Raleigh, N.C. — Leaders of North Carolina nonprofits asked lawmakers Wednesday to reject a Senate tax reform proposal that would do away with state deductions for charitable contributions and cap sales tax refunds for nonprofit groups.
North Carolina Center for Nonprofits director David Heinen said the Senate plan would hurt more than 250 groups across the state, from hospitals and hospice groups to private universities and food banks.
Heinen said most groups have seen an increase in requests for help during the current economic downturn, coupled with a decrease in giving. The tax changes would leave them hundreds of millions of dollars poorer.
"Do we want nonprofits to send a portion of their proceeds to the state to spend on government programs, or do we want nonprofits to continue to reinvest in their communities through the services they provide and the people they serve?" he asked.
Elon University President Leo Lambert estimated the loss of the sales tax refund would cost his school $1.7 million – "a potential tax hit that's very, very significant." He also predicted that repealing the deduction for charitable donations would make it harder to raise money for scholarships.
Lambert said the state's 36 private colleges and universities are part of the state's "economic engine."
"Expanding the tax burden for nonprofit organizations is exactly the wrong approach" for economic growth, he said. "At a time when we're talking about easing the burden on the private sector, we ought to have parity."
Hospice of Wake County Chief Executive John Thoma said paying hundreds of thousands of dollars in taxes each year will leave less money for staff, hospice beds and services and "will restrict availability of hospice care for a growing aging population."
Thoma said his group employs 350 paid staff and serves thousands of families in five counties. "The tax plans under consideration will make our job much more difficult," he said.
Heinen cited polls showing eight out of 10 North Carolinians don't agree with taxing nonprofits.
House Finance Committee Chairman Edgar Starnes, R-Caldwell, said he shares the groups' concerns.
"In the House tax reform plan, I think we treated the colleges, the universities and the nonprofits right, and I hope we continue to do so," Starnes said.
House and Senate negotiators, as well as representatives of Gov. Pat McCrory, are currently working on a rewrite of the Senate plan that all three parties can agree to. There's no word yet on when they expect to complete it.