While I commend legislators on their continued efforts to update and reform the state tax code, I am concerned about the harmful effects taxing one of our most important and widespread sectors will have on North Carolina’s future.
Historically, North Carolina nonprofits received full refunds on the sales taxes they paid on items to support their charitable missions. Then, two years ago, the sales tax exemption for nonprofits was capped at $45 million. This year, the recently introduced Senate tax plan proposes phasing down this cap to $1 million by 2020. This tax plan delivers a one-two punch by also including charitable giving in a cap on all itemized deductions, nearly eliminating any state tax incentive for charitable giving. Now more than ever it is critical that nonprofits be able to maintain their tax exempt status, not only for the millions of North Carolinians they serve, but also for the economic health of the state.
As chairman of the Research Triangle Foundation of North Carolina, I have seen the importance and benefit of nonprofits and businesses collaborating together. With RTF, I have worked with nonprofits specializing in health research, scientific advancement and education. Nonprofit organizations often complement and work with for-profit businesses to advance their shared missions and serve their communities.
It is also important to remember that the nonprofit sector provides essential services such as health care, education, disaster relief, religious services, senior care, hunger relief and housing. By taking resources away from the nonprofit sector and undermining its ability to serve communities, legislators would be threatening the long-term prosperity of the state. Lawmakers have often stated that continuing to grow our economy relies on legislation that will encourage businesses to relocate to North Carolina. Nonprofits are a vital part of the fabric of our way of life. If we impose costly taxes on these organizations, I am concerned we will diminish our quality of life and discourage businesses from moving here or staying here.
Additionally, an increased financial burden would ultimately be passed on to taxpayers. In what may at first be perceived as a way to lower other taxes by imposing sales taxes on nonprofits, legislators may in fact be causing the opposite effect. Many nonprofits would have to reduce services, while others would cut jobs and be forced out of business. This will consequently drive up the demand for government services, which will lead to more taxpayer-supported assistance from the government.
Economic development, job creation and fairness in the tax code are goals of the legislature, but it is clear that levying additional taxes on the nonprofit sector is not the way to achieve these goals. When nonprofits are forced to cut services and close their doors, then businesses, taxpayers and the community lose. I urge legislators to protect North Carolina’s future and reject any additional proposed taxes for nonprofit organizations.
Robert A. Ingram is chairman of the Research Triangle Foundation of North Carolina.