Last updated January 3, 2023
All 501(c)(3) nonprofits should be fully exempt from state and local taxes – including sales, property, and business taxes – on activities related to their charitable missions. New taxes on nonprofits would reduce their ability to provide essential services and force them to cut jobs.
State Policy
- Oppose further limits on nonprofit sales tax refunds or property tax exemption for any 501(c)(3) nonprofits.
- Support conversion of the sales tax refund system to a sales tax exemption for all 501(c)(3) nonprofits. Under current law, nonprofits pay sales tax but can request semi-annual refunds of the taxes they pay.
- Support elimination of limits on nonprofit sales tax refunds based on amounts of refunds or National Taxonomy of Exempt Entity (NTEE) classifications. Under current law, 501(c)(3) nonprofits are ineligible for sales tax refunds if they are “properly classified” in the NTEE system as “community improvement and capacity building”, “public and societal benefit”, or “mutual and membership benefit” organizations.
- Support clarifications necessary to ensure that all 501(c)(3) nonprofits are exempt from paying property tax on property they own that is used for nonprofit purposes. The North Carolina constitution requires exemptions from property tax to be consistent in all parts of the state, but counties and municipalities are inconsistent in their interpretation of the standards for nonprofit property tax exemption that are part of the state tax code.
- Oppose unreasonable new taxes on 501(c)(3) nonprofits.
- Oppose policies that condition state or local tax exemption for 501(c)(3) nonprofits operating in North Carolina on criteria beyond those required of 501(c)(3) tax-exempt organizations under federal law.
Federal Policy
- Support repeal of 2017 change to unrelated business income law that treats each revenue stream of a nonprofit as a separate trade or business. The impact of the new law has been a net increase in unrelated business income tax for some nonprofits with multiple revenue streams that are classified as unrelated business income (e.g., book sales, t-shirt sales, and rental of space in a nonprofit’s building), since nonprofits can no longer use expenses from one revenue stream to offset income from a separate revenue stream.
- Oppose unreasonable new taxes on 501(c)(3) nonprofits. Even taxes that only apply to certain types of charitable organizations can undermine nonprofits’ missions and set precedents that can ultimately lead to burdensome taxes on all nonprofits.