North Carolina Nonprofits Could Soon Pay Sales Tax

The North Carolina state Senate passed a measure Thursday that would cap sales tax refunds, a measure that critics say could cost hospitals, universities, and other charities millions of dollars.

According to a report in The Charlotte Observer, the Senate bill would cap sales tax refunds at $7.5 million initially, with that number going down to $100,000 beginning in July 2017. The state House did not include such a cap in their version of the bill, so its fate will be decided when the two chambers enter negotiations. The measure has strong support from Sen. Phil Berger (R-Rockingham), the president pro tem of the Senate who argued that nonprofit hospitals and other large organizations are nothing more than businesses organized as nonprofits. Berger framed the bill as a way to invigorate the state's economy.

“Our compromise plan incorporates feedback from folks across the state, provides much-needed tax relief to North Carolina families of all incomes and propels our state from the bottom of national rankings to the 6th best business tax climate in America,” Berger said in a statement.

On the other hand, the N.C. Hospital Associate has come out strongly against the cap estimating that it would eventually force the state's numerous nonprofit hospitals to pay $220 million a year in sales taxes. The N.C. Center for Nonprofits also estimates that the bill would affect about 250 of its 1,600 members. Don Dalton, a spokesman for the Center, said in a statement that hospitals would also be forced to cut back on services.

“Our hospitals are already facing $780 million per year in decreased payments every year for the next 10 years for serving Medicare patients,” Dalton said. “The State has not yet chosen to expand Medicaid or provide alternative coverage options for the state’s poor. Hospitals will continue to serve these uninsured patients without adequate compensation.”