Raising Awareness on Nonprofit COVID-19 Policy Priorities
Nonprofit advocates took advantage of a series of hearings in the Senate last week to advance priority policy issues that the nonprofit community has identified as essential for inclusion in future pandemic stimulus legislation. During a Joint Economic Committee hearing dedicated exclusively to “Supporting Charitable Giving during the COVID-19 Crisis,” the need to expand and extend the above-the-line charitable deduction received a thorough airing.
Some skepticism was heard, but the overall impact and reporting of the hearing was positive. A Senate Finance Committee hearing on “Unemployment Insurance During COVID-19” focused on the partisan divide over whether and how to extend federal unemployment payments. The event gave nonprofits the opportunity to promote fixes to reduce burdens on self-insured
(reimbursing) nonprofits and other employers. The nonprofit community is asking Congress to increase the federal unemployment insurance reimbursement for self-insured nonprofits from 50 percent to 100 percent of costs and to correct a Labor Department interpretation that requires reimbursing employers to pay all of unemployment costs up front. A Senate Small Business and Entrepreneurship Committee hearing saw a few fireworks over the refusal of SBA to divulge nonprofit and other data on Paycheck Protection Program loans and questions about loans going to affiliates of the nonprofit Planned
The big news of the week, perhaps, is the Administration's acknowledgement that another coronavirus stimulus bill is needed. Treasury Secretary Mnuchin said during the Small Business Committee hearing, “I definitely think we are going to need another bipartisan legislation to put more money into the economy." Federal Reserve Chairman Powell urged another fiscal rescue package, warning that the economy may need further support to avoid a cycle of business failures, job
losses, and bankruptcies. Speaking over the weekend, White House trade adviser Navarro said the next coronavirus relief package could provide funding up to $2 trillion. Conventional wisdom now holds that Congress will work first on police reform this month and then turn to stimulus legislation after July 4.
Paycheck Protection Program Flexibility Act Enacted
With impressive speed, Congress passed and the President signed the bipartisan Paycheck Protection Program Flexibility Act (H.R. 7010) this month. The law, which received only one dissenting vote in the two chambers, extends the PPP until December 31, 2020, expands the covered period for loan use from eight weeks to 24 weeks, and provides several safe harbors and exceptions for rehiring employees. The law replaces the Small Business Administration’s rule that at least 75 percent of the funds from PPP loans must go to payroll expenses with one that allows up to 40 percent of funds to be used for
non-payroll expenses. Loans entered after June 4 now have a maturity date of five years, rather than the two-year period adopted by SBA and Treasury; earlier borrowers and lenders are permitted to renegotiate the duration of their loans. The Flexibility Act also pushes off the start date for making principle and interest payments. Now, payments start on the later of 10 months after the close of the covered period (if no loan forgiveness application has yet been submitted to the lender) or when the lender receives payment of the forgiven amount from Treasury. On June 10, SBA issued revised regulations that modify
previous rules and clarify the real-world impact of the new legislation.
LGBTQ Discrimination Barred in Employment
The prohibition on sex discrimination in the Civil Rights Act of 1964 bans bias in the workplace against sexual orientation or gender identity, the U.S. Supreme Court ruled today in Bostock v. Clayton County, GA. Writing for the majority in the 6-to-3 ruling, Justice Gorsuch wrote, “An employer who fires an individual for being homosexual or transgender fires that person for traits or actions it would not have questioned in members of a different sex. Sex plays a necessary and undisguisable role in the decision, exactly what Title VII forbids.” Scores of nonprofits submitted “friends of the court” briefs in the cases, including the Leadership Conference on Civil and Human Rights, Legal Aid Society, National Association of Evangelicals, PFLAG, and United States Conference of Catholic Bishops, as well as Members of Congress, several states, and numerous professional associations and trade unions.
- Reforming Unemployment Insurance: A new bill (R. 7066) introduced by Representative Kevin Brady (R-TX), Ranking Member of the House Ways and Means Committee, would partially fix the unemployment payments challenge for reimbursing nonprofits. Specifically, the bill includes the text from the House-passed HEROES Act (Sec. 50005) that clarifies that nonprofits and other reimbursing employers do not have to pay 100 percent of their unemployment bill upfront and wait for
repayment from the state. The Brady bill would refine language in the CARES Act that the U.S. Department of Labor misinterpreted to insist that full payments must be made immediately. The bill would also allow workers to keep two weeks of the supplemental federal UI benefits ($1,200) after accepting a job, available from a week after date of enactment until July 31, 2020. See the Brady news release.
- Donating Paid Leave: The IRS clarified last week that employees can request donation of their accrued paid vacation, sick, and personal leave to charitable nonprofits without the employees or their employers suffering adverse tax consequences. Notice 2020-46 provides that cash payments employers make to charitable organizations that provide relief to victims of the COVID-19 pandemic in exchange for sick, vacation or personal leave that their employees forgo will not be treated as compensation to the employees. The employees will not be treated as receiving the value of the leave as income
but cannot claim a deduction for the leave that they donated through their employer. The employer is entitled to deduct the amount paid to the nonprofit as either a business expense or a charitable donation.
- Commenting on “Trade or Business” UBIT Rules: Time is running out for nonprofits to provide public comments on IRS proposed rules to provide guidance on how nonprofits are to calculate their taxes on unrelated business income (UBI) from separate trades or businesses. Until the 2017 tax law, nonprofits were treated the same as for-profit businesses when it came to taxable business income – revenues and expenses were aggregated and taxes paid on the excess. The “Tax Cuts and Jobs Act” added Internal Revenue Code Section 512(a)(6), singling out nonprofits
with UBI for a punitive tax by requiring charitable organizations to calculate the revenues and expenses separately for each “trade or business” and pay income taxes on each separate business line. The proposed rules would allow nonprofits to group their UBI into 20 or so broad buckets, or silos, based on the first two numbers of NAICS codes. For instance, all types of accommodations and food services fall into one category (72). The proposed rule is an improvement over an earlier
version announced in 2018, but does is go far enough in reducing burdens on nonprofits? Let the IRS know by submitting public comments by June 23, 2020.
- Taxing Nonprofit Executive Compensation: The IRS has released its notice of proposed rulemaking on the Tax on Excess Tax-Exempt Organization Executive Compensation, regulations intending to interpret the provision in the 2017 tax law imposing extra taxes on salaries in excess of $1 million. The law generally applies to the five highest-earning officials at universities, hospitals, and other nonprofits. Public comments are due on August 10, 2020.
Nonprofits Preparing to Reopen, Addressing Liability
Many nonprofits are taking steps to return to their locations following shelter-in-place orders with new health and risk-mitigation protections in place. Since the pandemic’s initial outbreak, nonprofit organizations have spent significant financial and human resources to implement protective measures for employees, clients, and communities so that they can continue or restart providing vital services. State associations of nonprofits in many states, including Delaware, Idaho, Kentucky, Maine, Maryland, Nebraska, North Carolina, Oklahoma, and Tennessee, have developed guides on promising practices and considerations for nonprofit re-engagement.
As for reducing liability, lawmakers in Tennessee are moving legislation to create the Tennessee Recovery Safe Harbor Act that would provide protections against excessive litigation for employers reopening after closure due to COVID-19. Strong advocacy by a coalition of nonprofits secured express coverage of charitable nonprofits. Momentum Nonprofit
Partners in Memphis applauds the willingness of lawmakers to compromise to “provide the most comprehensive and effective legislative measure.” The bill passed the Senate unanimously last week and is scheduled for House action today.
Nonprofits, States Seek Unemployment Reimbursement Solutions
While Congressional action could provide complete relief from crippling unemployment costs faced by nonprofits and local and tribal governments that had elected to self-insure under their state unemployment laws, several states are taking steps to provide some protections to those employers. The U.S. Labor Department currently interprets the CARES Act to require that these reimbursing employers immediately pay their states for 100 percent of the costs of benefits paid to laid-off and furloughed employees while most other employers are protected from increased unemployment costs this year. An executive order by Michigan Governor Whitmer relives all employers – reimbursing and contributing alike – of unemployment costs associated with COVID-19-related layoffs. To ease the unfair burden, last month, Texas Governor Abbott extended payment deadlines until the end of the year “for designated reimbursing employers that are required to pay a share of unemployment benefits,” which includes nonprofits. The executive action also waived
interest and penalty charges, but did not reduce or eliminate the payment for benefits provided. Similarly, Pennsylvania has granted no-interest delays of payments for 120 days in the hopes that Congress will clarify and alleviate the burdens on nonprofits and others. Lawmakers in New Jersey are considering a measure to exempt reimbursing employers payments in lieu of contributions for benefits paid out during the public health emergency. The legislation would also protect contributing employers from adjustments to experience ratings due to the pandemic payouts.
Other states have been more creative in their approaches, to the benefit or detriment of nonprofits. Illinois recently enacted a law that requires reimbursing employers to make payments in lieu of contributions of 50% of the unemployment benefits paid to former employees and then request reimbursement from the state for those same payments. The alternative before the law was to pay 100 percent of benefits and get reimbursement of 50 percent. In Ohio, nonprofits are receiving notices in their statements that nonprofits will not receive cash refunds from the state resulting from the CARES Act, but rather will see a credit on their account to be redeemed only if there are future unemployment costs.
State and Local Public Funds Arise, Some Nonprofits Benefit
Policymakers in several states are using COVID-19 funding from the federal government to establish funding mechanisms for providing financial relief to small businesses, including nonprofits. This past week, the Governor of New Hampshire launched the Nonprofit Emergency Relief Fund to award grants to help nonprofit organizations impacted by the COVID-19 pandemic. Two bills on the Governor’s desk in Colorado would provide financial relief to
nonprofits and other employers suffering the economic effects of the pandemic. One measure would establish a small business recovery program to provide loans to businesses and nonprofits with between 5 and 100 employees for amounts up to $500,000. The other would establish a small business COVID-19 grant program for nonprofits and other small businesses with fewer than 25 employees that face economic hardship caused by COVID-19. The bill would appropriate $25 million from the Coronavirus Relief Fund for the grant program and give preference to entities that did not qualify for or receive a Paycheck Protection Program loan, are majority owned by veterans, women, or minorities, or operate in a rural area.
The New York Legislature recently passed and sent to the Governor a bill to establish a state disaster emergency program for loans up to $25,000 to small businesses and nonprofits with fewer than 50 employees for the purpose of purchasing personal protective equipment and other fixtures needed to help prevent the spread of COVID-19. Advocates in North Carolina are working to include nonprofits in grants legislation that would create three new state
COVID-19 economic recovery grant programs. One would provide $50 million in grant funds for businesses that maintained at least 90 percent of their employees from March 1, 2020 through May 31, 2020 if they have not received financial assistance through the Paycheck Protection Program or the Main Street Lending Program. Under the bill as currently written, most nonprofits would not be eligible for these grants.
Local Government Reverses Nonprofit Spending Cuts
Earlier this month, Nonprofit Advocacy Matters highlighted the advocacy efforts of Kentucky Nonprofit Network (KNN) in rallying the community in opposition to spending cuts by local government. The advocacy campaign was successful and the county government rejected the spending cuts and maintained funding for 30+ nonprofits in and around Lexington, Kentucky. A statement from the state association of nonprofits celebrates the decision of policymakers, but also makes clear that there’s more advocacy
work to be done. As KNN stressed, the underlying challenge continues: local governments are running out of money and need Congress to provide support. It highlights a sign-on letter KNN is circulating that urges the Kentucky congressional delegation “to act now on bipartisan solutions important to all charitable nonprofits, as well as the critical need for local and state government funding.”
Advocacy Advice From Politicians
A long-sought nonprofit policy priority has now become a high-profile issue in Congress thanks to effective advocacy by a bipartisan group of United States Senators. The issue is the universal charitable deduction, also known as the above-the-line or non-itemizer deduction. The leading advocates are six Senators who are Democrats and Republicans from the North, South, East, and West of the United States. There is much that frontline nonprofit professionals can learn from this campaign by the Senators.
During the drafting and debate over the CARES Act in March, six Senators came together in support of improving charitable giving incentives. Those Senators are Chris Coons (D-DE), Amy Klobuchar (D-MN), James Lankford (R-OK), Mike Lee (R-UT), Tim Scott (R-SC), and Jeanne Shaheen (D-NH). They weren’t successful in getting what they wanted then but each remained committed to helping charitable nonprofits generate the resources they need to serve their communities, particularly during the COVID-19 crisis.
Substantively, their idea is to improve the above-the-line deduction in the next COVID-19 package by permitting taxpayers to deduct up to one-third of the standard deduction for charitable donations in tax years 2019 and 2020. If successful, this would mean that individual taxpayers who don’t itemize could deduct charitable donations of about $4,100 (and about $8,200 for couples) from the date of enactment through the end of the year. But how could they cut through the many competing policy proposals and generate immense interest for the idea in the Senate as quickly as possible? The Senators are so committed to the idea that they are willing to go above and beyond the normal call of duty.
The clearest example of this is the historic Zoom video call conducted by a dozen national nonprofits on June 2, From Common Ground to Congressional Action: Advancing the Universal Charitable Deduction. More than 4,400 nonprofit professionals from all 50 states registered to see and hear five of the Senators each make a strong, consistent case for improving the above-the-line deduction in the next COVID-19 package. They gave their perspectives on how Congress can strengthen the ability of nonprofits to help relief, recovery, and rebuilding during the pandemic crisis and beyond, took questions, and explained
what they are doing to enact improved charitable giving incentives this year.
They also gave advocacy advice. In particular, Senator Lee urged everyone “with a phone, email account, or any access to social media, or any access to any Senator or member of the House of Representative, which I presume represents all within the sound of my voice” to make your opinions known. He said, “Help us to help you to make the country better.” Senator Klobuchar recommended that nonprofits host virtual town hall meetings with their Senators and Representatives and ask them directly to support the policy proposal. She said that calls and emails are fine, but bringing together hundreds or even thousands of nonprofits as a show of support will definitely get the attention of your elected
The Utah Nonprofits Association followed up on Senator Klobuchar’s advice by hosting a town hall with Senator Lee on June 8. During the call, Senator Lee also gave an excellent rendition of Advocacy 101. Asked what nonprofits can do to get the enhanced above-the-line deduction enacted, he gave three suggestions for your advocacy activities:
- Ask lawmakers for their votes.
- Engage your nonprofit colleagues across the country, whether as part of national organizations or similar organizations with which you work.
- Activate the people who benefit from the work of nonprofits, “which is everyone,” he acknowledged.
Normally, nonprofits are reaching out to policymakers seeking to influence their views on legislation. In this case, Senators are seeking to engage with nonprofits for the greater good.
Let’s take action to answer their call for our help to help them help us and the people we serve.
Read more examples of Advocacy in Action,
a regular feature of Nonprofit Advocacy Matters.