The N.C. General Assembly is considering a bill (H.B. 482) that would create new penalties for nonprofits and businesses that improperly classify their workers as independent contractors rather than employees. Nonprofits that misclassify their employees and fail to provide benefits such as workers’ compensation or unemployment insurance benefits could face fines ($1,000 per misclassified worker) and could be barred from state contracts for five years.
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Comments of David Heinen of the North Carolina Center for Nonprofits House Judiciary II Subcommittee on H.B. 482 – Tuesday, July 28, 2015
Thank you Mr. Chair.
On behalf of the North Carolina Center for Nonprofits, I wanted to bring to your attention a potential unintended consequence of the employee misclassification reform bill (H.B. 482) that could affect nonprofits. I was hoping the subcommittee would be amenable to a small clarifying change in a PCS.
The General Assembly is in the final stages of its efforts to restructure North Carolina's tax system. The House and Senate are considering different version of legislation (H.B. 998) to lower tax rates and simplify the state tax system. It is essential that tax reform not harm nonprofits. Specifically:
Based on input we have received from member nonprofits over the past few years, the Center has compiled a list of several state tax law changes that could help nonprofits. These 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
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Thank you Mr. Chair. While individual nonprofits have many concerns with a variety of provisions in the Senate budget, the nonprofit sector has two main concerns about the tax plan in the Senate budget:
Impact of Nonprofit Provisions in Senate Tax Proposal (2015)
As Congress considers major tax reform in 2017, it is likely to revisit tax incentives for charitable giving. The Center recently sent a letter to all of North Carolina's members of Congress encouraging them to preserve or expand incentives for charitable giving as they contemplate tax reform this year.
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