FFTC Board of Directors Passes Resolution Opposing NC Senate Budget Plan

Posted June 18, 2015

In response to current Senate budget proposals in North Carolina, FFTC’s Board of Directors has passed a resolution opposing reductions in sales and use tax refunds to nonprofit organizations, as well as limits to state charitable tax deductions for donors.

FFTC joins nonprofits across the state, including universities, YMCA’s, hospitals and religious organizations, who are expressing their concern with proposals for new taxes for nonprofits and limitations on tax incentives for charitable giving.

To express our stance on these issues to lawmakers, Foundation For The Carolinas has submitted a letter, as well as a copy of the resolution, to all members of the North Carolina General Assembly. Specific areas of concern are as follows:

Limits to State Charitable Deductions for Donors - Proposed legislation includes a provision that charitable contributions along with all other itemized tax deductions fall under one aggregate cap of $20,000 for individuals in the state of North Carolina. Currently, individuals can deduct the full amount of their charitable contributions on state taxes, but can only deduct a total of $20,000 in mortgage interest and property taxes paid. Under the proposed Senate budget plan, charitable contributions would be included with all other federal itemized deductions in the $20,000 cap. Many taxpayers would reach the $20,000 cap from the total of their other deductions, leaving no state tax incentive to make charitable contributions. Furthermore, because the state standard deduction would go up (to $17,500 in 2016, increasing to $18,500 by 2020), there would be very little tax benefit for any individuals to itemize their deductions on state taxes.

Unlike the other itemized deductions included in the cap, charitable giving is truly discretionary. The charitable tax deduction, while not the only motivation for philanthropy, is one of the material factors that individuals consider in both determining whether to make charitable donations and how much to give. FFTC is extremely concerned about the impact that any reduction or elimination of a NC charitable tax deduction would have on overall giving and ultimately the ability of our state’s nonprofits to provide critical services to those in need. We also fear the dangerous precedent that this legislation could create for additional limitations at both the state and federal level. 

Cap on Sales and Use Tax Refunds for Nonprofits - Proposed legislation would cap the amount of state and local sales and use tax refunds that nonprofits could be reimbursed.  Original legislation proposed a reduction from $45 million to $100,000 – posing a significant threat for nonprofits across the region. The legislation has since been amended to reduce the cap from $45 million to $1 million (phased over the next five years). While we recognize that this change will mostly result in an adverse impact on larger nonprofits (such as colleges, universities, and hospitals, and as well as large service providers and nonprofits engaged in large capital projects), our Board remains steadfast in its opposition to any legislation that imposes additional local and state sales and use taxes on the charitable nonprofits that are vital to our community. The new taxes on larger nonprofits could also jeopardize any programs and services that such larger nonprofits provide in collaboration with smaller nonprofits in their communities. Moreover, we are concerned that the proposed cap would be a precursor to an eventual elimination of the sales tax refund which would impact all nonprofits.

Nonprofit organizations across the state of North Carolina are a critical component to our state’s economy and culture. Not only do nonprofits contribute to our state’s economy, providing 400,000 jobs and contributing an estimated $38 billion to the state’s economy, but nonprofits also bring communities together to address pressing needs and find creative solutions to help serve the public good. Our communities are enriched and enlightened by the contributions of nonprofits and FFTC stands alongside of and in support of our nonprofit partners across the state in expressing our opposition to this potentially harmful legislation.