
- Jeopardizing significant federal funding for North Carolina by reducing the number of people counted; and
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Eliminating important demographic data that many nonprofits use in assessing how and where to provide services.
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Overall, the Census Bureau received 148,842 public comments on the proposal from organizations and individuals, including many comments from North Carolina nonprofits. The Census Bureau must now review all of these comments before publishing a final rule. Thank you if your nonprofit submitted public comments; your voice is making a difference! |
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NC General Assembly Set to Return to Raleigh after Election
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The NC General Assembly is scheduled to return to Raleigh on November 16-19 and then again from November 30 through December 18 for the final votes of the 2025-26 legislative session. 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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During the post-election legislative sessions, legislators also could vote on legislation establishing property tax levy limits for counties. As noted in the third item in today’s policy update, voters approved a state constitutional amendment requiring legislators to pass this legislation. It is possible that legislation establishing property tax levy limit could also make other changes to property tax laws, some of which could have implications for nonprofits.
In addition, the Center continues to advocate for legislators to finalize legislation addressing challenges nonprofits have in accessing charitable donations that are made through bequests from IRAs during the post-election session. The House unanimously approved a bill (S.675) to address these issues in July, but the Senate never voted on it.
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New Lawsuit Alleges Education Department is Preventing PSLF Loan Forgiveness
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Last Friday, the National Federation of Teachers and several individuals filed a lawsuit in a federal court in the District of Columbia alleging that the U.S. Department of Education is unlawfully preventing many borrowers from receiving student loan forgiveness through the Public Service Loan Forgiveness (PSLF) program. Under PSLF, borrowers may receive forgiveness of their student debt if they work in public service jobs – including positions with 501(c)(3) nonprofits – for 10 years while paying off their student debt. The lawsuit alleges that the Department of Education has created a variety of procedural delays and roadblocks that have created significant challenges in the processing of PSLF applications. The lawsuit is asking the court to issue an injunction requiring the Department of Education to change its PSLF processing practices for members of the National Federation of Teachers and the individual plaintiffs in the case. It is possible that a ruling in favor of the plaintiffs could encourage the Department of Education to improve its practices.
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DHHS Provides Toolkit on Upcoming Medicaid Changes
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Many nonprofits provide services to people who receive their healthcare through Medicaid. The One Big Beautiful Bill Act that Congress passed last year made several significant changes to Medicaid that create additional compliance burdens for Medicaid recipients and that limit Medicaid eligibility. The NC General Assembly passed legislation earlier this year to conform with these new federal requirements and to add additional compliance requirements for Medicaid recipients. Among other things, these new federal and state rules mean that:
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- Many non-citizens lost Medicaid coverage on October 1;
- Most Medicaid recipients will need to meet new work or community engagement requirements starting on January 1, 2027; and
- Starting in 2027, most Medicaid recipients will need to renew their eligibility every six months instead of once a year.
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The NC Department of Health and Human Services (DHHS) has created a toolkit with print, video, and social media materials in both English and Spanish to explain these changes. The Center encourages nonprofits to share these materials with their communities and the people they serve to help prevent North Carolinians from losing Medicaid coverage because of non-compliance with these tricky new requirements.
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