Enough is Enough
Key elements of our nation’s social contract – equality, justice, and even truth – have been stained almost beyond recognition. It didn’t begin with George Floyd or Ahmaud Arbery or Breonna Taylor or Philando Castile or Freddie Gray or Michael Brown or Eric Garner or Trayvon Martin or any of the men and women whose lives were taken, but whose names didn’t make the headlines. ... We cannot let this senseless cycle continue. We need change. ... Enough is enough. Let’s get to work.
Read the full article from our President and CEO, Tim Delaney.
Major National Event
Join Six Senators in the Fight
for the Universal Charitable Deduction
Tuesday, June 2 at 5:00 pm Eastern
There is only one way to get Congress to improve charitable giving incentives in the next COVID-19 legislation: Powerful and Persistent Advocacy on the part of the nonprofit community. Six U.S. Senators are willing to put their reputations on the line in support of an expanded above-the-line, universal deduction, but they need your help to get their 94 Senate colleagues to join in the effort.
Register now to hear from six Senators who have crossed the partisan divide to find common ground in support of a critically needed solution: the Universal Charitable Deduction:
- Senator Chris Coons (D-Del.)
- Senator Amy Klobuchar (D-Minn.)
- Senator James Lankford (R-Okla.)
- Senator Mike Lee (R-Utah)
- Senator Tim Scott (R-SC)
- Senator Jeanne Shaheen (D-NH)
The Senators will give their perspectives on how Congress can strengthen the ability of nonprofits to help relief, recovery, and rebuilding during the pandemic crisis and beyond. They will also answer questions and explain what they are doing to enact improved charitable giving incentives THIS YEAR.
Tuesday, June 2 at 5:00 pm Eastern
This free event is open to charitable nonprofit professionals, board members, volunteers, and all who are committed to helping nonprofits advance their charitable missions.
Congress Loses Sense of Urgency Despite Growing Needs
Conventional wisdom has settled in that the bipartisan concern for the public’s health and economic impact of COVID-19 has waned and Congress has reverted to purely partisan posturing. This storyline is belied by multiple legislative solutions introduced on a bipartisan basis in recent weeks, but the reality persists that no bicameral action is taking place to enact meaningful and lasting legislation. Senate Majority Leader McConnell (R-KY) says he wants to wait until the results from three prior COVID-19 bills can be evaluated.
Nonprofits cannot afford for a wait-and-see approach to play out over many weeks or months. Time is already running out on Paycheck Protection Program loans as eight-week covered periods are rapidly coming to an end. Organizations with more than 500 employees still have not been deemed eligible for forgivable loans of any type; inaction is causing costly delays when nonprofits and those they serve need prompt legislative action. Thousands of self-insured nonprofits already have payments due to their state unemployment trust funds for benefits paid to their former employees; congressional relief appears to be the only solution.
The nonprofit position on each of these issues is clearly stated in the Nonprofit Community Letter. The following are updates on these critical issues:
Paycheck Protection Program (PPP): The eight-week periods for recipients of the earliest PPP loans to use their loan funds expire in the coming days, forcing thousands of employers to make employment and other decisions that may not be in their organizations’ or employees’ long-term interest. Last week the House passed the Paycheck Protection Program Flexibility Act (H.R. 7010) by a vote of 417 to 1. It would extend the PPP and the rehiring deadline through the end of the year, expand the time period for the loans to be used from eight to 24
weeks, expand the maturity date of loans to five years, ease rehiring requirements, revise the loan forgiveness rule to permit 40 percent of expenses to go to nonpayroll costs, defer loan payments, and make PPP borrowers eligible for employer payroll tax deferral. While approved almost unanimously in the House, quick passage in the Senate is in doubt because key Senators are raising objections.
A separate bill called the RESTART Act, introduced by Senators Young (R-IN) and Bennet (D-CO), would extend and revise the Paycheck Protection Program in some troubling ways for nonprofits. It would make for-profit businesses with up to 5,000 employees eligible for loans and loan forgiveness, but provide less favorable loan forgiveness for nonprofits with 500 or fewer employees. Nonprofits with more than 500 employees would be denied loan forgiveness entirely. The National Council of Nonprofits and Independent Sector sent a letter to the sponsors expressing opposition to the disparate treatment of nonprofits. The letter states, “The loan forgiveness provisions in your bill do not address the needs of the charitable community, our employees, or the people and communities we serve. We ask that you revise the legislation to provide loan-forgiveness parity so that our organizations are not disadvantaged or treated as less worthy of support.”
At the regulatory level, the big news is that Treasury and the Small Business Administration have released long-awaited guidance on loan forgiveness under the Paycheck Protection Program. The Interim Final Rule on loan forgiveness attempts to clarify numerous questions borrowers have and complements the loan forgiveness application and instructions announced by SBA on May 15. The National Council of Nonprofits prepared an Analysis of the Loan Forgiveness Interim Final Rule. Public comments are due on or about June 25.
Midsize Loans: Nonprofits employing more than 500 employees have not received forgivable loan support since the beginning of the pandemic. The House-passed HEROES Act includes a loan program with narrow forgiveness opportunities, but the bill was declared dead on arrival in the Senate. A separate bill, the Help Charities Help Communities Act, introduced by Representative Beatty (D-OH), would create a forgivable loan program for
nonprofits with between 500 to 10,000 employers. The bill has been endorsed by numerous national nonprofits with affiliates that currently are not eligible for the Paycheck Protection Program.
TAKE THE SURVEY: Independent Sector has created a survey for midsize nonprofits on how the pandemic is impacting finances, employment, and operations. Results of the survey will be used to develop materials, such as a summary paper and infographic, that can be used to advance advocacy efforts. TAKE THE SURVEY by Friday June 5.
Unemployment and Self-Insured Nonprofits: The result of a Labor Department interpretation (UIPL 18-20) of the CARES Act is that nonprofits and other employers that elected in the past to self-insure under their state unemployment systems must pay thousands and even millions of dollars in the coming weeks. According to the Labor Department, states must collect upfront 100 percent of the benefits paid to former employees of self-insured nonprofits, and at some later time reimburse the nonprofits for 50 percent as directed in the CARES Act. In the 13 states
that bill on a monthly basis, the payments are due immediately. Recent reports from Massachusetts and Minnesota indicate that the Labor Department has denied requests by some states to waive the 100 percent payment rule. A coalition of 31 national nonprofits sent a letter to Labor Secretary Scalia urging him to withdraw the interpretation on the grounds that it “disrupts the charitable nonprofit sector’s ability to provide critical services to those in greatest need during the COVID-19 pandemic.” The Maine congressional delegation sent a similar letter. Learn more about Self-Insured Nonprofits and Unemployment Insurance.
TAKE THE SURVEY: Is your organization facing burdensome unemployment payments to the state due to coronavirus-related layoffs and furloughs? Please complete the CONFIDENTIAL survey to provide data and experiences to enhance advocacy efforts to secure needed relief to nonprofits. TAKE THE SURVEY by Friday, June 5.
- Donor Disclosure Rule Revoked for Certain Nonprofits: Treasury and the IRS issued final regulations formally ending the requirement that 501(c)(4) social welfare organizations disclose the names of major donors on Schedule B of the Form 990. The organizations still must disclose the amounts of donations of $5,000 or more and maintain records of the donors’ names and addresses for potential audit purposes. The new rule does not apply to 501(c)(3) organizations which still must disclose donor information on Schedule B as mandated by statute. Last December the National Council of
Nonprofits submitted formal comments in opposition to this rule change, explaining why it is bad policy.
- Business Interruption Insurance Legislation: Last week, Representative Carolyn Maloney (D-NY) introduced legislation to create a system of shared public and private compensation for business interruption losses resulting from future pandemics or public health emergencies. According to her news release, the Pandemic Risk Insurance Act would require insurance companies to offer business interruption insurance policies that cover pandemics, and create a
"Pandemic Risk Reinsurance Program to ensure that there is sufficient capacity to cover these losses and protect our economy in anticipation of a resurgence of COVID-19 and future pandemics.” Susan Robertson, President and CEO of ASAE, said, “The Pandemic Risk Insurance Act offers a critical solution for associations and others devastated by event cancellations, slashed reserves and sharp membership declines amid COVID-19.”
- National Service During the Pandemic: Representative Price (D-NC) introduced the Pandemic Response and Opportunity Through Public Service, a bill to establish 750,000 new national service positions over the next three years to help with COVID-19 response and recovery and encourage national service. It would increase the AmeriCorps living allowance to 175 percent of the federal poverty level, provide support to enable SeniorCorps volunteers to work online, and increase public awareness of response and recovery service opportunities.
Bipartisan Support for Providing State Funding
As stated above, some Senate leaders appear to be taking a wait-and-see approach to prior legislation and the economy, so far rejecting pleas from governors, mayors, and other public officials seeking federal funds to maintain COVID-19 responses and balance budgets. The most common explanations are that some Senators don’t want to (1) “bail out” states they believe haven’t been properly funding their generous public employee pension plans, and (2) provide additional funds to states that have not yet used all the CARES Act money ($150 billion) that was appropriated for them. While waiting is the official position of the Senate Republican leadership, rank-and-file members are showing their eagerness to take
action as soon as possible. Senator Kennedy (R-LA) introduced a bill (S. 3608) that would provide state and local governments greater flexibility in spending that CARES Act money. (See State article, below.) Going further, Senators Cassidy (R-LA) and Collins (R-ME), joined by Senator Menendez (D-NJ), introduced the SMART Act, a $500 billion bill to help offset the collapse of state and local revenues resulting from the COVID-19 pandemic. This funding to state and local governments is important to nonprofits for two direct, overarching reasons: the charitable nonprofit sector collectively earns 31.8 percent of all revenues by providing services paid
for via government grants and contracts, and state and local governments without federal assistance, will be laying off their employees, generating even more demand for the services nonprofits provide.
State Budget Outlook Dismal, States Need Flexibility
Most state fiscal years begin July 1, and state budget revenue projections anticipate shortfalls in nearly half of the states. Three states (California, Colorado, and New Mexico) are expecting revenue declines greater than 20 percent. Other states are beginning or finishing their legislative sessions with large gaps. North Carolina anticipates a $4.2 billion shortfall, about 15 percent of the state’s budget, and Kentucky is looking at budget cuts of 12.5 percent. The Senate President of Florida recently released a general revenue collection report stating tax collections were down $598.2 million. Policymakers will be forced to make budget decisions and fill gaps through spending cuts and new revenues unless Congress appropriates funds to help fill the gaps (see related article, above). During past recessions, state legislators have made steep cuts to programs performed by nonprofits in an
effort to reduce budget gaps. State and local officials similarly have acted to give the appearance of fiscal stability by delaying payments on contracts for services performed or imposing more burdens without additional pay. Local leaders, facing budget shortfalls, often turn on their longstanding nonprofit partners and make demands for payments in lieu of taxes, payments that the elected officials do not have the legal authority to demand.
Can Coronavirus Relief Funds Support Nonprofits?
The CARES Act appropriated $150 billion for a Coronavirus Relief Fund (CRF) for state, territorial, local, and tribal governments, and many officials from those governments and nonprofits are asking whether any of these funds can be used to support nonprofit operations. Congress directed that moneys from the fund are to be used “to cover costs that are necessary expenditures incurred” due to COVID-19, “were not accounted for in the budget most recently approved” by such government, and were incurred between March 1 and December 30, 2020. Guidance from U.S. Treasury further explains that the funds may be used to “respond directly to the emergency” and address medical or public health needs as well as economic support for employment or business interruptions, including unemployment costs and payments to the state unemployment insurance fund. However, the funds may not be used to fill budget gaps, revenue replacement, or a cost not accounted for in the most recent budget. See articles below on unemployment insurance and above on budget shortfalls.
Many programs and services nonprofits provide are listed as permissible expenses such as food delivery, distance learning, and caring for homeless populations. Some state and local governments have created state and local funds under the CRF to provide economic support for small businesses and nonprofits. These include Alaska, the District of Columbia, the City and
County of Honolulu, Idaho, Illinois, Massachusetts, Montana, New Hampshire, North Dakota, South Carolina, and Utah, Others, however, have indicated funds cannot be used for nonprofit services, contradicting the Guidance and FAQs.
Unemployment Insurance Claims Remain Concern for Self-Insured Nonprofits
Despite intransigence by the federal Department of Labor, discussed above, officials in numerous states are working to ease the burden on nonprofit and other employers that opt out of their state unemployment insurance pools and “reimburse” their state system for actual costs of claims. Legislation recently enacted in North Carolina adds the Tar Heel State to the list of states that hold nonprofits
harmless by not requiring them to reimburse the state unemployment systems during the coronavirus crisis. Pending legislation in Illinois attempts to limit ultimate unemployment costs, but would charge nonprofits and government employers 50 percent of the claims and then have the organization request repayment back for the 50 percent just paid. This maneuver is in alignment with the double reimbursement requirement under the DOL guidance. As an alternative option, Massachusetts just enacted a law providing nonprofits a reprieve by providing a 120-day delay in payments in hopes the Labor Department mandate of 100 percent payment will be revoked by then.
A City Turns on Nonprofits, a Leader Turns Up the Volume
Facing a financial crisis due to the public health and economic fallout caused by COVID-19, the Mayor of Lexington, Kentucky proposed a budget last month that seeks to eliminate funding for 30+ nonprofits. The Mayor then proposed to help out by offering to fundraise for six of the defunded nonprofits that she considered most essential. Eliminating funding; picking favorites among nonprofits and missions; tapping private philanthropy to fill gaps in government funding? This was conduct the Kentucky Nonprofit Network (KNN) could not tolerate. Not for the sake of Lexington or Kentucky nonprofits, nor for similarly situated organizations facing budget cuts throughout the country.
In an Open Letter to the County Council for Lexington, KNN’s Executive Director Danielle Clore laid out the many problems in the Mayor’s approach. She explained how the elimination of funding would dismantle the community-support
system, lead to “massive layoffs of taxpaying Lexingtonians,” and increase competition for limited philanthropic resources. She warned, “Rebuilding the nonprofit sector will cost Lexington much more in the long run than it will cost to invest in its survival today.”
Recognizing that the situation in Lexington is not an isolated challenge, Clore went farther to publish an opinion piece in the local paper explaining to the public how their quality of life and wellbeing are possible thanks to the work of the defunded nonprofits and others. She asked residents to ponder several questions about how spending cuts would affect the stability of the community:
- Does the city plan to provide these services for our most vulnerable citizens when nonprofits are forced to shut their doors?
- Does the city have the expertise to meet needs better than its nonprofit partners?
- Will the city take on the full responsibility for ensuring a quality of life that encourages businesses to operate in Lexington and people to visit?
- How much more will taxpayers have to pay to replicate the efficient and effective organizations when they are gone?
Th op-ed also addressed the Mayor’s private fundraising scheme to aid six of the 30+ nonprofits that saw their funding cut. She explained, that “while likely well-intentioned,” it will “cause more harm than good.” As all nonprofit professionals know, “Private donations cannot fill the gap left by city government for these organizations.” Then there’s the injustice that “hand-picking six nonprofits as more worthy than others to be recipients of a special fund will decrease funding to the remaining nonprofits in our community – and has the potential to undermine these six organizations’ own fundraising efforts.”
Faced with pandemic-related funding catastrophes, many local and state government officials from across the partisan spectrum are calling on Congress to provide emergency funding as quickly as possible. It is unfortunate that the Mayor of Lexington, Kentucky appears to have turned on the city’s nonprofit partners in this time of crisis. It is a blessing that nonprofit leaders like Danielle Clore of KNN spoke up for all nonprofits when she called the Mayor out for promoting self-defeating policies.
Read more examples of Advocacy in Action,
a regular feature of Nonprofit Advocacy Matters.