Charitable nonprofits, which are part of a sector that provides critical services to thousands of North Carolinians, are again being threatened by harmful tax legislation. In 2013, it was concluded that taxing nonprofits was poor public policy, and I hope that same finding will carry through in this year’s General Assembly.
Senate Bill 700, which was recently introduced in the General Assembly, threatens nonprofit tax exemption in North Carolina. It would reduce the cap on sales tax refunds to $100,000 per year, down from the current $45 million. If passed, this law would create new taxes for hundreds of nonprofits. They would have to pay a tax on almost everything they buy to support their charitable missions, including food, supplies, construction materials, computers, and utilities. This proposal would create unintended harm for nonprofits in all 100 counties of North Carolina.
As Chair of the Board for the N.C. Center for Nonprofits and President and CEO of the Levine Museum of the New South, I know firsthand how essential charitable nonprofits are in our state. From child care, preschool and early education, to recreation, arts, disaster relief, health care, higher education, places of faith and senior care – nonprofits play an integral role in the lives of North Carolinians.
If the legislature added a tax on our state’s nonprofits, many charitable nonprofits would have to restructure their business models. If enacted, the new tax would take precious resources away from churches, hospices, YMCAs, Habitat for Humanity, hospitals, colleges and universities, senior care organizations, community health centers, and other charitable nonprofits. They would inevitably be forced to scale back on the volume of services we provide, and potentially even need to eliminate some job positions. Nonprofits’ ability to meet community needs is directly tied to our tax status.
The fact that our proceeds must, by law, be reinvested in our organization and the services we provide, is what sets us apart from for-profit entities, and we deserve better protection. Our mission is to serve the people of North Carolina, not shareholders.
At a time when more than two-thirds of North Carolina nonprofits lack the resources to fully meet their communities’ growing demand for their services, this would mean that fewer North Carolinians would have access to nonprofits’ essential services.
The nonprofit sector wants a strong, sustainable economy for North Carolina. But tax reforms that target the nonprofit tax exemption are shortsighted and may undercut the overall goal of promoting economic growth through tax policy.
Tax reform should not be achieved by limiting sales tax refunds at the expense of nonprofits. The unintended consequences are not only a diminished quality of life, but also job loss and increased burdens on taxpayers. We don’t believe anyone, especially our elected officials, wants this to happen.