The North Carolina General Assembly is nearing final approveal of legislation (S.114) to create a new annual filing requirement for nonprofits that are incorporated in North Carolina. Main requirements of the bill include:
On May 19, the House of Representatives gave final approval to its version of the state budget (H.B. 1030) for FY 2016-17. Overall, the House budget, which passed with a 103-12 vote, would maintain or increase most state funding for nonprofits. Some highlights for nonprofits include:
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Problem #1: The sales tax refund process is less efficient than a system of tax exemption
Problem #2: State law allows the IRS to arbitrarily deny sales tax refunds to some North Carolina nonprofits
Problem #3: Nonprofits are confused whether they need to collect and remit sales tax on their fundraising events
Problem #4: The exemption from sales tax on admission fees for “volunteer-only” nonprofits is confusing and unnecessary
Impact of Nonprofit Provisions in Senate Tax Proposal (2015)
Why Is Nonprofit Tax Exemption Essential for North Carolina?
1. It protects taxpayers.
- Nonprofits provide essential services that government would have to provide otherwise. Tax exemption costs much less than the cost of government having to provide the services itself.
- Nonprofits provide public benefits in exchange for tax exemption.
- Organizations may choose not to locate in counties or states that do not grant tax exemption. This is a potential loss for the people and economy in those locations.
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Capping State Itemized Deductions Would Reduce Charitable Giving In North Carolina
North Carolina’s nonprofit sector is concerned that the $20,000 cap on itemized deductions in the Senate budget would harm communities across the state by reducing charitable giving.
North Carolinians gave $5.9 billion in charitable contributions in 2012, the most recent year for which federal income tax data is available.
Senate Tax Proposal
The Senate tax plan, which was passed as part of the Senate's version of the state budget for FY2015-17, would have made three changes that would harm nonprofits: