Nonprofit Tax Exemption

Date Posted: 11/27/2017
Last Updated: 5/30/2024

Nonprofit tax exemption is essential for all North Carolinians.

North Carolina nonprofits are presently exempt from virtually all state and local taxes, except for state sales tax.  It is important to maintain documentation detailing your organizations tax-exempt status, such as its letter of determination from the IRS, at all times.  If your letter of determination has been misplaced or otherwise lost, you may easily request a new copy from the IRS or an equivalent affirmation letter affirming your status. The NC Department of Revenue is also preparing to publish the newest edition of its publication reviewing the overall relationship between nonprofits and state tax law, which should be available soon.

Exemption from property tax and other taxation is a cornerstone of the nonprofit sector's existence and growth, as well as an essential part of the social contract between nonprofits and the public. Given that many nonprofits operate on narrow budget margins in order to dedicate as many resources to their missions as possible, tax exemption allows them to extend their services to as many people in the state as possible and to hire and retain the more than 425,000 nonprofit employees in North Carolina, all at a cost to taxpayer less than that of government programs to cover the same gaps. There are many practical reasons why all nonprofits should be exempt from state and local taxes, but cash-strapped state and local governments are increasingly beginning to look toward taxes on nonprofits as a pathway out of their fiscal woes. With the combined advocacy of many nonprofits throughout the state, however, several major policy proposals in the recent session of the General Assembly that would have imposed new taxes on nonprofits, including by way of eliminating exemptions, were defeated.  The possibility remains that the legislature could revisit the issue in its session next year.