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Federal COVID-19 Legislation:
What do they mean for nonprofits?
Last week, more than 16,000 people registered for our webinar on the COVID-19 relief legislation that addressed which programs might be available for nonprofits to find funding to continue serving their communities. Now, with numerous requests from many of you and others, including some Members of Congress who wanted a webinar for their nonprofit constituents, we're excited to announce another webinar to go over the options for your nonprofit. On Tuesday, April 7 at 3:00 pm Eastern, the networks of the National Council of Nonprofits will host an updated presentation – for free – to help all in the charitable community understand the various provisions of the two new federal relief laws and what they mean for nonprofits. The webinar, Federal COVID-19 Legislation: What do they mean for nonprofits?, will present the latest news, government guidance and interpretations, plus answer questions from nonprofit participants.
Are Nonprofits Being Left Behind?
Improving Treatment of Nonprofits Now and In the Next Stimulus Bill
Thanks to nationwide advocacy efforts, charitable nonprofits were expressly made eligible for various stimulus relief programs established for for-profit businesses in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Congress intentionally and specifically declared that charitable nonprofits, foundations, and religious organizations are eligible for loan programs and other relief because it recognized people are turning to nonprofits even more in this time of crisis. Reliance on nonprofits will only increase in the weeks and months ahead. Yet, early reports suggest that federal agencies like the Small Business Administration and the IRS are having difficulty addressing the unique qualities that make charitable organizations the best-positioned and best-suited entities to help people deal with the COVID-19 challenges they face in their local communities.
It is becoming clearer that Congress must enact improvements to the CARES Act, both to ensure that the money does not run out and to correct the law’s inadequacies and mistakes. In "CARES Act 2.0" legislation, nonprofits will be calling on Congress to create a specific Nonprofit Track that, among other things, 1) establishes dedicated nonprofit funding for the Paycheck Protection Program and Mid-Size Business Loans; 2) makes charitable giving incentives retroactive to 2019 and increases the above-the-line deduction; 3) reimburses nonprofits fully for unemployment claims; 4) increases funding for targeted state formula grants and programs; and 5) makes technical corrections that become apparent as nonprofits and governments work to turn legislative language into action.
Paycheck Protection Program Update
The Paycheck Protection Program is an emergency loan program providing loans of up to $10 million for eligible nonprofits and other small businesses, permitting them to cover costs of payroll, operations, and debt service, and declaring that the loans will be forgiven in whole or in part under certain circumstances. It is based on the pre-existing Small Business Administration 7(a) loan program that previously had been available only to for-profit businesses.
Nonprofits Experience Hassles in Applying for Loans
The emergency loan program for small nonprofits and other businesses designed to get money out quickly to employers had a turbulent launch on April 3, with applicants across the country reporting experiences ranging from mild to extreme frustration and outright denial of access. In days leading up to the opening of the Paycheck Protection Program (PPP), SBA changed forms, instructions, and loan terms several times, only issuing final guidance less than 24 hours before banks were scheduled to open. In a special “Tell Us Your Experience with the PPP” form set up by the National Council of Nonprofits, organizations have shared that many banks announced that they were only processing applications from existing customers with which they have lending relationships, denying applicants with checking accounts at the banks. A few nonprofits were informed that their banks would not be processing nonprofit loan applicants for another week, giving priority to for-profit applicants. Other nonprofits commented on confusion about how to answer questions in the online application about ownership and other items. Some nonprofits, however, have reported that their community banks were easy to work with and are awaiting swift approval.
SBA Expands Access to Loans for Faith-Based Organizations
SBA has been criticized for issuing conflicting or belated guidance on numerous issues in the loan programs, including how borrowers are supposed to count the total number of employees for determining whether an employer has 500 or fewer employees. For charitable nonprofits, the CARES Act expressly applies strict SBA affiliation rules that require all employees of separate affiliates to be counted as a group if the parent organization can exercise control over the whole. On Friday, SBA issued additional guidance largely exempting faith-based organizations from the affiliation rules, citing religious freedom and constitutional protections.
Official Documents and Guidance
- PPP Loan Application Form, Small Business Administration, effective Apr. 3, 2020.
- General Guidance on the Paycheck Protection Program, Interim Final Rule, Small Business Administration, Apr. 2, 2020, addressing common questions regarding eligibility, calculations, and rules for loan forgiveness.
- Eligibility of Faith-Based Organizations for Loan Programs, Interim Final Rule, Apr. 3, 2020.
- FAQ Regarding Participation of Faith-Based Organizations in PPP and EIDL, Small Business Administration, Apr. 3, 2020.
Paid Leave Benefits and Tax Credits
The Families First Coronavirus Response Act granted paid sick and family leave benefits to employees of nonprofits and other businesses affected by COVID-19 and provided affected employers refundable payroll tax credits in equal amounts. Generally, the law requires employers with fewer than 500 employees to grant paid leave to employees for COVID-19-related reasons and sets caps on pay levels based on the reasons for an employee’s absence. The statute also allows employers to claim exemptions for healthcare workers and if leave would threaten the viability of the business. Read the full analysis by the National Council of Nonprofits.
IRS Offers Tax Advice on Refundable Payroll Tax Credits
The IRS has posted on its website an explanation of the refundable tax credits available to small and midsize nonprofits and other businesses that are required to provide the paid leave. The explanations, arranged in a helpful Q & A format, clarify the common areas of confusion. For example, they make clear that the tax credits apply to mandated wages paid and associated health plan expenses (#9), employers that have provided paid leave are entitled to retain payroll tax payments in an equal amount (#17), and employers are entitled to claim both the paid leave tax credit and the Employee Retention tax credit (#18). The explanations also address the interplay between Paycheck Protection Program loans and the paid leave tax credits (#19), how to calculate qualified sick leave (##20-24) and qualified family leave (##25-29), and how to claim the credit (##38-43). In all, there are 66 questions and answers.
Official Documents and Guidance
- PSLF Update Under CARES Act: Borrowers of federal student loans owned by the U.S. Department of Education will automatically be placed into forbearance with 0% interest rates through Sep. 30, 2020, for federal student debt under a recently updated announcement, Coronavirus and Forbearance Info for Students, Borrowers, and Parents, by the Education Department. However, borrowers must continue to be employed full time at qualifying employers, including 501(c)(3) charitable nonprofits and governments, during the forbearance period for the non-payments to count towards the requisite 120 qualifying payments for forgiveness under the Public Service Loan Forgiveness program. Borrowers may elect to continue to make payments or receive a refund if a payment was made after the CARES Act was enacted. The announcement warns, “Please note that some FFEL Program loans are owned by commercial lenders, and some Perkins Loans are owned by the institution you attended. These loans are not eligible for this benefit at this time.”
- DOL Unemployment Insurance Guidance: The U.S. Department of Labor announced guidance on unemployment insurance for states under the CARES Act in response to COVID-19 last week. The guidance addresses administration and eligibility criteria for state unemployment insurance programs, including Pandemic Unemployment Assistance (PUA) and the Federal Pandemic Unemployment Compensation (FPUC) program. PUA applies to individuals who are self-employed, seeking part-time work, or would otherwise not qualify for benefits. FPUC provides an additional $600 per week in federal benefits for individuals typically not covered under unemployment insurance, like workers for nonprofits too small to quality for the state insurance systems. Employees who are laid off by nonprofits may qualify under these additional programs if certain conditions are met.
Keep Filling Out the Census!
Last Wednesday marked the official start of the 2020 Census, and more than 43 percent of households in America have filled out the census so far. The U.S. Census Bureau has launched a state by state response rate map so you can see how your communities matches up nationwide. Right now, Minnesota and Wisconsin lead the pack with response rates of 53 and 51 percent, respectively. All households can complete the Census online, by phone, or via a paper questionnaire. Completing the census now relieves burdens on government follow-up and nonprofit get-out-the-count efforts. Be counted today!
State Revenue Estimates Dreadful
State officials are forecasting severe declines in state revenues due to the shutdowns caused by the coronavirus. Early estimates project declines ranging from $225 million in Hawaii to $15 billion in New York for the next fiscal year. Governors across the country are already warning of harsh budget cuts and other cost cutting measures like spending limitations, purchasing bans, and hiring freezes. Lawmakers in Colorado are reconsidering new programs and possibly cutting existing ones after tax revenue expectations dropped by $1 billion over the next 15 months. Delayed tax filing deadlines and possible deferments also play a part in tax projections as states must wait to collect the revenues. The Senate Majority Leader in Pennsylvania said the delay will cause “significant disruption to the budget process.” All states with a personal income tax have extended their deadlines, most to July 15.
States Adjusting Unemployment, Leave Policies
Policymakers in states across the country are taking action to modify unemployment and leave policies to cope with the COVID-19 pandemic and adjust to the new federal laws. The Governor of Maine signed a bill last month that may become model legislation for unemployment insurance in confronting COVID-19. The law prohibits the experience rating of an employer from being affected by any benefits paid to an individual dislocated or temporarily laid off as a result of the state of emergency caused by the pandemic. It also waives waiting periods for unemployment benefits and prohibits an individual from disqualification of unemployment benefits if on temporary leave due to COVID-19. A similar new law in Minnesota holds harmless employers paying into the state unemployment system for benefits paid to applicants unable to work because of COVID-19. Specifically, the law states that persons receiving benefits do not count toward unemployment benefit usage for an employer’s experience rating or employer’s future unemployment insurance tax rate. Lawmakers in Massachusetts are also in the process of waiving the one-week waiting period for unemployment benefits, something authorized in the federal CARES Act, but still needing state law changes. Separate legislation would allow for a delay in payments by self-insured nonprofits without penalty. Finally, New York enacted sick leave requirements for employees, adjusting the paid or unpaid requirements as well as the number of days provided based on the size of the for-profit or nonprofit employer. These benefits are not as generous as under the Families First Coronavirus Response Act, but may apply to different time periods.
Utah Enacts Nonprofit Nonpartisanship Protections
Utah lawmakers are now on record incorporating the protections of the longstanding Johnson Amendment into state law. The new statute expressly denies property tax exemptions to any charitable nonprofit property owner that “participates in or intervenes in any political campaign on behalf of or in opposition to any candidate for public office, including the publishing or distribution of statements.” New York and Pennsylvania tax statutes similarly include a version of the prohibition on engaging in partisan, election-related activities. The provision is part of a larger bill, signed by the Governor recently, that codifies judicial rulings on nonprofit property tax exemptions. For most nonprofits, the new law lists six factors for exemption from an earlier decision.
Digging Into the Details, Together
There is no template or playbook for what our country is going through; nonprofit innovation is in ultra-high demand. The rapid-succession passage of two federal COVID-19 stimulus bills poses immense opportunities for nonprofits to secure immediate relief, but only if they know how to access the details. Nonprofits need answers to their questions. Many organizations across the country are working to translate the often changing guidance from government into workable knowledge.
Something state associations of nonprofits are uniquely qualified to undertake is the connecting of policymakers and government officials with frontline nonprofits and enabling them all to learn together. As displayed in the sidebar under Nonprofit Events, state associations are embracing their roles as conveners and the results are profound.
Last week, the CT Community Nonprofit Alliance conducted a virtual town hall meeting with Governor Lamont at which he announced key nonprofit-friendly initiatives, like his order that state agencies continue to pay nonprofits under grants even when suffering pandemic-related shutdowns. A senior official of the Small Business Administration addressed questions on a call set up by the Kentucky Nonprofit Network. Importantly, he acknowledged that SBA field offices don’t have all the answers and promised to run the nonprofits’ toughest questions up the chain of command for inclusion in future FAQs. Maryland Nonprofits hosted an hour-long call with both of the state’s U.S. Senators, Cardin and Van Hollen. The Senators answered questions and gave meaningful insights into both the legislative process and their recognition of the need to protect and promote the work of charitable nonprofits.
Each of these engagements, and the dozens that have already happened and will be occurring in the coming weeks, have several beneficial things in common. They give nonprofits and elected officials the opportunity to learn – together – the details of the new laws and the scope of the crisis. Also, on these calls the lawmakers are consistently reminded of the commitment of nonprofit leaders to their missions and communities.
The questions nonprofits are asking educate the officials about what is and is not clear about the relief programs, and how a plan that may make sense for for-profit entities often needs to be adjusted to meet nonprofit realities. Questions like, “why am I being asked to identify my nonprofit’s owner?; the public owns us.” Or “How are we supposed to stay at home when we’re a homeless-outreach nonprofit?; getting out on the streets is what we do!”
For every nonprofit, there are many questions and concerns that most policymakers have never considered. These virtual town hall meetings give individuals in the nonprofit community the opportunities to learn how to access needed resources and support while advancing their missions through questions, answers, and their powerful show of commitment. That’s advocacy in action in times of crisis.
Read more examples of Advocacy in Action,
a regular feature of Nonprofit Advocacy Matters.