Tell Your Senators:
Pass Nonprofit Unemployment Relief
The bipartisan Protecting Nonprofits from Catastrophic Cash Flow Strain Act (S.4001) solves half of the problems nonprofits have with the enormous costs of reimbursing their states for benefits paid to laid off or furloughed employees. Specifically, the bill would correct the Labor Department’s interpretation that reimbursing employers must pay their states 100 percent of unemployment claims upfront and then wait to get repaid 50 percent later. The bill currently has 16 cosponsors, evenly split between the
ACTION ITEM: Reach out to both of your Senators, urge them to co-sponsor S.4001 and demand a vote this week before the Senate leaves for its July 4 break. It’s only half the UI challenge for reimbursing employers, but it’s the most time sensitive.
Contacting your Senators is easy. Simply email or tweet this message to each: “.[SenatorTwitterHandle], #nonprofits in our state must have immediate relief from catastrophic cash flow strains caused by flawed Labor Department guidance. Cosponsor and insist on Senate passage this week of the bipartisan S.4001. #Relief4Charities."
For more information, read this article in today’s Nonprofit Quarterly: Act Now to Rescue Nonprofits from Federally Induced Cash Flow Strains.
Unemployment Compensation Debate
Congress is not expected to enact comprehensive COVID-19 stimulus legislation until policymakers reach agreement on whether and how to continue expiring unemployment compensation provisions. The CARES Act extended benefits payments from three to four months and provides temporary unemployment compensation of $600 per week on top of regular state and federal benefits. It also extended access to benefits to part-time, self-employed, gig economy workers, and individuals whose employers were exempt from the unemployment system, like employees of very small businesses and houses of worship. Many of those provisions expire on
July 31, meaning that Congress must act, or tens of millions of out-of-work Americans will lose all or some of their benefits. The business community is calling on lawmakers to curb or eliminate the increased benefit, complaining that it discourages workers from returning to their jobs when recalled.
The debate on unemployment compensation includes three issues of great importance to nonprofits and others. First, nonprofits, local governments, and federally recognized tribes that self-insure (reimburse) the states for unemployment claims must be protected immediately from crippling unemployment bills. Second, state unemployment systems urgently need additional funds to add staff, consultants, and equipment to unclog and expedite the processing of the millions of claims the system was never built to handle. Finally, all employers that contribute into the unemployment trust funds must be protected from COVID-19-related tax hikes that states will be forced to impose without Congressional action.
Above-the-Line Deduction Expansion Bills Introduced
Lawmakers made good on their promise to promote increased charitable giving by introducing bills in the Sente and House. The Universal Giving Pandemic Response Act (S. 4032 / H.R. 7324), would make available — for tax years 2019 and 2020 — an above-the-line deduction for charitable giving on federal income taxes valued at up to one-third of the standard deduction (around $4,000 for an individual filer and
$8,000 for married joint filers). The Senate bill was introduced by Senators Lankford (R-OK) and Coons (D-DE). The House sponsors are Representatives Pappas (D-NH) and Walker (R-NC). See the Senators’ news release and the Representatives’ news release. Expanding the above-the-line deduction in the CARES Act is a major policy priority of the nonprofit community, as explained in the Nonprofit Community Letter signed by more
than 450 national organizations.
Challenges Seen in Charitable Giving Data
Reports of the annual release of Giving USA charitable giving data for last year came with headlines celebrating solid growth and record receipts, causing some policymakers to suggest that the giving environment for charitable organizations is secure. The truth is less rosy. Adjusted for inflation, giving was lower than in 2017, according to Giving USA. Further, 2018 and 2019 are the only two years on record in which
individual donations were less than 70 percent of total charitable giving, a dangerous trend following the 2017 tax reform law. Also, charitable giving fell below combined Gross Domestic Product growth for 2018 and 2019.
While Giving USA looked at last year’s data, the Fundraising Effectiveness Project released troubling data a few days later about giving in the first quarter of 2020. That analysis found that donations are down 6 percent and the number of donors is down 5.3 percent. Perhaps most disturbing, donations from major donors ($1,000 and up) dropped 7.4 percent. See analysis by the Charitable Giving Coalition. Most nonprofit observers have concluded that the data prove that immediate stimulus is needed very much along
the lines of the Universal Giving Pandemic Response Act (S. 4032 / H.R. 7324), discussed above.
Federal Reserve Proposes Loan Program for Nonprofits
The Federal Reserve Board announced on June 15 its plan to expand the Main Street Lending Program to provide access to credit for nonprofit organizations. The Fed proposes two types of loans to nonprofits – a new loan facility and an expanded loan facility – with some of the details changing between them. As initially described, loans would be available to charitable nonprofits with between 50 and 15,000
employees, at least 5 years of operations, donations of less than 30 percent of total 2019 revenues, and endowments not exceeding $3 billion. Eligible nonprofits could take out non-forgivable loans ranging from $250,000 to $300 million at an interest rate of less than 4%; principal payments would be fully deferred for the first two years of the loan, and interest payments would be deferred for one year.
Numerous national and statewide organizations submitted public comments in response to the Fed’s initial proposals. Most organizations challenged the Fed to work with Congress to create a forgivable loan program for larger nonprofits excluded from the Paycheck Protection Program and identified several problem areas and recommendations for improving the nonprofit loan program. The National Council of Nonprofits, in addition, pointed out that the proposed limit of donations of 30 percent ran counter to the IRS “public support” test that requires charitable organizations to secure at least 33 percent of their
funding from the public. The Federal Reserve is expected to release final loan terms and documents in July.
- Seeking PPP Loan Forgiveness: One of many questions presented to the Administration in mid-June by a coalition of nonprofits is whether a borrower under the Paycheck Protection Program (PPP) must wait until the end of the eight- or 24-week covered period to apply for loan forgiveness. In guidance posted on June 26 by the Small Business Administration and Treasury, the answer is no, but with caveats. The guidance states, “A borrower may submit a loan forgiveness application any time on or before the
maturity date of the loan – including before the end of the covered period – if the borrower has used all of the loan proceeds for which the borrower is requesting forgiveness.” However, the guidance goes on to say, “If the borrower applies for forgiveness before the end of the covered period, it must account for the salary reduction for the full 24-week covered period (totaling $1,200).” Left unresolved in this document is whether borrowers that seek forgiveness early are required to maintain their workforce level for the entire covered period.
- Covering Reopening Expenses: Lawmakers are proposing a variety of tax credits to mitigate the unforeseen and unique costs of safely reopening business operations. Senator Cruz (R-TX) introduced the Work Safe Act, S.3966, a bill to provide a tax credit for biweekly health screening tests provided by employers to workers in 2020. The Clean Start: Back to Work Tax Credit Act, H.R.7079, is a bipartisan bill
that would provide a 50 percent tax credit capped at $25,000 per location and $250,000 per company for cleaning products, tools, machinery and other equipment needed to ensure a safe and sanitary environment and for training certification programs for custodial cleaning and management. The Small Business PPE Tax Credit Act, H.R.7216, seeks to provide a tax credit capped at $25,000 for the costs of personal protective equipment for small businesses, independent contractors, veterans' groups, farmers and nonprofits. Since tax-exempt organizations do not pay income taxes, each of these bills would need to be revised to enable nonprofits
to apply the credits to the taxes they do pay, including payroll taxes.
- Clarifying the Employee Retention Tax Credit: The Internal Revenue Service has published a long-delayed answer to the question of how nonprofits are to calculate finances for purposes of claiming the Employee Retention Tax Credit, a section in the CARES Act that provides refundable tax credits to employers that keep workers on the payroll during on the pandemic. To qualify for the credit, a tax-exempt employer must show a decline in gross receipts of at least 50 percent compared to the same calendar quarter in 2019. The IRS was slow in providing guidance to nonprofits because of difficulty it had in defining “gross receipts” for purposes of the credit. In FAQ #46, the IRS instructs nonprofits to “include gross receipts from all operations, not only from activities that constitute unrelated trades or businesses.” It goes on to provide examples.
- Gauging Government COVID-19 Responses: The Government Accountability Office issued a 403-page report raising concerns about many aspects of the government’s response to COVID-19, including the Paycheck Protection Program (PPP). It was highly critical of the Small Business Administration for refusing to cooperate with the GAO oversight. The report also points out that the PPP is open to fraud and recommends that the SBA develop plans for identifying risks in the program to address potential fraud. See the summary and the full report.
As State Revenues Fall, Nonprofits at Greater Risk
States will see tax collections drop by an average of 20 percent, losing more than $100 billion this year, according to a new report from researchers at Arizona State and Old Dominion Universities. Further, the report predicts that 10 states will see revenues drop by at least 30 percent – New York (-40%), Maine (-39.7%), Hawai`i (-39.5%), Massachusetts (-37.5%), Georgia (-35.9%), New Jersey (-34.9%),
Nevada (-33.6%), North Dakota (-32.8%), and Connecticut (-32.7%). The severity of the fiscal crisis in New York, the state that was the epicenter of COVID-19 cases, is already playing out for nonprofits. This month, New York informed nonprofits that payments are being delayed and new contracts are on hold. Doug Sauer, CEO of New York Council of Nonprofits, said thousands of nonprofits that contract with the state are in jeopardy of seeing their funding cut or written agreements eliminated. Nonprofits that have multi-year contracts with state agencies
are being told they may not get the full amount, Sauer said. Others, which have rendered services under existing state contracts, have not been reimbursed by the state for expenses the nonprofits already incurred delivering services in reliance on their written agreements with the state.
States Consider COVID-19 Liability Protections
State policymakers are taking seriously the call for liability protections from lawsuits regarding COVID-19 upon reopening. Governors in two states have issued executive orders (Arkansas and Alabama) and legislators in a dozen have enacted or are considering liability legislation. Oklahoma, Utah, and Wyoming passed laws that limit claims against certain defined entities for exposure to or contraction of COVID-19 that may have stemmed from being on-site. The North Carolina COVID-19 Recovery Act gives liability protections to health care facilities, health care providers, and volunteer organizations; a separate bill awaiting the Governor’s signature would extend the immunity to individuals, nonprofit board members, and volunteers. Proposed legislation in Oregon would extend liability protections only to state and local governments and “isolation shelters,” privately owned and operated short-term sheltering locations.
Legislation in Georgia, Minnesota, Mississippi (H.1783/S. 3049), and Pennsylvania would extend protections explicitly to nonprofit organizations and for-profit businesses. A separate Georgia bill (HB 167) fails to include language covering nonprofits. A measure in South Carolina covers “any for profit or [nonprofit] business entity, organized in any form whatsoever.” Louisiana lawmakers would go the furthest to apply protections only for nonprofits, including religious institutions, leaving out for-profit businesses. Tennessee lawmakers considered, but failed to pass, two bills (H.B. 2623/S.B2381) on immunity. However, there are rumblings that the Legislature may return for a special session to take up the legislation again. Pending legislation in New York, however, would go in the opposite direction, banning any agreement made to exempt employers from liability for negligence related to the pandemic.
Worth Seeking in Your State?
State Pandemic Grants & Loan Programs
Legislatures continue to craft grant and loan programs designed to help nonprofits and for-profit businesses weather the pandemic and prepare to reopen. Colorado this month created a small business COVID-19 grant program for businesses, including nonprofits, with fewer than 25 employees that face economic hardship caused by COVID-19. The new law appropriates $25 million from the Coronavirus Relief Fund for the grant program and gives 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.
New York established a state disaster emergency loan program for loans up to $25,000 for small businesses and nonprofits with fewer than 50 employees to purchase personal protection equipment and other fixtures needed to help prevent the spread of COVID-19.
Awaiting the signature of the Michigan Governor is bill to set up a $100 million small business restart grant program that would provide grants to small businesses and nonprofit entities with fewer than 50 employees for maximum grant amounts up to $20,000. Thirty percent of grant funds would be awarded to women-, minority-, or veteran-owned businesses. New Mexico’s Governor has on her desk the Small Business Recovery Act of 2020 intended to provide low-interest loans, available on a
first-come, first-served basis, set at half the prime rate to small businesses and nonprofits with revenues less than $5 million. It would set the loan amount at up to 200 percent of the small business’ or nonprofit’s adjusted monthly business expenses from the previous calendar or fiscal year, not to exceed $75,000. Finally, a bill that passed the North Carolina Legislature would, among other things, waive a 15-percent matching fund requirement for nonprofits receiving state funding through the NC Department of Health and Human Services competitive grants program for FY2020-21. A separate measure still
working its way through the process in North Carolina has been revised to include nonprofits in grants legislation that would create three new state COVID-19 economic recovery grant programs.
Getting Out the Count - Creatively
The 2020 Census is still underway despite most people remaining sheltered in place. So how can the Census Bureau continue to get the word out when people are stuck inside? Officials turned to the creativity of the citizenry, and we’re celebrating the individuals who responded to give voice (and video) to the call to action.
Last week, the Census Bureau announced winners of the “Get Out the Count” Video Challenge, a project that called for engaging video content to explain the importance, use, and safety of the census, and how to complete it. According to the Bureau, “The competition challenged contestants to make the 2020 Census a must-do for communities, particularly those considered “hard-to-count,” such as racial and ethnic minorities, young and mobile populations, families with young children,
LGBTQ+, non-English speakers, among others.”
Census Accelerate, an initiative of the Census Bureau’s innovation arm, awarded the prizes to the top three most engaging, impactful and informative short-form video submissions that demonstrate the importance of the 2020 Census, while encouraging viewers to respond online, by phone or by mail.
And the winners are:
- Make It Count / #2020Census, Keaton Davis, Austin, Texas - Awarded $30,000 Grand Prize
While teaching his son a new soccer kick, a father lands in unexpected territory. A neighbor helps him come to his senses by completing the US Census.
- Me Toca a Mi, Latino Community Fund Georgia - Awarded $10,000 Runner Up Prize
It is our time, to be seen, to count, to say ESTAMOS AQUI, for our present, for our future, for our parent's dreams, for more opportunities for our communities. PARTICIPATE IN THE CENSUS NOW. COUNT ALL: MyCensus2020.gov
- The 2020 Census Song!, Austyn Malynn Santa Clarita, California - Awarded $10,000 Student Prize
Read more examples of Advocacy in Action,
a regular feature of Nonprofit Advocacy Matters.