Congress Passes Omnibus Spending, COVID Relief Bill
On Monday night, Congress passed the Omnibus Appropriations and Emergency Coronavirus Relief Act, a 5,593-page conglomeration of legislation that incorporates twelve annual spending bills to fund the federal government, a collection of long-delayed COVID relief measures, and a wide variety of tax and other provisions typically thrown into the last bill of the year. The legislation funds the federal government through September with spending of $1.4 trillion and largely follows the bipartisan spending agreement reached last year. The President is expected to sign the bill into law this week. Overall, the bill reflects progress for the priorities of nonprofits and the people and communities they serve, but the new 117th Congress has much more to do when its members are sworn into office in January.
COVID Relief Package
The COVID relief provisions of the legislation include many significant protections and support programs to address immediate needs. The bill provides a $300 federal boost to state weekly unemployment benefits; continues extended unemployment benefits for an additional 11 weeks; provides $600 relief checks for every adult and child in households earning up to $150,000 a year; allocates more than $330 billion in aid for small employers (for-profits and nonprofits); and large sums for schools, hospitals and vaccine distribution. There’s also money for childcare, nutrition, and rental assistance, as well as a one-month extension of the CDC eviction moratorium, and a continuation of student loan forbearance.
As a direct result of nationwide advocacy efforts, the legislation reflects significant improvements over earlier drafts. Nonprofits have not yet secured all they have sought to strengthen their ability to support individuals and communities, but advocacy will continue into the New Year. Here are key provisions of direct interest to charitable nonprofits sector-wide. See the analysis, Nonprofit Provisions in COVID Relief Legislation, for more information.
Charitable Giving Incentives: The legislation reestablishes the temporary $300 above-the-line deduction for people who do not itemize their deductions and establishes a $600 deduction for couples filing jointly in 2021. It imposes a penalty for overstating contributions. The bill also extends for one year the increased limits on deductible charitable contributions for individuals who itemize and for corporations.
Relief for Reimbursing Employers: Congress approved a 10-week extension – until March 14 – of a provision that requires the federal government to cover half of the costs of unemployment benefits paid to laid-off and furloughed employees of “reimbursing” employers. Nonprofits that self-insure under their state’s unemployment systems had faced an automatic doubling of unemployment costs payable to their states starting January 1, 2021.
Coronavirus Relief Fund: The bill removes the risk that state and local governments would have had to return unspent CARES Act money by December 30 by extending the deadline until the end of 2021. 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. Others have contributed CARES Act dollars to their unemployment trust funds and reduced the unemployment costs of nonprofits.
PPP Reforms: Most notably, the legislation authorizes a Second Draw of Paycheck Protection Program loans for qualified employers. Charitable nonprofits (as well as for-profit businesses) may qualify for a Second Draw loan of up to $2 million 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. This second round is much narrower than the PPP loans granted under the CARES Act, both in terms of maximum loan amounts and eligibility factors. The drafters of the bill did eliminate numerous impediments to nonprofit eligibility that had been proposed in earlier versions of the legislation. 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.
Economic Injury Disaster Loan Grants: The bill allocates $20 billion for additional $10,000 grants. It also repeals retroactively a requirement that EIDL grant recipients must pay back the $10,000 grants even when PPP loans were forgiven.
Save Our Stages: Congress dedicated $15 billion to aid performance venues, independent movie theaters, and cultural institutions. Covered organizations may seek grants of up to $10 million.
Employee Retention Tax Credit: The bill extends the earlier credit for retaining employees for six months (to 7/1/2021) and expands the usefulness of the refundable payroll tax credit, particularly for nonprofits excluded from Paycheck Protection Program (PPP) participation. It reduces the required decline in gross receipts from 50% to 20%, increases the refundable payroll tax credit from 50% to 70%, and covers up to two quarters for a total benefit of $14,000 per covered employee. It also provides that employers who receive PPP loans may still qualify for the ERTC with respect to wages that are not paid for with forgiven PPP proceeds.
Paid Sick Leave Tax Credit: The bill extends through 3/31/2021 the refundable payroll tax credits for paid sick and family leave that were established in the Families First Coronavirus Response Act. The bill 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.
A Recap and Call to Action
As the spending and COVID relief bill was being released, an exasperated lobbyist asked on a nonprofit coalition call, “Why did it take Congress so long to accomplish so little?” His sentiment, commonly held by nonprofit advocates, was sharpened later when House Majority Whip James Clyburn (D-SC), observed during the floor debate, “This bill is long overdue and inadequate.” Similar opinions of “too little, too late” are being expressed by economists, state and local officials, and many others. There are good and important things in the new law, but too much damage has been done while Congress postured and bickered, and the little relief that is provided now will run out much too soon.
On the plus side, the Omnibus Appropriations and Emergency Coronavirus Relief Act contains a respectable collection of gains on the priorities of mission-focused nonprofits. The legislation renews and clarifies the above-the-line charitable deduction, perhaps the most frequent legislative ask by charitable organizations. Congress gave states and local governments an additional year to spend Coronavirus Relief Funds and briefly extended until mid-March the federal government’s commitment to covering half the unemployment costs of self-insured or reimbursing employers. The Small Business Administration will now oversee another round of Paycheck Protection Program forgivable loans that will be available to nonprofits on roughly equal footing with for-profit businesses. Mid-size and larger nonprofits, shut out of access to PPP forgivable loans, will be able to take advantage of an expanded Employee Retention Tax Credit that is well suited to provide relief to tax-exempt organizations. And there is new, hard-fought funding for programs like schools, childcare, and nutrition that nonprofits provide, along with dedicated assistance for cultural institutions and performance arts venues.
None of these gains for nonprofits was a foregone conclusion. But not one was easily achieved, nor sufficient to address the immediate needs. Congress consistently rejected proposals to secure the full measure of relief and support that the dual pandemic and economic crises demand. Further, Congress basically kicked the can down the road on many of these provisions. The COVID Cliff of late December is now the COVID Cliff of mid-March because of merely short-term extensions of unemployment other programs. For some protections, like the eviction moratorium, the extensions are even shorter, perhaps based on the presumption that by-then President Biden will take executive action. In short, there is progress to celebrate and a heavy to-do list of things on which nonprofits need Congress to deliver.
The Key Was/Will Be Advocacy
These short-term and pending successes have not come easy. Through this publication we issued more than a dozen nationwide action alerts and ran an average of four articles per edition informing readers of the issues and solutions. State associations of nonprofits sent out innumerable calls to action and many hosted weekly or biweekly virtual town hall meetings at which elected officials spoke and listened to the concerns and needs of their nonprofit constituents. And many other national, regional, and local nonprofits took similar actions.
Nonprofit advocates in DC convened virtually on a daily, and sometimes thrice daily, basis to identify challenges and solutions, mobilize their networks, and engage in direct advocacy with Senators, Representatives, and their staffs.
Through surveys, research, op-eds, news articles, briefings, news conferences, and uncountable Zoom calls, nonprofit professionals, board members, and other volunteers have spoken up and spoken out for the needs of communities.
Through all of that effort, and more, the nonprofit community moved the policy needle forward. The partial gains in the Omnibus Appropriations and Emergency Coronavirus Relief Act are testament to your hard work. Still, as one nonprofit leader summarized, Congress must come to grip with this undeniable fact: “Expecting charitable nonprofits to do so much more for so many more for so much longer with even less is a formula for disaster.” Accordingly, much more must be done to orient the incoming 117th Congress to the true needs of their constituents.
Thank you for all you did in 2020. Rest up. 2021’s going to be busy.