State Regulation of Nonprofits

Last updated July 28, 2020

Annual reporting

Unlike in other states, North Carolina nonprofit corporations do not file annual reports with the state. This can harm the public's trust in nonprofits, since tens of thousands of defunct nonprofits remain incorporated in North Carolina, creating the potential for misuse of a non-operational nonprofit in a way that would harm the public's trust in the nonprofit sector.

  • What didn’t happen in 2020:
    • The NC House of Representatives did not vote on a bill (S.362) that would fix this problem by creating a new annual reporting requirement for nonprofits that are incorporated in North Carolina. The bill, which passed the Senate unanimously in 2019, would have ensured that these annual reports were simple online forms, that there would be no new fees for nonprofits, and that organizations that have charitable solicitation licenses (and therefore already provide the same information to the Secretary of State) would be exempt. The Center supported this bill.
  • What comes next:
    • While this proposal has had bipartisan support in the Senate, it is unclear whether it will be re-introduced next year since the bill’s sponsor is retiring.
  • The Center’s role:
    • The Center worked with the bill sponsor to improve this legislation to minimize potential burdens on nonprofits by creating an exemption for nonprofits that already file similar reports with the Secretary of State’s Charitable Solicitation Licensing Division. We have spoken out in support of this bill, since it would improve the public’s trust in nonprofits.

 

Nonprofit corporations 

Legislators have not made substantive changes to the NC Nonprofit Corporation Act (Chapter 55A of the NC General Statutes) in more than a decade.

  • What didn’t happen in 2020:
    • The Senate didn’t vote on a bill (H.B. 732) that would have made two good changes to modernize the NC Nonprofit Corporation Act. Specifically, the bill would have:
      1. Modernized state laws for mergers of nonprofits to expressly allow nonprofit corporations to merge with unincorporated nonprofit associations and with single-member limited liability companies whose sole members are 501(c)(3) nonprofits; and
      2. Exempted a charitable nonprofit that is dissolving and transferring its assets to another charitable or religious organization from having the NC Attorney General review the transactions, as long as the asset transfer is done in accordance with a properly authorized plan of dissolution.

The House had unanimously passed this bill in 2019.

  • What comes next:
    • The Center will work with legislators to have this bill re-introduced next year.​
  • The Center’s role:
    • The Center worked with the NC Bar Association to develop the language for this bill. We recruited bill sponsors in both the NC Senate and NC House of Representatives and worked with legislative leadership to get the House to pass the bill unanimously.

 

Mandatory volunteerism

Government "mandatory volunteerism" policies – which are work requirements in government benefit programs that include spending time volunteering with nonprofits – can put a strain on some nonprofits' capacity to handle volunteers, can create new financial and administrative burdens (and potential liability) for nonprofit organizations, and can create a pool of volunteers who may not be fully committed to nonprofits' missions.

  • What didn’t happen in 2020:
    • The NC Senate did not vote on a bill (S.387) that would have required DHHS to add work and “community engagement” requirements for most Medicaid recipients in North Carolina. Typically, these types of “community engagement” requirements obligate individuals to "volunteer" for a certain number of hours per week or per month to be eligible to receive governmental benefits. The Center opposed this bill.
  • What comes next:
    • It is likely that legislators will continue to try to push for more work requirements with “mandatory volunteerism” components for other government programs. The Center will continue to oppose these proposals.