May 14, 2020
Dear Nonprofit Colleagues and Supporters:

The toll on society in deaths, illnesses and lost jobs is more than the numbers can say. Having responded to disasters all over the world, I can say that the emergency health and social as well as long-term economic impacts of COVID-19 are like nothing we have ever seen before. Not only are we losing individuals in our communities – grandmothers and grandfathers, sisters and brothers, parents and even children – we are also losing connections that humans crave in times of crisis. In many ways there is no more sinister kind of disaster than that which requires relatives of a sick person to say good-bye to their loved one from another room through a video chat. 
 
It will only be through significant support to medical institutions, testing and tracing protocols, constant cleaning vigilance and strict physical distancing protocols that we can turn the tide on this virus until health researchers can find a vaccine.  We, in nonprofits, will need to keep doing our part as we enter back into work spaces and try to figure out what our “next normal” will be.
Here in Oregon

Oregon agencies asked to plan 17% budget cuts

Governor Brown is expected to announce this morning at 10 (PT) which counties will be allowed to begin slowly reopening their economies, some as soon as tomorrow. Every county must meet specific public health criteria in order to enter Phase 1 of the governor’s reopening plan.
 
All but three of Oregon’s 36 counties have submitted plans to gradually lift the governor’s stay-at-home restrictions. The three largest counties in Oregon – Clackamas, Multnomah and Washington - have yet to apply. 
 
As we reported in an earlier alert, the Governor has directed all line departments of government to cut expenses by 17 percent in reaction to the loss of projected revenues from taxes. Many nonprofits have begun re-strategizing and re-projecting their budgets. NAO will be offering support in this regard by offering  “Rethinking your Strategy: Planning Recovery for COVID-19 (a series of three sessions) .” It is not too late to sign up for this free webinar which begins today at noon.
 
Thank you to everyone who joined the discussion with the staff of Senator Wyden and Senator Merkley yesterday. The staffers were very appreciative to have the opportunity to hear the direct concerns of nonprofits and community members. NAO will be scheduling another virtual town hall in the coming weeks that we hope both Senators will join since they could not be available last minute as they had to appear on the senate floor at the time of our scheduled town hall yesterday. In fact, both senators have been busy working to submit or co-sponsor bills that support many of the concerns that nonprofits are voicing. Read more on that in the section on senate activity below.
But First in the U.S. House

House Speaker Pelosi released the “ Health and Economic Recovery Omnibus Emergency Solutions Act ,” the HEROES Act (H.R. 6800) yesterday that includes many Democratic priorities left out of previous bills and reversing positions on a few negotiated issues. As of this writing, the House is scheduled to convene tomorrow (Friday) to pass the HEROES Act. 
 
Before getting into the details, it’s best to level set. While all this is important progress in the right direction, this is just the first public step in a long slog for passage. As the  Washington Post  reports , “Republicans rejected the legislation even before they saw it, describing it as a liberal wish list that would go nowhere in the Republican-led Senate.” The  Post quoted Senate Majority Leader McConnell as saying it was “exactly the wrong approach” and that Senate Republicans are writing a bill to provide immunity to businesses sued for not providing enough protection against COVID-19. This return to raw partisanship departs from the bipartisan passage of the four previous pandemic-related bills and portends the need for greatly increased advocacy from all of us.
 
The HEROES Act is 1,815 pages long! We’ve put in page numbers for those of you that want to skip to the parts that are crucial to nonprofits. You can also review this  one-pager  and a  Section-by-Section Summary . Below is what jumped out during first readings of the bill. There are some clear advocacy wins, some partial successes, and plenty of more work to be done.

Employee Retention Credit (p 236 – 257)

  • Increases the value of the employee retention credit from the current 50 percent of $10,000 to a maximum of 80 percent of $15,000 for up to three quarters, i.e. from a maximum of $5,000 to a maximum credit of $36,000. It would make it clear that the cost of health care is covered even if wages are not paid during the period. (Sec. 20211)

  • Modifies the existing gross receipts requirement (triggered by a decline of 50 percent) to allow a partial credit, phased in for a decline in gross receipts (calculated by nonprofits using Form 990, Line G) between 10 percent and 50 percent compared to the same calendar quarter of the previous year. (Sec. 20211)

  • Changes retroactive to the effective date of the CARES Act. (Sec. 20211)

  • Also would provide a 50 percent refundable payroll tax credit for qualified fixed costs, including rent, mortgage, and utility payments, which are defined the same as under Sec. 1106 of the CARES Act, relating to forgiveness of Paycheck Protection Program loans. This provision is limited to employers with 1,500 or fewer employees or gross receipts (calculated using Form 990, Line G) of no more than $41,500,000 in 2019. (Sec. 20212)

  • NOTE: With these changes, the Employee Retention refundable credit may be a better deal for some nonprofits than the Paycheck Protection Program.

Unemployment Insurance (p 687) (Sec. 50005)
House Summary : Extension of emergency relief and technical corrections for governmental entities and nonprofit organizations. This section would extend the financial relief provided to reimbursable employers in the CARES Act through January 31, 2021, and make technical corrections to ensure that states can simply waive 50 percent of the amount owed by such employers.

Highlights:

  • This fixes the issue of nonprofits having to reimburse and then waiting to get reimbursed for their reimbursement, effectively overriding the bad guidance issued by US DOL on April 27.

  • The provision does not raise the reimbursement rate to 100 percent, meaning that nonprofits will still be charged for half the costs of basic unemployment benefits received by their former employees.

Paycheck Protection Program Provisions (pp 821 – 878)
House Summary : Supports small businesses and nonprofits ,  by strengthening the Payroll Protection Program to ensure that it reaches underserved communities, nonprofits of all sizes and types and responds flexibly to small businesses by providing $10 billion for Covid-19 emergency grants through the Economic Injury Disaster Loan program (EIDL).
 
Highlights:

  • Extends the covered period from June 30 to December 31, 2020.

  • Makes critical access hospitals and nonprofit news outlets eligible for PPP loans

  • Expands PPP to nonprofits of all sizes and types
  • Removes the 500-employee cap
  • Includes all 501(c) employers as eligible, e.g., social welfare, unions, chambers
  • Removes nonprofits from the affiliation rule that was intended to block Planned Parenthood from access to PPP loans.

  • Corrects Treasury/SBA Interim Final Rule by 
  • Setting minimum maturity at 5 years (up from 2 years in Rule)
  • Banning forgiveness limits on non-payroll expenses – the 75%/25% rule (Sec. 90004)
  • Mandating deferment of principal and interest for 1 year (up from 6 months) (Sec. 90008)

  • Creates 25 percent set-aside for PPP funding for nonprofits
  • Half for nonprofits with 500 or fewer employees
  • Half for nonprofits with more than 500 employees

  • Sets aside 25 percent of PPP funding for eligible employers with 10 or fewer employees, and for community financial institutions the bill would set aside the lesser of 25 percent or $10 billion from remaining funds under the interim funding bill passed in April.

  • Loan Forgiveness Changes (Sec. 90004)
  • Expands covered period from 8 weeks to the earlier of 24 weeks or December 31, 2020. It also extends the rehire exemption from June 30 to December 31, 2020.
  • Makes technical corrections to expressly allow forgiveness of payments on interest on pre-existing debt.
  • Alters application forms to require demographic information and reporting of full-time equivalents on Feb. 15, 2020, at date of application, and upon application for loan forgiveness.

  • Mandates that SBA provide reports on loan approval and disbursement to nonprofits, provided on a state, congressional district, industry, and loan size. (Sec. 90016)

Loan Program for Mid-Sized Nonprofits (pp 1063-65)
House Summary : Main Street Lending Program requirements. This section mandates that the Federal Reserve’s Main Street Lending Program, which was established utilizing CARES Act funds and is backstopped by the Treasury Department, include non-profit organizations as eligible borrowers, and stipulates that the Fed immediately offer a low-cost loan option tailored to the unique needs of nonprofit organizations with deferred payments, and the loan may be forgiven solely for non- profits predominantly serving low-income communities that are ineligible for a PPP loan.
 
Highlights:

  • Mandates creation of a low-cost loan program for nonprofits, one that includes the ability to defer payments. (Sec. 110604)

  • For nonprofits that are ineligible for Paycheck Protection Program loans and that predominately serve low-income communities, loan forgiveness along the lines of CARES Act Sec. 1106 shall be granted. NOTE: This forgiveness provision was unexpected BUT the changes to the PPP, discussed above, would make all nonprofits eligible, potentially disqualifying nonprofits from forgiveness under this loan program. (Sec. 110604)

  • Only gives the Federal Reserve five days from date of enactment to implement the nonprofit lending program. (Sec. 110604)

  • Also mandates that the Federal Reserve ensures that at least one loan option for which small nonprofits and small businesses are eligible has no minimum loan size. (Sec. 110605)

Emergency Paid leave

  • Extends the paid leave provisions under the Families First Coronavirus Response Act to nonprofits and other employers with more than 500 employees. Applying the paid leave provision only to smaller employers was a last-minute change to the Families First Act back in March. (Secs. 120104 and 120117)
 
As a required step, the House Rule Committee is set to meet today (Thursday, May 14) to structure the debate. We have heard from national colleagues that the Committee will provide edits to the HEROES Act to correct a few glitches in the drafting. The one we know about is the text for the loan program for mid-size nonprofits (Section 110604, p 1064) that only applies the narrow loan forgiveness provision to nonprofits that are otherwise ineligible for Paycheck Protection Program (PPP) loans. Earlier in the bill (Section 90001, pp 821), the PPP is expanded to nonprofits of all sizes and types, meaning that none would be ineligible for PPP loans and thereby making mid-size loan forgiveness unavailable. The Rules Committee will likely fix this and other technical mistakes.

In preparation for the floor debate, national organizations that have affiliate/federated structures updated the  Nonprofit Community Letter  to include all the new signers – for a total of 450 national nonprofits. The letter will be sent to every House office today and the coalition of national nonprofits will be putting out a statement to the media highlighting the bipartisan provisions in the bill that support the work of charitable nonprofits.  NAO will social media that statement, so please do your part to tag and like that press release and direct message it to our U.S. Congressional Delegation. 
In the Senate

Senators are introducing free-standing bills that they hope will be folded into the next stimulus bill that works its way through the chamber.

  • Funding Nonprofit Work in Communities: Senators Klobuchar (D-MN), Brown (D-OH), and Oregon’s own Ron Wyden (D-OR) are introducing the Work Opportunities and Resources to Keep Nonprofit Organizations Well Act (the WORK NOW Act). The bill seeks to inject $50 billion into frontline nonprofits over the next 6 months to generate employment for laid-off workers and to address the skyrocketing needs in communities for COVID-19 relief and recovery. NAO is endorsing this bill, as are national organizations and other state associations. Please consider sending a letter of endorsement to Senator Wyden’s office for this important bill!

  • Republican Support for Expanding Nonprofit PPP Eligibility: Yesterday, Senator Kelly Loeffler (R-GA) introduced a bill to remove the 500-employee cap on nonprofit eligibility for PPP loans. The bill also repeals the nonprofit-specific affiliation restriction in the CARES Act and replaces it with an express prohibition on PPP loans to entities that provide abortions. The bill’s title is the Limiting Infant Fatality and Empowering Nonprofit Organization Workforces (LIFE NOW) Act. Senators Cramer (R-ND), Lankford (R-OK), and Rounds (R-SD) are co-sponsors. 

In Other Federal News… Mostly Good, Some Bad, News on “Necessity” Verification

The SBA issued  a new FAQ #46  that creates a $2 million safe harbor for nonprofits and other businesses on the question of whether their good faith certification of necessity for PPP loans is appropriate.  PPP loans of less than $2 million will automatically be deemed legitimate.  The operative language is: “Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.” SBA still plans to audit all larger loans, but has backed off the more threatening language from officials that organizations with adequate capital will be charged with fraud if they don’t repay the money by May 14. Now SBA says that it will inform borrowers it determines did not qualify for the loan based on “necessity” that they must repay the loan proceeds and will not be eligible for loan forgiveness. Borrowers that return the loan money will be subject to no further penalties or prosecution. We presume there will be due process to challenge such an SBA determination.

At the same time this good news was announced, public scrutiny increased on presumed abusers. A  Washington Post article under the aggressive headline, “ Aspen Institute think tank receives $8 million federal small-business loan ,”   opens with the declaration, “The Aspen Institute think tank accepted more than $8 million in federal small-businesses funds despite having a $115 million endowment and a board of trustees populated by billionaires.” The greatest concern expressed by nonprofits since questions about “liquidity” and “necessity” popped up in relation to PPP loans has been whether organizations would be penalized for seeking loans when they had cash-on-hand, endowments, or reserves of a certain amount. The Aspen story makes clear that the nonprofit’s endowment is 80 percent restricted and revenues have fall off precipitously – all good reasons to believe that the “current economic uncertainty makes [their] loan request necessary to support the ongoing operations of the Applicant.” The concern remains, however, that the focus on allegedly “undeserving” borrowers is not a legal question, but a public relations issue that may continue to waver as stories and facts change. We will keep watching this issue and report any new guidance from SBA or Treasury.
Upcoming Online Sessions for Nonprofits  

Rethinking Your Strategy: Planning for Your Nonprofit’s Recovery – a three-part series on Thursday, May 14, Thursday, May 21, and Thursday, May 28, Noon – 1 p.m. PT:  Steve Patty, Founder of Dialogues in Action will guide nonprofits on how to rethink our pre-COVID strategies and plan for recovery in this three-part series. The COVID-19 pandemic has disrupted the way nonprofits deliver services and programming and continuing to pursue our pre-COVID-19 strategies is not an option. Steve will discuss how nonprofits can make it through this crisis, emerge better, and be even more valuable to our communities for greater impact. The series consist of: Session 1 – The Opportunity of a Crisis (May 14); Session 2 - How to Adapt Your Strategy (May 21); and Session 3 – Create a New Future for a New Normal (May 28).  Register for the three-part series  here .

Ask the Experts: Building Your Plan for More Meaningful Donor Engagement, May 19, Noon  – 1 p.m. PT:  Laurel McCombs, Consultant of The Osborne Group will discuss how and why building even stronger relationships with your donors is more critical than ever before. Relationship building has always been the core of fundraising efforts; however, the past couple of months have brought these even more clearly into focus. Many organizations have seized the opportunity and built even stronger relationships, while others continue to struggle to connect. Laurel will discuss how to engage your donors no matter where you are today and how to plan for the transition that is here and now. Register for the session  here . 

Nonstop Presents: Workplace Strategies to Support Mental Health, Thursday, May 28, 10 – 11 a.m. PT: Nonstop Administration and Insurances Services, an NAO partner, will be hosting Laura Green, SHRM-CP of Nonprofit HR, who will share how employers can best support their employees during these uncertain times. She’ll discuss tangible, simple solutions to help employees feel connected to the organization, as well as provide resources to assist with finding personal peace of mind. Register for the session on Nonstop’s site  here.
 
QuickBooks Desktop Edition Made Easy for Nonprofits, June 16, 17 & 18, 11 a.m. – 1 p.m. PT:  Gregg S. Bossen, CPA of QuickBooks Made Easy, is partnering with NAO to offer an updated three-part QuickBooks® training webinar for nonprofits.  This webinar is for the Desktop edition of Quickbooks . Gregg will cover the basics of setting up and entering transactions specifically for nonprofits, an overview of the software updates included in the QuickBooks® 2018 Desktop Edition, as well as advanced topics covering a host of specific processes that will help you do more helpful and amazing things! Register for the three-part webinar  here .

QuickBooks Online Edition Made Easy for Nonprofits, June 23, 24 & 25, 11 a.m. – 1 pm. PT:  Gregg S. Bossen, CPA of QuickBooks Made Easy, is partnering with NAO to offer an updated three-part QuickBooks® training webinar for nonprofits.  This webinar is for the Online edition of Quickbooks.  Gregg will cover the basics of setting up and entering transactions specifically for nonprofits, an overview of the software updates included in the QuickBooks® 2018 Online Edition, as well as advanced topics covering a host of specific processes that will help you do more helpful and amazing things! Register for the three-part webinar  here .
Other Updates  

Oregon Business’  100 Best Nonprofits to Work for in Oregon survey launched: Oregon Business has launched its 100 Best Nonprofits to Work For in Oregon survey for 2020. The coronavirus pandemic has created a lot of uncertainties for organizations across all sectors of the economy, including Oregon’s nonprofits. It is more important than ever to keep communication flowing with employees as many are working remotely. Register for Oregon Business’ 2020 100 Best Nonprofits to Work For in Oregon survey to find out how satisfied your employees are and what their concerns are in these uncertain times. Taking time to listen to your employees will set you up to be an even stronger organization. Join our effort to support strong workplace culture and celebrate successful employers by participating in the 100 Best Nonprofits to Work For in Oregon survey. The survey must be completed by mid-July. Click here for  survey information ; to register for the survey, click  here .
 
Stay safe and healthy!
Sincerely,
Jim White
Executive Director
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