The North Carolina Senate’s economic development proposal lays out some changes for non-profits when it comes to contributions and collecting sales tax refunds. Many non-profits say they’re not good ones.
The Senate plan sets some limits. It would include charitable contributions as part of a $20,000 cap on all itemized deductions.
“We think that would be a significant deterrent from charitable contributions to many taxpayers,” says David Heinen with the North Carolina Center for Nonprofits.
Right now state law allows for unlimited charitable deductions.
The plan would also reduce the amount of sales tax refunds non-profits could receive. Two years ago, lawmakers set that cap at $45 million, an amount only a few non-profits like hospitals and universities come close to collecting. The Senate plan would reduce that to $1 million over five years.
“It narrows the loophole that major corporations sheltering in non-profit status use to avoid paying their fair share of sales tax,” said Senate President Pro-Tem Phil Berger’s Office in a press release.
“The mistaken assumption is that larger systems make a lot of money, so this won’t affect them,” says Julie Henry with the North Carolina Hospital Association.
“The truth is a lot of our larger systems in the state support many, many small, more rural hospitals, so the ripple effect will be felt in local communities. It does make an impact on the larger hospital systems, as well as the smaller ones,” says Henry.
Some private schools would also be affected. The group representing North Carolina’s Independent colleges and universities says it could force schools to cut back on construction and financial aid.
Heinen says smaller non-profits could feel the impact too.
“It could discourage some building projects for others. It could mean that some programs done collaboratively with non-profits may be reduced or go away,” says Heinen.
The Senate’s idea is not new. The $45 million cap on sales tax refunds was a compromise two years ago. The economic development plan is still in the Senate Commerce committee.
