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It’s Not Over. Keep Pushing!
The mixed messages from the Administration and Congress about COVID relief is confusing, but the needs of charitable nonprofits and those we serve continue to grow. Therefore, we all must keep increasing the pressure on federal policymakers to pass legislation. Stated another way, Warning: It’s Now or Never! That is the title of an article by Tim Delaney in Nonprofit Quarterly last week. It’s a call to action; it’s a rallying cry; it’s a statement of reality: It’s now or never for nonprofit priorities in the COVID relief legislation. The article urges everyone in the nonprofit community – every nonprofit staff member, board member, volunteer, and donor – to take action, right now, by telling their U.S. Representative and two U.S. Senators that the COVID-19 bill being negotiated must include the bipartisan solutions in the new Nonprofit Community Letter.
Here are just a few of the actions you can take now and in the coming days to make a difference:
The State of Play
With negotiations between the Administration and Democrats over a COVID relief bill stalled, the President signed documents over weekend purporting to partially renew unemployment benefits, defer payroll taxes, and call on federal agencies to consider how to extend the eviction ban and provide student debt relief. Each of the measures is legally suspect, given that the President took unilateral action over matters controlled by statutes enacted by Congress. Whether intended as legitimate policy moves, as ploys to give the Administration and congressional Republicans some leverage in the COVID relief negotiations, or simply as political moves to give the appearance of doing something, the actions will no doubt be litigated in federal courts. See a summary of the executive actions, and comments of Senate Majority Leader McConnell (R-KY), and a joint statement from House Speaker Pelosi (D-CA) and Senate Democratic Leader Schumer (D-NY).
No new negotiating sessions have been announced, but resumption is considered inevitable. The parties still have high priorities that were not addressed through the President’s unilateral actions. Republicans remain committed to enacting liability protections and Democrats, and some Republican Governors, are seeking significant funds for state and local governments. Nonprofits have stakes in almost all of the issues on the table, e.g., questioning how efforts to curb lawsuits will affect worker and client safety and organizational sustainability, and recognizing that governments typically turn to and turn on their nonprofit partners during times of financial duress. And, of course, none of the essential nonprofit policy priorities identified in the new Nonprofit Community Letter can be enacted unless and until lawmakers resolve the broader issues and reach a deal on COVID relief.
Partial UI Fix Now the Law
Does Your Nonprofit Self-Insure?
If so, we encourage you to reach out to your state unemployment office to make sure they know the law has changed and you are not on the hook for paying 100% of unemployment claims. Use this Joint Statement to show that government and nonprofit representatives agree that the newly signed law relieves nonprofits of the full costs. Learn more about self-insured (or reimbursing) employers.
Last week, President Trump signed into law the Protecting Nonprofits from Catastrophic Cash Flow Strain Act (S. 4209), which clarifies that self-insured (also known as reimbursing) nonprofits do not have to pay 100% of their state’s unemployment bill upfront and wait for repayment of half at some later date. This reverses problematic guidance from the U.S. Department of Labor requiring nonprofits to fully reimburse states for the costs of their COVID-19 related unemployment insurance claims and then seek reimbursement of half the money they just paid. Federal and state laws permit charitable nonprofits, and local and tribal governments to self-insure under their state unemployment system, meaning that in normal times they pay all of the costs of benefits the state paid to former employees rather than contribute unemployment taxes into the state trust fund. The CARES Act provides that the federal government will pay half the costs of these benefits. The National Council of Nonprofits and the National Association of State Workforce Agencies issued a joint statement the day the bill was enacted to ensure that the states and employers got the news of the legislative fix.
Census Deadline Squeezed, Reducing Chances of Complete Count
Last week the U.S. Census Bureau reversed itself and announced plans to end in-person operations and non-response follow-up on September 30. The Bureau previously told Congress that because of public health delays stemming from the COVID-19 pandemic it needed until at least Oct. 31 to complete field operations to count all persons. Its stated rationale for reversing course and ending the count early was to meet a Dec. 31 deadline for submitting final Census numbers for the apportionment of congressional districts for the next decade. Nearly 900 organizations signed a letter asking Congress to extend the deadline to give the Bureau more time to complete the count. A fair, accurate, and complete count for the 2020 Census is essential to ensure proper allocation of more than $1.5 trillion federal dollars – annually – that hinge on decennial data, including funding for state and local governments and nonprofits that deliver vital services to individuals and communities.
- New PPP Loan Forgiveness Guidance: The Small Business Administration and Treasury Department released additional guidance last week: Frequently Asked Questions For Loan Forgiveness. Many of the 10 pages of questions and answers relate to timing issues for expenses and interpreting what counts as payroll and nonpayroll expenses. The new FAQs repeat past guidance about reductions to loan forgiveness, such as when borrowers are not able to rehire qualified staff, and provide new examples regarding the effect of pay reductions. See also the loan application and instructions for additional information.
- Questioning the Main Street Lending Program for Nonprofits: At a hearing before the COVID-19 Congressional Oversight Commission, the head of the Boston Federal Reserve was questioned about the Main Street Lending Program for nonprofits. Notably Representative Shalala (D-FL) pressed on the unrealistic loan eligibility criteria and asked when it will be operational. Boston Fed President Eric Rosengren responded that the eligibility criteria were relaxed in response to nonprofit comments, but ultimately they were based on what banks told the Fed they needed in the term sheet if they were to consider offering the Main Street loans to nonprofits. He also said that the loan documents are available online but that the program won’t be “live” for several more weeks.
- New SALT–Charitable Donation Regulations: The IRS announced final regulations on Friday that incorporate previous guidance for determining when taxpayers can and cannot deduct the full value of charitable donations that also generate state or local tax credits. The guidance and the new regulations were made necessary because of the cap on state and local tax (SALT) deductions enacted as part of the 2017 tax law. Learn more about the original guidance issued in June 2019. The impact of the regulations will only matter to taxpayers who itemize SALT and charitable deductions, as well as the charitable and governmental nonprofits that benefit from donations that trigger state and local tax credits.
Forgivable Loans for Nonprofits
Embedded in the negotiations over a COVID relief bill are proposals to renew, alter, and/or expand the Paycheck Protection Program (PPP) that provided lifeline loans to many but not all charitable organizations. The House-passed HEROES Act includes access to PPP loans for nonprofits of all sizes. The HEALS Act in the Senate proposes a second PPP forgivable loan opportunity. The RESTART Act in the Senate and House would count the number of employees more equitably and improve on maximum loan amounts. While each set of proposals contain some of the essential priorities identified by charitable nonprofits, significant revisions are needed before a program would work for most organizations. The National Council of Nonprofits developed a resource for understanding and advocating in support of forgivable loans: Charitable Nonprofits, Forgivable Loans, and Legislative Proposals.
State and Local Revenue Projections Continue to Decline
State and county budget gaps could exceed $400 billion due to the coronavirus crisis, according to revised analyses. State tax revenues were down 29 percent, or by $200 billion, over the past three months compared with last year, NPR reports. Counties expect gaps of $202 billion through next fiscal year, a recent analysis by the National Association of Counties projects. This estimate includes $114 billion in lost revenue and $58 billion in state funding cuts for counties. Seventy-one percent of counties surveyed reported cuts or delays in capital investments and 68 percent reported cuts or delayed services. The National Governors Association recently asked Congress to “provide states with $500 billion unrestricted assistance.” According to the chief economist for the National Association of Counties, “The fiscal impacts of the coronavirus pandemic will be felt by county residents across the nation, as services are reduced and local governments make difficult decisions while balancing already strained budgets.” Even the U.S. Chamber of Commerce is expressing concern, stating “The combination of falling revenue, rising costs, and balanced budget requirements will put significant and sustained stress on state and local budgets.” Nonprofits closely follow these fiscal challenges at governments because budget gaps often lead to spending cuts for vital services provided by nonprofit organizations.
State Agencies Extend UI Relief, But Others Lose Ground
State workforce agencies are swiftly responding to the new federal law reversing the DOL unemployment payment rule (see article above), sending letters to self-insured (also called reimbursing) employers to adjust the invoices that had been previously sent out. The Maryland Department of Labor recently wrote to all reimbursing employers in the state announcing that although second quarter billings charged the full 100 percent of employer liabilities, the Department would accept 50 percent in light of the enactment of S.4209. Last month, the New Mexico Department of Workforce Solutions instructed all reimbursers to “disregard the request for payment” previously sent until a revised invoice is created with further guidance from the U.S. Department of Labor. Similarly, Minnesota and Iowa have waived second quarter payments in response to the recent federal change. Nonprofits that may have received incorrect invoices are encouraged to reach out to their corresponding state agency for a correction citing the new law.
Elsewhere, nonprofits and other reimbursing employers in Louisiana and Nebraska have lost ground with coverage of unemployment benefits. Both states previously covered the remaining 50 percent of costs for self-insured employers, but that relief expired on July 31 and Aug. 1, respectively. The Louisiana expiration comes as the state’s unemployment compensation trust fund is being quickly depleted.
More States Open Grants for Nonprofits
As states begin spending Coronavirus Relief Funds from the CARES Act, nonprofits are starting to see positive results. Grant opportunities previously announced in Alaska and Tennessee are now open to nonprofits for economic relief related to the COVID-19 pandemic. The Energize Colorado initiative opened loans, grants, and other financial relief programs for nonprofits, small businesses, women-owned businesses, disaster relief, rural-based businesses, and more. The North Carolina Job Retention Grant provides up to $250,000 for operational purposes and North Dakota grant programs provide funds for economic resiliency and technical skills training for for-profit business and nonprofits, respectively. One of three new programs in Oklahoma City provides financial resources for COVID-19 assistance specifically for nonprofits. Two other programs focus on small business continuity, including nonprofits, and arts and cultural programming in the city.
In Connecticut, the CT Community Nonprofit Alliance received a letter from the Office of Policy and Management clarifying the state’s intentions on disbursing Coronavirus Relief Fund funding to community nonprofits. Nonprofits were not originally included for access to the monies from the fund. “We are pleased to report that OPM will be disbursing $125 million in relief to community nonprofits through the CRF to support uncovered expenses as long as they are not also covered as part of the PPP,” wrote The Alliance’s President and CEO Gian-Carl Casa in a statement. “This news comes after weeks of unrelenting advocacy.”
Data in Context - Now That's Advocacy!
Lots of organizations are surveying nonprofits on what they are experiencing during the pandemic, documenting increasing demand for services, revenue declines, operational disruptions, and more. The data help nonprofit boards and executives see emerging trends, assist policymakers make informed decisions on a wide range of matters, aid grantmakers and donors see the greatest needs, and provide ideas and citations for reporters clamoring to tell the story for the public and all to see. Nonprofit Advocacy Matters has reported many times throughout the health and economic crisis about surveys and investigations by state associations of nonprofits (see Minnesota Council of Nonprofits’ report in the sidebar). Today’s installment has a twist – the data in context of the ongoing negotiations over COVID relief legislation, and what’s needed in … Kentucky, home of the Senate Majority Leader.
Last week, the Kentucky Nonprofit Network (KNN) issued a report on Critical Issues Important to Nonprofits Missing in Federal Legislation. It reveals results of a recent survey that quantifies the toll COVID-19 is taking on organizations across Kentucky. Of the nonprofits responding, 57 percent report at least 608,000 Kentuckians are being impacted by their reduction in services. Yet other nonprofits are facing an increased demand with 43 percent of organizations reporting an increase of over 130,000 Kentuckians seeking services. The KNN infographic is a beautiful thing.
What’s particularly timely and useful in this report is how KNN highlights the critical relief needed by Kentucky's nonprofits. The report relates the issues that Kentucky nonprofits themselves identified as most critical to their survival. Ninety-four percent of nonprofits responding to the survey express the need for universal charitable tax deductions. Ninety-three percent see the need for additional funds for state and local governments. On unemployment, 77 percent call for full federal coverage of the costs of benefits charted to self-insured employers and also strongly support extension of unemployment benefits for individuals.
In an ordinary report, data points such as those just listed can be dry and generally meaningless out of context. The KNN infographic puts the views of Kentucky nonprofits squarely in context by breaking down the views as they relate to the leading legislative proposals currently on the bargaining table: the House-passed HEROES Act and the Senate HEALS Act. Kentucky nonprofits see a very high need for improving the Universal Charitable Deduction – but neither the House nor Senate bills include it yet. Funds for state and local governments? The HEROES Act addresses nonprofit concerns, but the Senate bill does not. Fixing unemployment charges against self-insured nonprofits? The Senate bill does better than the House-passed version, but still falls short of what’s needed. And so on with other issues like government contracting flexibility, voting rights and access, rent and mortgage assistance, and forgivable loans for larger nonprofits.
Danielle Clore, CEO of KNN, explains: "The issues facing the very organizations critical to meeting the needs of Kentuckians as we continue to fight COVID-19 must not be overlooked by Congress - it's the difference in nonprofits closing their doors and keeping those doors, even their virtual doors, open to serve us and our neighbors in need."
As we see it, data to have numbers does little, but data put in context is advocacy.
Read more examples of Advocacy in Action,
a regular feature of Nonprofit Advocacy Matters.