Summary of SB 860 (Session 2025) – North Carolina
Title: Nonprofit Fundraising Sales Tax Exemption
Categories: Tax policy, nonprofit exemptions, charitable property use, fundraising events
Sponsors: Senators Burgin, Corbin, and McInnis (primary)
Status: Filed April 28, 2026
Purpose and intent
- Establishes a broad sales and use tax exemption for certain nonprofit entities, expands exemptions for nonprofit fundraising events, and clarifies ownership rules for real and personal property used for charitable purposes.
- Aims to reduce the tax burden on nonprofit operations and on fundraising activities, supporting charitable missions and service delivery.
Key provisions and changes
1) General sales tax exemptions for nonprofit entities (contingent on specific criteria)
- Adds an exemption under G.S. 105-164.13(52a) for tangible personal property, digital property, and services used in the work of specified nonprofit entities that are not owned or controlled by the State. Eligible categories include:
- Nonprofit hospitals, especially those not operated for profit
- 501(c)(3) organizations in designated major groups of the National Taxonomy of Exempt Entities
- Volunteer fire departments and volunteer emergency medical services
- A single-member LLC that is disregarded for tax purposes, where the owner is a 501(c)(3) and the LLC meets listed criteria
- Qualified retirement facilities
- University-affiliated nonprofit organizations serving UNC constituent institutions
- Other listed hospital and nonprofit facility scenarios
- Important: The exemption explicitly covers indirect purchases by a real property contractor for a building owned or leased by the nonprofit entity, if the item is used for charitable work on its facilities. Contractors must provide an exemption certificate with required details.
2) Cap on exemption value
- For the aggregate annual exemption under this new provision, the total must not exceed $31,700,000 in tax per fiscal year.
3) Requirements for real property contractors
- Contractors must issue a signed statement to the nonprofit entity detailing purchase date, property type, project, and location, and attach receipts when purchases occur in-state.
4) New nonprofit exemption process (SB 860, Section 3)
- Creates a process for nonprofit entities to obtain a Department of Revenue sales tax exemption number.
- Requires proper application, signed by an authorized individual.
- If a nonprofit does not use items purchased with the exemption number, the entity must pay the tax plus interest.
5) Related adjustments to existing exemptions and refunds
- Limits on local refunds for the nonprofit exemption (G.S. 105-467(b)) align with a statewide cap; the aggregate annual local refund amount for the State’s fiscal year under the nonprofit exemption cannot exceed $13,300,000.
- Clarifies that local jurisdictions must follow State-level exemptions, exclusions, and refund rules, with specific exclusions for electricity, telecommunications, piped gas, video programming, prepaid meal plans, aviation fuels, etc.
6) Misuse penalties for exemption certificates
- Establishes a penalty of $250 for misuse of exemption certificates or related documents by purchasers, including misuse involving nonprofit exemptions.
7) Related changes to admissions and charitable property taxation
- Amends an existing exemption rule to clarify fundraising event exemptions under the state tax code, allowing certain nonprofit fundraising events to be exempt from admission-related taxes when qualifying as charitable activities.
Effective dates
- Sections 1–5 become effective October 1, 2026 (applies to purchases on/after that date).
- Section 6: effective July 1, 2026 (applies to entertainment admission charges on/after that date).
- Section 7: effective for taxes imposed for taxable years beginning on/after July 1, 2026.
- Other provisions effective upon enactment.
Impact and who is affected
- Nonprofit organizations that meet the listed criteria may qualify for substantial sales tax exemptions on property, digital goods, and services used in their charitable work.
- Real property contractors working with exempt nonprofits may benefit from tax-exemption treatment for installed building components, subject to documentation requirements.
- State and local revenue implications include cap limits on exemptions and refunds, plus new administration requirements (exemption numbers, certificates, and penalties for misuse).
Overall, SB 860 seeks to ease tax burdens on qualifying nonprofits and their fundraising activities while tightening compliance and establishing a formal exemption-approval process.
