Point of View

Tax cuts would thin nonprofit businesses

February 18, 2013 

Our governor and legislative leaders have said they will overhaul our tax code with the goal of injecting new life into our long-struggling economy, but they must be especially mindful of how tax reform will affect nonprofit organizations and the North Carolinians they serve.

North Carolina nonprofits touch the lives of ordinary citizens in so many ways every day. Low-income North Carolinians count on charitable nonprofits for food, clothing and shelter. Much of the rest of society – hundreds of thousands of residents – depends on nonprofits for child care, education, health care and places of worship. Charitable nonprofits are part of the everyday social fabric of the state.

Over the past several years, the recession has created a budget crisis for government and for nonprofits. With skyrocketing demand for their services, nonprofits are stretched thin, often beyond their capacity. In 2011, 93 percent of North Carolina nonprofits experienced an increased demand for their services, and 58 percent did not have the resources to meet the need.

In each of the past three years, more than one-third of North Carolina nonprofits have seen a decrease in private giving from individuals, businesses and foundations. Despite tremendous efforts, 42 percent have not been able to raise enough funds to cover their expenses. In short, government support and private donations are hard to come by, especially in this economy.

This is why we are keeping such a close watch on the tax reform debate in Raleigh. Regardless of their size or the type of service they provide, North Carolina charitable nonprofits are worried about the future of the people, communities and causes they serve. They also are worried that the state will reduce incentives for many individuals and businesses to contribute to nonprofits. They are worried that nonprofits will for the first time have to pay sales tax on purchases.

All the options on the table would have a significant negative effect on the ability of nonprofits to continue their work to improve the quality of life for the people of North Carolina. Some of our 1,600 members report that, if these provisions are enacted, they would be forced to eliminate services, reduce the number of people served and cut jobs.

Others believe they may be forced out of business, which would have the unfortunate and ironic effect of driving people back to government’s door for basic survival.

We must impress upon lawmakers just how momentous this tax debate is. If they want effective tax policies, more efficient government and a growing economy, they should enact laws that foster a thriving charitable nonprofit sector.

Jane Kendall is president of the N.C. Center for Nonprofits.

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