June 26, 2020
Note: The North Carolina Center for Nonprofits typically provides Nonprofit Policy Matters each week as a benefit to its nonprofit members . However, to help all North Carolina nonprofits respond to the COVID-19 crisis, we're temporarily providing this newsletter to non-member nonprofits.
In this issue...
New congressional bills would expand universal charitable deduction
Legislators approve COVID-19 appropriations bill providing support to many nonprofits
NC House proposes new grant program for businesses that closed due to COVID-19
NC House approves bill that would limit nonprofits’ liability for COVID-19 claims
NC Senate approves bill to delay Medicaid transformation and fund other DHHS priorities
General Assembly (sort of) ends its 2020 short session
U.S. Senate bill would improve UI process for self-insured nonprofits
North Carolina extends phase 2 of COVID-19 by three weeks and adds mask requirement
Center submits comments to Federal Reserve plans on proposed nonprofit lending program 
NC Senate approves limits on state tax benefits for enhanced charitable giving incentives
Take 12 minutes to let funders and state government know what your nonprofit needs
General Assembly approves bill to limit governor’s emergency powers
Legislators approve noncontroversial provisions from vetoed state budget
SBA issues additional rule on PPP loan forgiveness
IRS provides guidance on employee retention tax credit for nonprofits
New Congressional Bills Would Expand Universal Charitable Deduction
This week, bipartisan bills were filed in both the U.S. Senate ( S.4032) and the U.S. House of Representatives ( H.R. 7324) to expand the temporary universal charitable deduction that was established in the CARES Act. Congressman Mark Walker (R-NC) is the primary sponsor of the House bill. The Universal Giving Pandemic Response Act would significantly increase the limit on the deduction (currently set at $300 in contributions per year for all taxpayers) to one-third of the amount of the standard deduction ($4,133 for individuals and $8,266 for married couples filing jointly). It also would encourage immediate donations to nonprofits by allowing taxpayers to take the deduction for 2019 for contributions made before July 15, 2020 and to file amended tax returns to claim this deduction. 

An enhanced universal charitable deduction is particularly important in light of two recent reports that show declines in charitable contributions. The recent Giving USA report found that, when adjusted for inflation, overall charitable giving was lower in 2019 than in 2017. A quarterly report from the Fundraising Effectiveness Project showed that donations to nonprofits declined by 6% during the first quarter of 2020 as many donors faced financial uncertainty due to the COVID-19 pandemic.

Your advocacy made a difference in getting these bills introduced. In April, the Center and a group of 461 North Carolina nonprofits sent a letter to Congressman Walker and the rest of our state’s congressional delegation asking for them to expand the universal charitable deduction and provide three other types of relief to help nonprofits deal with the COVID-19 pandemic. The bills to bolster charitable giving are a direct response to nonprofits’ unified message. Look for an additional call to action on this issue in the coming weeks.
Legislators Approve COVID-19 Appropriations Bill Providing Support to Many Nonprofits
Yesterday, the NC House of Representatives gave final approval to a bill ( H.B. 1023) that would spend about $600 million of the state’s CARES Act funding on a variety of appropriations and programs. Several parts of the bill would help nonprofits including:
  1. Creating a $15 million grant program for businesses or nonprofits that maintained at least 90% of their employees from March 1, 2020 through May 31, 2020 if they have not received financial assistance through the Paycheck Protection Program (PPP) or the Main Street Lending Program. The Center worked to get nonprofits added to this grant program.
  2. Appropriating more CARES Act funding to some nonprofits, including an additional $2.425 million for free and charitable clinics, an additional $2.425 million to community health centers, $3.5 million for domestic violence prevention programs, $7 million to hospitals, and $4.3 million to children’s advocacy centers.
  3. Providing an additional $150 million in support for counties and municipalities. This funding could help minimize local governments’ cuts to grants and contracts with nonprofits.
  4. Waiving a 15% matching funding requirement for nonprofits receiving state funding through the NC Department of Health and Human Services (DHHS) competitive grants program for FY2020-21. This change is important since it should help prevent reductions in nonprofits’ other revenue sources from jeopardizing their state funding as well. The Center had asked legislators to waive matching fund requirements for state grant programs for the upcoming year. Most other state matching fund requirements are established by the state agencies through which grants are made (rather than by statute or a provision in the state budget).

The Senate approved the bill earlier in the week, and it now goes to Governor Cooper for his consideration.

In a separate bill ( S.816) that passed the House and Senate on Tuesday, legislators allocated $645.4 million of the state’s CARES Act funding to be used to fund certain parts of state government operations during the FY2020-21 fiscal year. This could help cover some of the estimated $4.2 billion revenue shortfall for the upcoming fiscal year, which begins on July 1, 2020. A smaller revenue shortfall is good news (or at least less bad news) for nonprofits; during past recessions, state legislators have made steep cuts to nonprofit funding to help fill budget shortfalls. That bill has also gone to Governor Cooper for his consideration.

Even with the General Assembly finishing its 2020 session, North Carolina has not spent all of its CARES Act funding. Legislators have indicated that, if the federal government provides state and local governments more flexibility, the remaining CARES Act money could be used to reduce the state’s budget hole for next year even more. Legislators also expect that Congress will provide state and local governments with additional federal support to fill budget holes later this summer.
NC House Proposes New Grant Program for Businesses that Closed Due to COVID-19
Late last night, the NC House of Representatives approved an amendment to a bill ( S.730) that would create a new grant program for businesses that had to close due to COVID-19 and the related executive orders. Under the proposal, businesses would be eligible for grants of up to $50,000. The Senate could consider the bill when legislators return to Raleigh in September. The Center has been working with House and Senate members to make nonprofits eligible for these grants. If enacted, the grant program could provide significant financial relief for many nonprofits that have had to cancel programs and services over the past three months.
NC House Approves Bill That Would Limit Nonprofits’ Liability for COVID-19 Claims
On Tuesday, the NC House of Representatives approved a bill ( H.B. 118) that would provide immunity for nonprofits, businesses, and individuals from liability for alleged transmission of COVID-19. By extending the immunity to individuals, nonprofit board members and volunteers also would be protected from liability under this legislation. The limited immunity would not apply if alleged contraction of COVID-19 were due to the gross negligence, willful or wanton conduct, or intentional wrongdoing of the nonprofit, business, or individual. The bill would not limit the ability of workers to file workers’ compensation claims if they contracted COVID-19 in the course of their employment. The limitation on liability would be applicable for claims up to 180 days after the end of the COVID-19 state of emergency in North Carolina ( Executive Order No. 116).

The bill also would require nonprofits, businesses, and governmental agencies to provide reasonable notice to people entering their facilities of actions they are taking to reduce the risk of COVID-19 transmission. Many nonprofits are already doing this by posting signs about their policies for social distancing, mask wearing, and sanitizing.

The NC Senate approved the bill last week, so the bill now goes to Governor Roy Cooper for his consideration.
NC Senate Approves Bill to Delay Medicaid Transformation and Fund Other DHHS Priorities
Yesterday, the NC House of Representatives and NC Senate gave final approval to a bill ( S.808) that would delay Medicaid transformation – the state's planned transition of Medicaid to a managed care network – until July 1, 2021. Last fall, the NC Department of Health and Human Services (DHHS) indefinitely suspended its Medicaid transformation plans after the General Assembly and Governor Cooper were unable to agree on a state budget that included necessary funding for this transition. The bill also would:
  • Provide funding for Medicaid transformation;
  • Provide preliminary funding for moving DHHS’s headquarters from Dorothea Dix Park to another location in Wake County;
  • Appropriate $50 million from CARES Act funding for behavioral health and crisis services related to the COVID-19 pandemic; 
  • Appropriate $100 million from CARES Act funding for additional COVID-19 testing, contact tracing, and tracking;
  • Appropriate $20 million from CARES Act funding for child care and other early childhood initiatives; and
  • Appropriate funds for the child welfare case management component of DHHS’s NC FAST system.

Many of the provisions in the bill are (at least partial) good news for nonprofits. Specifically:
  1. The bill should finally bring closure to the multi-year effort to restructure the state’s Medicaid system in a way that emphasizes value-based care. This should ultimately provide greater certainty for many nonprofit service providers about Medicaid payments and should help continue the trend of heath care organizations working more closely with nonprofits that are focused on the social determinants of health.  
  2. The decision to keep DHHS headquarters in Wake County should ensure continuity of DHHS staffing. Many nonprofits that provide services through grants and contracts with DHHS were concerned that agency staff with whom they work would leave if DHHS moved its offices outside of the Triangle, as legislators had previously proposed. 
  3. The use of CARES Act funding for behavioral health, childcare, and COVID-19 testing, tracing, and tracking will be helpful to a wide variety of nonprofits, although nonprofit advocates have been clear that far more funding is needed to fill gaps in these areas, particularly in childcare services.
General Assembly (Sort of) Ends its 2020 Short Session
The General Assembly finished the main part of its 2020 legislative session early this morning. Technically, the legislature will remain in session through Saturday, July 11 so lawmakers can reconsider any bills that Governor Cooper vetoes in the next two weeks and take action on other urgent legislation. Legislators will then return to Raleigh on September 2-3 for a brief session to appropriate the remaining state funds from the CARES Act and other federal support for COVID-19. Congress is expected to pass another COVID-19 relief bill in July or August that would provide additional support to state and local governments.
U.S. Senate Bill Would Improve UI Process for Self-Insured Nonprofits
Last Friday, a bipartisan group of 10 U.S. Senators introduced the Protecting Nonprofits from Catastrophic Cash Flow Strain Act (S. 4001), which would partially fix the unemployment payments challenge for reimbursing nonprofits. Specifically, the bill clarifies that self-insured nonprofits would not have to pay 100% of their unemployment bill up front and wait for repayment from the state. This would fix problematic guidance from the U.S. Department of Labor requiring nonprofits to fully reimburse states for the costs of their COVID-19 related UI claims and then seek reimbursement of their reimbursement.
North Carolina Extends Phase 2 of COVID-19 by Three Weeks and Adds Mask Requirement
On Wednesday, Governor Cooper issued Executive Order No. 147 extending Phase 2 of the re-opening of the state’s economy by three weeks, until July 17 at 5 p.m. The Executive Order also requires North Carolinians to wear face coverings in most public settings where social distancing is not practical. This Executive Order comes after COVID-19 cases and hospitalizations have spiked in North Carolina over the past two weeks. Some notable provisions for nonprofits include:
  • Childcare providers, day camps, and overnight camps may re-open, but they must follow NC Department of Health and Human Service guidelines, screen individuals every day, and immediately isolate sick service providers, counselors, or children. Under the new Executive Order, camp counselors and staff and children aged 11 and over would be required to wear masks at camps. 
  • Mass gatherings are limited to 10 people indoors and 25 people outside.
  • Parks, trails, and swimming pools may re-open with safety precautions in place.
  • Retail stores (such as nonprofit thrift stores) may remain open at 50% of their fire code capacity.
  • Theaters, gyms, indoor exercise facilities, and charitable bingo venues are among the types of venues that must remain closed, although the General Assembly and some exercise facility owners have challenged these provisions through legislation and litigation. While Governor Cooper has vetoed legislation to re-open gyms and indoor exercise facilities, legislators approved a new version of this bill (H.B. 806) with bipartisan support this morning.
Center Submits Comments to Federal Reserve Plans on Proposed Nonprofit Lending Program
On Monday, the Center submitted comments to the Federal Reserve on its plan to expand the Main Street Lending Program to provide access to credit for nonprofit organizations. Under the Federal Reserve’s proposal, these loans – which would not be forgivable – would be available to 501(c)(3) nonprofits with between 50 and 15,000 employees if: (a) their endowments are less than $3 billion; and (b) less than 30% of their total 2019 revenue came from donations. The Center’s comments focused on three main concerns:
  1. Because the loans would not be forgivable, they could create financial liability for nonprofits;
  2. Many of the proposed loan terms (e.g. the requirements that borrowers have at least 50 employees and that no more than 30% of their total revenue come from donations) would disqualify many nonprofits; and
  3. Some of the financial provisions are not directly applicable to nonprofits’ operations and would require greater clarification.
NC Senate Approves Limits on State Tax Benefits for Enhanced Charitable Giving Incentives
Yesterday, the NC Senate gave final approval to a bill ( H.B. 1080) that would decouple the state tax code from the Internal Revenue Code on most of the new tax provisions from the CARES Act. Notably for nonprofits, this would mean that:
  1. North Carolinians who use the standard deduction and make $300 in charitable contributions this year would need to pay state taxes on these donations, even though they are eligible for an above-the-line federal tax deduction under the CARES Act.
  2. High-income North Carolinians who make significant contributions to nonprofits in 2020 might have to pay state income tax on a portion of these contributions. This would be a result of North Carolina maintaining the limitation that only charitable contributions up to 60% of a taxpayer’s adjusted gross income are deductible. The CARES Act waived this limitation on deductibility for 2020.

While these three provisions are not ideal, the Center’s analysis is that their impact on charitable giving should be negligible.

A separate provision of the bill would make a technical change to ensure that nonprofits are able to receive refunds of the sales tax they pay on digital property. The bill now goes to Governor Cooper for his consideration.
Take 12 Minutes to Let Funders and State Government Know Your Nonprofit Needs
Last month, the Center and our state government partners launched a new survey on the impact of COVID-19 on North Carolina nonprofits. More than 1,300 nonprofits have already completed the survey, and we're hoping to have thousands more organizations reply in the coming days and weeks. Please take 12 minutes to complete the survey, which asks about your organization's operations and needs during the COVID-19 crisis and in the coming months. Your response to the survey will inform government, philanthropy, and others about what COVID-19 related needs are most pressing in North Carolina. To maximize the benefits and value of this survey, responses will be publicly available.

The survey, which is available in both English and Spanish, is a joint effort of the Center, the Office of the NC Secretary of State, and the Strategic Partnerships office at the NC Office of State Budget and Management. The Center encourages nonprofits to complete the survey even if you responded to our original COVID-19 survey in March. Thank you if your organization has already completed the survey!
General Assembly Approves Bill to Limit Governor’s Emergency Powers
Yesterday, the NC House of Representatives and NC Senate both approved a new bill ( S.105) that would require the Governor to receive consent of the 10-member Council of State before issuing many types of executive orders during a state of emergency like the COVID-19 pandemic. The bill was approved after Governor Cooper vetoed two bills to reopen certain types of businesses that are currently closed due to executive orders.

The Center and other nonprofits have been working with the Governor’s Office for months on a variety of potential executive orders that could help nonprofits and the communities they serve respond to the pandemic. If enacted, this legislation could make it harder for Governor Cooper to take action by executive order. It is quite likely that Governor Cooper will veto it.
Legislators Approve Noncontroversial Provisions from Vetoed State Budget
Early this morning, the NC House of Representatives and NC Senate released and approved a bill ( S.681) that would enact a variety of non-controversial provisions from the state budget for FY2019-21, which was vetoed by Governor Cooper last year. Among other things, the bill adds new reporting requirements for nonprofits receiving appropriations (but not grant funding) through the NC Department of Commerce and establishes new criteria for conservation grants. The bill now goes to Governor Cooper for his consideration.
SBA Issues Additional Rule on PPP Loan Forgiveness
On Tuesday, the U.S. Small Business Administration (SBA) issued another interim final rule on loan forgiveness under the Paycheck Protection Program (PPP). Notably, the rule clarifies that borrowers do not need to wait until the end of their eight-week or 24-week loan period to apply for forgiveness.
IRS Provides Guidance on Employee Retention Tax Credit for Nonprofits
This week, the IRS updated its frequently asked questions on the Employee Retention Credit under the CARES Act. Most notably, the IRS provides guidance for tax-exempt employers on how to calculate “gross receipts” under the credit. Specifically, the answer to FAQ #46 explains that gross receipts for tax-exempt organizations include total revenue from all operations, not just from (taxable) unrelated business income activities. If the state COVID-19 grant program is enacted, the Center will advocate for the NC Department of Commerce to follow the IRS’s guidance for nonprofits to calculate changes in their gross receipts as they determine whether they are eligible for grants.
Nonprofit Policy Matters is a service for current Members of the North Carolina Center for Nonprofits. We track state and federal policy issues that affect all 501(c)(3) nonprofits. Learn about the Center's public policy priorities . For more information, contact David Heinen , Vice President for Public Policy and Advocacy.

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