The New COVID Relief Law and Nonprofits
After many months of inaction, the House, Senate, and President finally came together to enact important COVID relief for individuals, nonprofits, businesses, and governments. Some of the provisions will expire in just a few weeks, and others will last only a few months. Learn which provisions will help your nonprofit and what you need to do to take advantage of them by attending this Nonprofit Town Hall briefing hosted by the National Council of Nonprofits on Wednesday, January 13 at 3:00 pm Eastern.
How Did 2020 Nonprofit Policy Issues Turn Out?
2020 ended in a blur of public policy actions by Congress, the Administration, and the courts, some of which occurred when many people had unplugged for the holidays. Here’s an intentionally brief progress report on a dozen nonprofit policy issues of sector-wide interest from 2020, listed in alphabetical order. See the sidebar and links provided to learn more about each of the issues.
- Appropriations: The Consolidated Appropriations Act of 2021 (P.L. 116-260), signed into law December 27, 2020, funds the federal government through the end of the current fiscal year. The new law addresses numerous priorities advanced by various charitable organizations, including increased funds for schools, hospitals and vaccine distribution. There’s also money for childcare, food, and rental assistance.
➡️ Next Steps: With federal funding issues resolved for this year, the appropriations process for fiscal year 2022 starts when the new Administration releases the Biden budget blueprint in March.
- Bias Training Executive Order: On December 22, a federal court ordered the Administration to stop enforcing Executive Order 13950 that prohibits government contractors and grantees from providing many types of trainings intended to eliminate workplace bias. In issuing a nationwide preliminary injunction, the court agreed with nonprofit plaintiffs that the EO is unconstitutionally vague and “impermissibly chills the exercise of constitutionally protected speech, based on the content and viewpoint of their speech.” Read more about the nonprofit perspective and an analysis of the case.
➡️ Next Steps: Many are urging President-Elect Biden to rescind Executive Order 13950 shortly after his inauguration and replace it with new guidance that affirms the value of workplace trainings that promote diversity, equity, and inclusion.
- Census Apportionment Presidential Memorandum: The Census Bureau missed the statutory deadline of December 31 for delivering the 2020 Census to Congress. This effectively renders moot an extremely controversial action by President Trump, who in July ordered federal officials to exclude undocumented immigrants from census numbers for apportioning congressional districts. The issue was tied up in litigation, including a Supreme Court decision in December that took a wait-and-see approach. The missed deadline means President Trump will not be able to subtract people from the census count.
➡️ Next Steps: After his inauguration, President Biden likely will revoke the July Presidential Memorandum. That alone will not correct other problems with the census count, however; further actions will be necessary once additional information becomes available.
- Charitable Giving Incentives: The Consolidated Appropriations Act extends by one year, through 2021, the incentive for taxpayers who do not itemize deductions to deduct the first $300 of charitable donations from their taxes. In 2021, couples may deduct $600 in so-called above-the-line deductions. The new law also extends through 2021 the increased limits on deductible charitable contributions for individuals who itemize and for corporations.
➡️ Next Steps: Charitable organizations need to do two things to keep these incentives in the law beyond 2021: encourage donors to take advantage of the giving incentives (which will help nonprofits this year, while also generating data to show their value to Congress) and advocate for increasing the above-the-line deduction to a higher level to promote greater support for nonprofit work in communities.
- Coronavirus Relief Fund: The new law extends through December 2021 the deadline for state and local governments to spend their Coronavirus Relief Funds (CRF) from the CARES Act, thus removing the risk that they would have had to return unspent money at the end of last year. Charitable organizations lobbied for this extension because numerous states and cities have used some of their Coronavirus Relief Funds to create grants programs for nonprofits and businesses and/or use the money to reduce the unemployment costs of nonprofits and others.
➡️ Next Steps: Nonprofits need to make sure their state and local governments spend every dime of CRF monies, paying particular attention to nonprofit priorities.
- Employee Retention Tax Credit (ERTC): The new law extends the CARES Act credit for retaining employees for six months (to July 1, 2021) and expands the usefulness of the refundable payroll tax credit by:
➡️ Next Steps: This payroll tax credit is particularly helpful for nonprofits deemed too large (more than 500 employees) to participate in the Paycheck Protection Program because it provides near automatic benefits up front without needing to seek forgiveness later.
- Reducing the required decline in gross receipts from 50% to 20%,
- Increasing the refundable payroll tax credit from 50% to 70%.
- Covering up to two quarters for a total benefit of $14,000 per covered employee in 2021, and
- Providing that employers that receive PPP loans may still qualify for the ERTC with respect to wages that are not paid for with forgiven PPP proceeds.
- Liability Protections: Despite being the number one priority for Senate Republicans for most of 2020, Congress did not enact liability protections for businesses, nonprofits, and others from COVID-related claims when certain safeguards were put in place.
➡️ Next Steps: Demand for liability protections will certainly return when negotiations over the next COVID relief or stimulus legislation commences in the coming weeks or months. Read more about the impact on nonprofits.
- Paid Sick Leave Tax Credit: The new law extends – but only through March 31, 2021 – the refundable payroll tax credits for paid sick and family leave that were established in the Families First Coronavirus Response Act. It does not extend the mandate to provide paid leave included the Families First Act that expired at the end of 2020. The new law also extends through 2025 the 12.5% to 25% income tax credit for paid family and medical leave originally enacted in the 2017 tax law.
➡️ Next Steps: With COVID cases increasing at alarming rates, nonprofits need to learn more about how to use this potentially valuable option to assist and retain staff.
- Paycheck Protection Program (PPP): The reforms to the Paycheck Protection Program are a mixed bag. Notably, the new law authorizes a Second Draw of PPP loans for qualified employers. Charitable nonprofits (as well as for-profit businesses) may qualify for a Second Draw loan of up to $2 million only if they a) employ 300 or fewer employees and b) experience a decline in gross receipts of 25% in one of the four quarters in 2020 compared to the same quarter in 2019.
In the area of PPP loan forgiveness, the legislation expands the types of expenses eligible for forgiveness to include the costs of personal protective equipment and workplace modifications. It also authorizes a short-form approval of forgiveness for loans of $150,000 or less. The law also reverses Small Business Administration policy by repealing retroactively a requirement that Economic Injury Disaster Loan Grants grant recipients must pay back $10,000 emergency grants even when PPP loans were forgiven.
➡️ Next Steps: The Small Business Administration will soon be issuing new forms and guidance that will enable nonprofits and others to take advantage of the new law.
- State & Local Aid: Congress ultimately took no action on proposals to provide hundreds of billions of dollars in emergency aid to state and local governments facing revenue shortfalls due to the pandemic.
➡️ Next Steps: As with the liability protections issue, Congress is expected to use negotiations over COVID relief to provide additional funds to help state and local governments weather the fiscal fallout of the COVID-related recession. Because states and localities must balance their budgets, nonprofits are girding for spending cuts, late payments on their grants and contracts, and imposition of new taxes, fees, and demands for payments from tax-exempt organizations. Read more about the significant impact on nonprofits.
- Student Loans: In December, the Education Department extended by one month – through January 31 – the forbearance granted to federal loan borrowers. An automatic suspension of payments applies to any borrower more than 31 days delinquent. Forbearance counts as payments towards the minimum requirements for Public Service Loan Forgiveness (PSLF), a program that assists individuals working at charitable nonprofits and in government.
➡️ Next Steps: Individuals benefitting from loan forbearance and the PSLF should check the fine print. For example, a borrower must continue to be employed full time at a qualifying employer during the forbearance period to ultimately secure loan forgiveness. See Coronavirus and Forbearance Info for Students, Borrowers, and Parents for more information.
- Unemployment Benefits and Costs: The new law approved only a 9-week extension – until March 14 – of unemployment benefits for laid-off and furloughed workers. The law also extends through mid-March the CARES Act requirement that the federal government cover half of the costs of unemployment benefits paid to former employees of self-insured or “reimbursing” employers.
➡️ Next Steps: The looming expiration on March 14 of the many unemployment provisions means that nonprofits must begin advocating immediately for extended benefits and relief for reimbursing employers. The policy priority laid out in the Nonprofit Community Letter (Item #4) remains valid and urgently needed.
The dozen issues discussed above relate primarily to federal policies that affect charitable organizations in all subsectors of the nonprofit community. They entail actions by all three branches of government – legislative, executive, and judicial. They also affect the decisions that state and local policymakers must make as they allocate limited resources or generate new revenues in the coming months. Therefore, nonprofits should be aggressive in identifying new and improved programs that can support their missions and remain vigilant to challenges arising at all levels of government. The best way to stay engaged is to join and be active in state associations of nonprofits. Find your state association of nonprofits.