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The Weeks Ahead
Continuing the mayhem of 2020, the first weeks of 2021 have not been the usual days of calm transition at the beginning of a new Congress and Administration. Elected federal officials are struggling to find the path forward after the scarring events of January 6, the calls for the President’s resignation, removal, or impeachment, and the soaring COVID-19 infections and deaths. Come January 20, control of the levers of power in the federal government will shift significantly, with a new Administration and – due to a new Vice President presiding over the Senate to tip the 50-50 partisan split – with Democratic Senators controlling the agendas on the floor and in committees. While the prior Congress took exactly nine months between enacting the CARES Act and the new COVID relief law, the 117th Congress may act within weeks to approve larger stimulus checks for individuals, extend unemployment insurance relief for individuals and perhaps nonprofits, and provide aid to state and local governments, among other priorities subject to negotiations. Nonprofits can help shape the progress over the coming weeks and months by staying informed, meeting or keeping in contact with their Representatives and Senators, and taking action as needed.
What’s in the New COVID Relief Law for 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.
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A Nonprofit Agenda for Additional COVID Relief
Incoming President Biden and congressional Democratic leaders have made clear they intend to move quickly to enact additional COVID legislation to provide relief to individuals and to help stimulate the economy. The National Council of Nonprofits continues to promote the following nonprofit priorities that are based on the Nonprofit Community Letter signed by more than 4,100 nonprofits from all 50 states and additional communications.
- Provide Full Unemployment Benefit Reimbursement: Increase the federal unemployment insurance reimbursement for reimbursing (self-insured) nonprofits to 100% of costs and extend relief through at least the third quarter of 2021.
- Expand Nonprofit Access to PPP Loans: Expand the Paycheck Protection Program to provide forgivable loans to nonprofits with more than 500 employees and revise the nonprofit eligibility criteria for PPP Second Draw loans to eliminate the requirement that these organizations serving their communities must suffer a 25% decline in gross receipts.
- Strengthen Charitable Giving Incentives: Increase and make permanent the above-the-line or universal charitable deduction in the new COVID relief law.
- State and Local Aid: Nonprofits recognize the need and endorse providing substantial federal aid to state and local governments to help cover lost revenues during the pandemic and avoid layoffs and cuts to essential programs and services.
- Liability Protections: Charitable organizations recognize the need for stringent standards for operating safely and believe that entities that take all reasonable steps to reopen safely should receive protections from litigation.
Federal FastView
- Donor Disclosure Up for Review: The U.S. Supreme Court has agreed to consider challenges to California’s requirement that charitable organizations disclose donor information to state officials. The cases are the results of appeals by the conservative Americans for Progress and Thomas More Law Center to rulings by the Ninth Circuit Court of Appeals rejecting their claims that the state disclosure rule infringes their First Amendment rights. In prior proceedings, the appeals court ruled that the groups had not shown that confidential disclosure to the state (not the public) of the donor information in Form 990 Schedule B would chill participation or lead to donors being harassed.
- Reviewing Nonprofit Tax Forms: The Internal Revenue Service announced in November that it is seeking comments from the public, by today, January 11, on potential revisions to nearly five dozen IRS forms filed by nonprofit organizations, including the Form 1023 and Form 1023-EZ applications for tax-exempt status and the Form 990 informational tax return and various schedules. The IRS seeks input on whether the collection of information is necessary and has practical utility; ways to enhance the quality, utility, and clarity of the information to be collected; and ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Comments submitted by the National Council of Nonprofits call for greater clarity in reporting government grants, a complete revocation and rewrite of Form 1023-EZ, and an additional 90 days for nonprofits to analyze and comment on the dozens of complex forms and their related schedules.
- IRS Standard Mileage Rate: The mileage rate for business expense deductions for 2021 is 56 cents per mile, a decrease from the 57.5 cents per mile rate used for 2020, the IRS announced at the end of last year. The rate for medical or moving expenses also dropped, from 17 cents to 16 cents per mile. The standard mileage rate for determining deductions for volunteers using their vehicles for charitable purposes remains at 14 cents because that rate is fixed in statute.
Observations
One-Party Control and the Nonprofit Public Policy Agenda
As organizations that are nonpartisan in law and fact, charitable nonprofits don’t count on one political party or the other to deliver nonprofit policy priorities that typically garner bipartisan support. Indeed, one-party control of the federal government typically creates challenges for charitable organizations. Nonprofits faced threats in 2009-2010 when Democrats controlled the House, Senate, and White House and in 2017-2018 when Republicans controlled all three. President Obama’s first budgets called for limiting the value of charitable donations, among other itemized deductions. Bipartisan opposition was critical to retaining the charitable giving incentive. President Trump’s first year in office saw Republicans enact the 2017 tax law with zero Democratic support. That is the law that reduced to 10 percent the share of taxpayers who receive a tax incentive for donating to charities, while imposing new or expanded taxes on nonprofit transportation benefits, unrelated business income, executive compensation, and investment returns of some educational nonprofits. With that warning from history, what should nonprofits watch out for and expect over the next two years?
Competing Priorities: As with Republicans, the Democratic Caucus is deeply divided. Progressives reportedly are promoting a “go bold or go home” approach, while moderates warn their colleagues not to overplay their hands. In these situations where the Democratic majorities in the House and Senate are so very thin, it’s the moderates who hold most of the cards. Look to the bipartisan members of the Problem Solvers Caucus in the House and the group of middle-of-the-road Senators who crafted their own bipartisan COVID relief bill last month as the lawmakers in the center of all significant legislation for the next two years.
Budget Reconciliation: With Democrats now in control of the House and Senate, there is growing interest in a process known as “budget reconciliation” as a tool for securing statutory changes in mandatory spending (entitlements) or revenue programs (tax laws) to achieve goals set forth by a budget resolution. The majority party in the Senate typically favors the reconciliation process because filibusters are not allowed and controversial changes to law can be approved with a simple majority.
COVID-19 Influences Dynamics of State Legislatures
By the end of today, legislatures in 25 states will have gaveled in for the 2021 session, and an additional 15 states will convene by the end of the month. Yet those sessions will look very different this year because of COVID-19. To address public health concerns, legislatures have amended their rules, altered their protocols, and seen changed expectations among lawmakers, staff, and the public. The most common change - hybrid meetings that provide a mixture of virtual convenings and in-person meetings that follow social distance rules - likely will adversely impact the ability of nonprofits and others to advocate effectively. Connecticut, Delaware, Hawaii, Oregon, Vermont, and Virginia have announced all meetings will be virtual at the start of their sessions. Last week, New Hampshire lawmakers met in their cars in a parking lot for the first-ever drive-in legislative session. During a virtual presentation, legislative leaders in Hawai`i called for all virtual hearings, shortened meetings, reduced number of bill introductions, and prioritization of legislation taken up for consideration during public hearings.
State Revenues, Budgets Projections Varying Widely
Forecasts for state budgets are varying widely due to unexpected increased sales tax revenues in some states, delayed income tax payments, and enacted reductions in government spending during the pandemic. Some revenue projections and budget proposals reflect stronger financial positions than previously expected. Several states (e.g., Maryland, Minnesota, Mississippi) have experienced increased sales tax revenues that they credit to federal unemployment payments that allowed families and individuals to continue buying necessities. Yet Texas reported a seven-percent decline in sales tax revenues last year. Other states (including Connecticut, Georgia, Indiana, Kentucky, New Hampshire, New Mexico, and Virginia) have reported better general fund receipts and financial forecasts than previously projected that may allow for smaller budget gaps, renewed and new spending, and replenishment of rainy day funds. Last month, California Governor Newsom predicted a $15.5 billion revenue windfall, but that is $10.5 billion less than originally projected. Kentucky Governor Beshear included $20 million in additional funds for nonprofits in his proposed budget and $100 million to repay the state’s unemployment insurance loans in addition to the previously announced aid for reimbursing employers. North Dakota Governor Burgum is proposing a $15 billion budget that includes a spending hike of 2 percent, the second largest proposal in state history.
All is not good news across the country, however, as long-term forecasts in some states anticipate large budget gaps and austerity. Fourteen states have tapped into rainy day funds to fill gaps, cover expenditures, and balance budgets, leaving them financially vulnerable. Minnesota currently has a $641 million surplus but is expected to make a swift shift to a $1.27 billion budget gap next budget period, and then decline further to a $4.7 billion deficit for the following two years. The Governor of Hawai`i is warning nonprofits that they face deep cuts as tax revenues dwindle due to the pandemic, which are projected to drop by more than $1 billion from 2019 levels before partially rebounding. Illinois Governor Pritzker has already announced $711 million in budget cuts, including $126 million in grant reductions and operations. Many of the agency cuts and adjustments are to government grants and contracts with nonprofits in health and human services. Policymakers in Mississippi have proposed government job cuts.
Unemployment Relief Remains Top Priority
State associations of nonprofits are continuing to advocate for unemployment insurance relief. New Jersey Governor Murphy signed into law legislation that stops experience rate increases for contributing employers, makes direct payments to the state to pay for unemployment claims, holds reimbursing employers harmless, and delays an automatic payroll tax increase. “This important legislation will provide vitally needed relief for [nonprofit] employers of all sizes, helping to keep more resources available for charitable missions,” according to the Center for Non-Profits, the state association of nonprofits in New Jersey. Minnesota enacted COVID relief legislation that provides an additional 13 weeks of extended unemployment benefits and covers 100 percent of the costs that would otherwise be charged to reimbursing employers. The Massachusetts Nonprofit Network successfully advocated for the inclusion in their state budget of a 6-month deadline extension for nonprofit employers that self-insure for their unemployment costs. Without this deadline extension, nonprofits across the Commonwealth would now be facing large balloon payments. Reimbursing employers in Delaware had initially secured relief from making payments to the state payments, but the short-term relief has now expired.
In December, Kentucky’s Governor announced that the Commonwealth is dedicating $51.5 million in remaining Coronavirus Relief Funds to cover the non-federal half of the costs of benefits charged to reimbursing employers. “This relief will help nearly 1,000 nonprofits keep their doors open to maintain services and meet the urgent needs of Kentuckians,” said Danielle Clore, CEO of the Kentucky Nonprofit Network. Likewise, last month, the North Dakota Emergency Commission reallocated $2.65 million of Coronavirus Relief Funds to cover 50 percent of unemployment costs for reimbursing employers in the state.
Why We Publish This Newsletter
We believe that to be successful, nonprofits – just like for-profit businesses and governmental entities – need a supportive and reliable policy environment in which to operate. Nonprofits can be neither efficient nor effective in improving the lives of individuals and strengthening communities when governments are undercutting their ability to function, such as by curbing charitable giving incentives, imposing taxes on tax-exempt organizations, encroaching on nonprofits’ independence and decision-making, and adopting costly or unreasonable regulations. Nonprofits need timely access to the latest information and analysis about policy threats and opportunities that Nonprofit Advocacy Updates provides to help nonprofits advocate directly or collectively for their missions.
This newsletter serves as a critical part of the flywheel of both gathering real-world information from front-line nonprofits and sharing analyses back out to the nonprofit community about emerging policy challenges and developments. The articles presented in each edition reflect the scope of the work of the National Council of Nonprofits as we engage with our nonprofit networks and others across the country to identify and evaluate public policy developments at the federal, state, and local levels and then advocate for (and alongside) nonprofits in legislative bodies, regulatory agencies, and the courts.
In each edition, we share information so nonprofits can learn about and track items enabling them to take action as they see fit. A few times each year, we use Nonprofit Advocacy Updates to ask for your insights from the real world to inform policymakers and other advocates, thereby turning the newsletter into a conduit for nonprofits of all types to share their information and perspectives to build stronger advocacy muscle for the community. Other times we use it to announce Action Alerts so nonprofits know it’s time to engage on particular legislative and regulatory policy threats or opportunities.
Please read this roadmap on the values and substance that goes into preparing each biweekly edition of Nonprofit Advocacy Updates, as well as a guide to how you can use the information.
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“America’s charitable organizations are united in opposition to the actions of the mob that stormed the ultimate symbol of democracy, the U.S. Capitol. The First Amendment protects the right to peaceably assemble and to petition government for a redress of grievances. It does not protect those who planned, participated, and incited a mob to act with violence rather than act peacefully and delivered insurrection instead of petitions. As we all take a step back and call for calm, we should also resolve to hold violators accountable for their unlawful actions to prevent further outbreaks. In a democracy, disagreement is natural. Debate is healthy. But violence and mob rule are unacceptable.”
Nonprofit Provisions in COVID Relief Legislation
