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President Announces American Families Plan
The White House released the American Families Plan, the third installment of the President’s Build Back Better agenda, after the American Rescue Plan enacted in March and the American Jobs Plan proposed at the end of March. The American Families Plan calls for spending $1.8 trillion to provide subsidized childcare, free education (pre-K and community college), paid family and medical leave, and more. The paid leave proposal appears to track a bill announced by House Ways and Means Committee Chair Neal (D-MA). The President proposes paying for the new spending through increased taxes on taxpayers earning more than $400,000 and an increase in capital gains tax rates for people earning more than $1 million. The plan calls for eliminating “stepped up basis,” meaning heirs would be liable for taxes on gains in the value of inherited property (above $1 million), including the ones that accrued before they took ownership. Notably, there is no reference in the plan to the proposal by candidate Biden to limit the value of itemized deductions to 28 percent. The plan also is silent on changes to the estate tax or to the $10,000 cap on State and Local Taxes (SALT cap). One or more these may show up later in legislative text for the American Families Plan or other legislation. See White House Fact Sheet for more details on the American Families Plan.
Supreme Court Hears Donor Secrecy Cases
The U.S. Supreme Court heard oral arguments last week in consolidated cases challenging California’s requirement that charitable nonprofits soliciting in the state file on a confidential basis the same Schedule B that they already file with the IRS reporting donations by their major contributors. By most accounts the conservative justices on the Court appeared inclined to strike down the confidential reporting requirement, but the rationale and breadth of the likely decision is unclear. In an amicus curiae brief in support of the California law, the National Council of Nonprofits urged the justices to be very careful when writing the opinion to avoid harming the work of the vast majority of charitable nonprofits. This article explains the concerns and reasoning behind the brief that, along with the brief of California Association of Nonprofits (CalNonprofits), the lawyers for California and United States specifically mentioned during their arguments. A decision in the case is expected in June.
2020 Census
Apportionment Data Released, State Winners and Losers
After months of delay, the Census Bureau released the population results of the 2020 Census last week, reporting there are 331,449,281 of us living in the United States. The Bureau also reported the total resident population in each state, as well as the congressional apportionment totals per state. The big news concerns the winners and losers of seats in the House of Representatives. Texas is gaining two seats, and Colorado, Florida, Montana, North Carolina, and Oregon are each adding a House seat. Seven states (California, Illinois, Michigan, New York, Ohio, Pennsylvania, and West Virginia) each lost one seat. The narrow margins and where the seats were lost have raised questions regarding undercounts of certain demographics, specifically the Hispanic population. Many groups have already filed lawsuits on how the new census data will affect redrawing district maps for Congress (reapportionment) and state and local offices (redistricting).
Federal FastView
- Venues Grant Program Reopens: After several false starts, the Small Business Administration finally opened the online portal to the Shuttered Venue Operators Grant (SVOG) program to some success. Variety reports that the program providing grants of up to $10 million for performance venues, independent movie theaters, and cultural institutions received 17,356 applications in the first 24 hours of operation. Information about the program is posted on the Shuttered Venue Operators Grant web portal, which is the primary source of information about the application process. Additional resources are also available: Application Form 3515, Frequently Asked Questions, Applicant User Guide, and Application Checklist.
- EIDL Update: The Small Business Administration has launched a new form of Economic Injury Disaster Loan (EIDL) assistance – called Supplemental Targeted Advances. To qualify, an eligible nonprofit or for-profit business must be in a low-income community, have suffered greater than 50 percent economic loss, and have 10 or fewer employees. Further, the SBA has modified the Targeted EIDL Advance application process to determine if businesses also qualify for a additional $5,000 Supplemental Targeted Advance. SBA announced that it will directly contact eligible entities to apply. Applications will be processed on a first-come, first-served basis. See more at COVID-19 Economic Injury Disaster Loan.
- Seeking WORK NOW Act Support: Last month, 55 charitable nonprofits sent a letter to President Biden urging him “to insist on the inclusion of the WORK NOW Act in any infrastructure legislation” he signs. The letter explains that the “WORK NOW Act would inject $50 billion into frontline nonprofits – with most of the funds allocated through states, Tribal governments, and localities – to enable them to pay the wages, salaries, and benefits of returning or newly hired employees.” It points out that the legislation “recognizes charitable nonprofits as the quintessential ’shovel-ready’ projects because their missions and track-records in their communities are clear, and they can put people to work quickly in meaningful jobs that benefit the public good rather than a private interest’s personal profits.” See one-page summary and other advocacy materials.
- Federal Contractor Minimum Wage: Last week, President Biden signed an Executive Order on Increasing the Minimum Wage for Federal Contractors that will require contractors to pay a $15 minimum wage to employees working on federal contracts. The White House Fact Sheet states: “Starting January 30, 2022 all agencies will need to incorporate a $15 minimum wage in new contract solicitations, and by March 30, 2022, all agencies will need to implement the minimum wage into new contracts.” The higher rate must also be incorporated into existing contracts at the time of renewal. The Executive Order states that the mandate does not apply to grants; it only applies to entities contracting with the federal government for (a) procurement or construction, (b) services covered under the Service Contract Act, (c) concessions, or (d) services in connection with federal property or lands and for the benefit of federal employees, their dependents, or the general public.
- 'Help Set IRS Priorities: In Notice 2021-28, the IRS and Treasury Department formally invites the public to submit recommendations for items to be included on the 2021-2022 Priority Guidance Plan. That’s essentially the government’s regulatory “to do” list for tax matters, used by Treasury and the IRS to identify and prioritize the tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance. You are encouraged to submit recommendations for guidance electronically via the Federal eRulemaking Portal (type IRS-2021-0004 in the comment box). The deadline for submitting public recommendations is Friday, May 28, 2021.
In Focus
COVID-Related Tax Credits Available to Nonprofit Employers
While checks to individuals and state and local recovery funds captured the headlines regarding the American Rescue Plan Act (ARPA) enacted in early March, the $1.9 trillion economic stimulus plan contains several important tax credits designed to help businesses, including charitable nonprofits, recoup the costs of providing assistance to their employees impacted by COVID-19. Those credits include extending the employee retention tax credit and creating a refundable tax credit for providing paid leave for employees receiving or recovering from vaccines. Another key provision in the ARPA will provide significant financial support for lower-income families, many of whom are served by charitable organizations. Continue reading the full article.
States Continue to Allocate Federal Funds for Nonprofits
Federal aid promised to state, local, Tribal, and territorial governments under the American Rescue Plan Act (ARPA) is scheduled to be released in the coming days, and affected governments continue to evaluate how to use the $360 billion for their communities. Forthcoming Treasury guidance is needed to clarify approved uses of the funds, such as which types of budget categories qualify as “government services” or “water” infrastructure. Other permissible uses may also need clarification, such as premium pay for essential workers, services that may otherwise be cut, education, transit, the arts, and rental assistance. Importantly, the American Rescue Plan expressly says that “nonprofits” are appropriate recipients of funding under the law.
Governments at all levels have started to consider how best to spend the funds. In Connecticut, which will receive $6.2 billion in ARPA funds, state policymakers plan to direct $1.75 billion into the state budget to help avoid deficits. The Connecticut Conference of Municipalities has established a special advisory committee to recommend allocations for $1.56 billion among towns. A budget committee in North Carolina approved a bill to create a State Fiscal Recovery Fund to spend the state’s $5.3 billion in ARPA aid, including a Local Fiscal Recovery Fund for $3.8 billion for local governments. In describing the bill, the committee chair acknowledged that aid for nonprofits would be an appropriate way for the state to spend some of its ARPA funding. The City of Alexandria, Virginia is taking a transparent approach to decision making by inviting residents, nonprofits, and businesses to identify their priorities for the use of the funds by ranking a list of potential programs and projects that are already under consideration, or by proposing new priorities.
Nonprofit Corporate Codes Opened, Modernized
Some legislators and charitable nonprofit leaders are using the pandemic as an opportunity to update decades-old statutes to bring nonprofit governance laws into the modern era. While many states have updated meeting procedures to allow for electronic communications, a few have gone further to reinvigorate the controlling statutes for nonprofits in the state. For example, in Alabama lawmakers authorized nonprofit boards to hold remote meetings and updated the Nonprofit Entities Code to require the Secretary of State to assign and track nonprofits filing with the state, among other things. An overhaul bill awaiting the signature of the Washington Governor would further protect charitable assets, provide more comprehensive rules for membership corporations, and clarify roles and positions of boards. Bills recently filed in North Carolina would make a variety of improvements to state nonprofit statutes, including modernizing the NC Nonprofit Corporation Act to better align it with best practices for nonprofit organizations. A separate measure would improve the state charitable solicitation licensing statute by aligning filing extensions with automatic extensions for filing IRS Form 990, eliminating notarization requirements for charitable solicitation applications and renewals, and exempting more small nonprofits from filing requirements.
Government Grants and Contracts Update
New York City Acts to Fully Fund Nonprofit Indirect Costs
Last week, New York City officials announced the City will include full funding in the upcoming budget for reimbursing nonprofits for the indirect costs they incur when performing City grants and contracts. This signals a major win for nonprofits providing services on behalf of the City. The result, if enacted as announced, will be that nonprofit human services providers receive 100 percent of their approved indirect funding this year instead of the previously announced cut of up to 70 percent. The Indirect Cost Rate Funding Initiative was launched in 2019 and grew out of a partnership between the Mayor, City Council, and sector leaders through the Nonprofit Resiliency Committee. Responding to the news, a coalition of nonprofits stated, “This announcement is both an acknowledgement of the true cost of our work and a recognition that a healthy nonprofit sector is essential to a stronger and more equitable city.” See the joint news release for more details.
In Focus
States Unemployment Laws in Flux for Nonprofit Employers
Charitable nonprofits throughout the country are likely to experience rapidly increasing unemployment costs unless federal and state policymakers take corrective actions. State unemployment laws recognize three categories of nonprofit employers: exempt employers (typically religious institutions and very small entities with very few employees), contributing employers (those that make quarterly payments into the state unemployment system like for-profit businesses), and reimbursing employers (nonprofits and local governments that self-insure and reimburse the state directly for benefits paid to their former employees). Through the CARES Act of 2020, the federal government fully covered the costs of exempt employers, delayed any costs for contributing employers, but covered only 50% of the costs charged to reimbursing employers. In the coming weeks, the taxes charged to contributing employers may jump exponentially and reimbursing employers will suffer large out-of-pocket expenses – unless governments act appropriately and quickly.
For contributing employers, the challenges are complicated by the so-called “tax-cut prohibition” in the American Rescue Plan Act (ARPA), which prevents states from using the ARPA funds to “either directly or indirectly offset a reduction in the net tax revenue… or delay[] the imposition of any tax or tax increase.” In many states, these employers are facing automatic tax hikes unless and until the state's unemployment trust fund is restored to pre-pandemic solvency. It is unclear whether use of American Rescue Plan Act funds by a state to pay down the trust fund debt would trigger the law’s prohibition on delaying the imposition of a tax. This question will have to be resolved by the Treasury Department or through litigation.
Last year, about a dozen states provided relief to reimbursing employers, but that relief has largely expired or must be revised to hold these nonprofits harmless from these pandemic-caused costs. Legislation has recently been introduced in New Jersey to clarify and update an earlier law intended to provide relief for employers that had to lay off employees due to the COVID-19 pandemic. The bill provides that employers that reimburse the state for unemployment claims are not liable for any portion of the payments of unemployment benefits which are not paid by the federal government pursuant to the CARES Act, the American Rescue Plan Act, or any other applicable federal law. Earlier this year North Carolina enacted a bill to update its coverage. Unfortunately, a measure in Kansas was amended to remove the operative language protecting nonprofits.
Nonpartisan, but Not Indifferent
Charitable nonprofits may not promote or oppose individual candidates for public office – nonprofit nonpartisanship, of course, is the law of the land. But that doesn’t mean charitable organizations don’t have an interest or must sit silently on the sidelines when it comes to elections. This isn’t an academic discussion of future engagement the next time a Presidential election takes place. Important local elections are happening this year across the country that will have huge impacts on government and services. Charitable nonprofits have the legal right to engage in a broad range of election-related activities – including voter registration and participation, candidate education, redistricting, community awareness – provided they do so on a nonpartisan basis.
Here are three current examples.
Candidate Forum
On May 7, up to eight candidates for New York City Mayor will be participating in the Nonprofit Mayoral Forum. The event is billed as an opportunity for the millions of New Yorkers who engage with nonprofits every day to hear directly from the 2021 Mayoral candidates about how their ideas and policy platforms engage with community nonprofits. The forum is intended to educate the community about the candidates’ views on a wide range of issues, including how they would plan to work with nonprofits as part of New York City’s recovery. Likely topics open to discussion during the Forum are equity for all workers, fair contracts, and needed community investments. Organizers encourage nonprofits to provide opportunities for staff, clients, supporters, and board members to participate in the event.
Nonprofits and Redistricting
Last week, the Kentucky Nonprofit Network devoted its weekly virtual town hall meeting with nonprofits across the Commonwealth to redistricting. More detailed census data will be released later this year for the Kentucky General Assembly to use in drawing maps of new congressional and state legislative districts for future elections. Karen Brown of the League of Women Voters of Kentucky joined KNN’s call to help nonprofits understand the process, learn what's at stake when election districts are redrawn, and hear how nonprofits can help ensure a fair process exists for determining legislative districts. See how the redistricting process works in your state.
Voter Engagement
Nonprofit VOTE will focus on nonprofit leadership in communities during its May 20, 2021 webinar on The Benefits of Voting in Local Elections. The program will help nonprofits discover WHY this is the right year and right time for organizations to engage voters on a nonpartisan basis. The webinar will also provide tips, techniques, and messaging strategies on HOW to find, engage, and entice voters to turnout for local races, all on a nonpartisan basis. Registe here.
Read more examples of Advocacy in Action,
a regular feature of Nonprofit Advocacy Updates.
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“What I would really like to see and work towards, is a time where New York City, and New York state, and the federal government really value the nonprofit sector as an integral, an important, an empowerful fabric of our society.”
