March 26, 2020
Note: The Center is publishing an extra Nonprofit Policy Matters newsletter this week to help your nonprofit understand the latest federal and state policy developments that will help nonprofits respond to the COVID-19 crisis. We will publish our regular Nonprofit Policy Matters with additional information and resources tomorrow. The Center typically provides this newsletter as a benefit to its nonprofit members . However, because today’s news includes several major policy changes that could significantly help nonprofits, the Center is providing this edition to all NC nonprofits.
In this issue...
Congress close to passing the CARES Act with major COVID-19 relief for nonprofits
Forgivable small business loans could help nonprofits stay in business
Unemployment relief would provide aid for workers and nonprofits
CARES Act includes (limited) universal charitable deduction
Many appropriations in CARES Act would benefit nonprofits
Center provides input as NC House begins developing COVID-19 relief solutions
Learn more about the Families First Coronavirus Response Act
Congress Close to Passing the CARES Act with Major COVID-19 Relief for Nonprofits
Late last night, the U.S. Senate approved the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The bill provides significant relief for nonprofits struggling through the COVID-19 crisis and for many of their employees and clients. Most notably, the bill: 
  1. Creates a forgivable emergency small business loan program that will essentially provide grants to nonprofits (with 500 or fewer employees) and small businesses to cover the costs of payroll and operations between February 15 and June 30.
  2. Significantly increases unemployment insurance (UI) benefits for workers who have lost their jobs, including providing coverage to many nonprofit workers who are currently ineligible for UI benefits.
  3. Makes direct payments to Americans, including payments to adults of $1,200 and $500 per child ($3,400 for a family of four) to be sent out in weeks. The amount of the payments phases out for high-income adults.

The U.S. House of Representatives hopes to pass the bill this week if it can overcome some procedural hurdles while most members work remotely. The next several newsletter items will highlight some key nonprofit provisions in the CARES Act.
Forgivable Small Business Loans Could Help Nonprofits Stay in Business
One important provision in the CARES Act would provide funding for a new small business loan program (emergency SBA 7(a) loans) that would provide many nonprofits and small businesses up to $10 million to cover costs of payroll, operations, and debt service. These loans would be available to nonprofits with 500 or fewer employees that existed on March 1, 2020 and had paid employees. Loan funds could be used to make payroll and associated costs, including health insurance premiums, facilities costs, and debt service. Notably, employers that maintain employment between March 1 and June 30 would be eligible to have their loans forgiven, essentially turning the loan into a grant.

In a major victory for charitable nonprofits, the final bill does not include a provision in earlier drafts that would have disqualified nonprofits that are eligible for Medicaid payments. For most nonprofits, these SBA 7(a) loans will be a much better option than the emergency SBA loans that were approved for North Carolina small businesses and nonprofits last week. Those loans, which could cover up to $2 million to pay fixed debts, payroll, accounts payable, and other bills that cannot be paid because of the disaster’s impact, carry a 2.75% interest rate for nonprofits (lower than the 3.75% rate for small for-profit businesses), but are not forgivable. 

For larger nonprofits (between 500 and 10,000 employees) that are not eligible for SBA 7(a) loans, the industry stabilization provisions in the CARES Act provide for (non-forgivable) loans at interest rates of 2% or lower with no interest or repayments required in the first six months. Large nonprofits must retain at least 90% of their staff at their full compensation to qualify for these loans. 

For organizations that don’t receive 7(a) loans, the CARES Act provides a refundable payroll tax credit of up to $5,000 for each employee on the payroll when certain conditions are met. The credits are available to organizations that were operating at the beginning of 2020 and saw a drop in revenue of at least 50% in the first quarter compared to the first quarter of 2019. The availability of the credit would continue each quarter until the organization’s revenue exceeds 80% of the same quarter in 2019. For tax-exempt organizations, the entity’s whole operations must be taken into account when determining the decline in revenues.
Unemployment Relief Would Provide Aid for Workers and Nonprofits
Three provisions in the CARES Act provide significant unemployment insurance (UI) relief to workers and to nonprofits, most notably:
  1. A new Pandemic Unemployment Assistance (PUA) program extends UI benefits to self-employed workers and others who are typically not eligible for UI benefits from the state of North Carolina. Notably, this means that employees of churches, religious nonprofits, and small charitable nonprofits (fewer than four employees) who are out of work due to COVID-19 may now receive UI benefits under PUA. For more details about nonprofit employees who are generally ineligible for UI benefits, see the Center’s blog post.
  2. The federal government would pay states for half of the cost of benefits that self-funded nonprofits owe as reimbursement for their laid-off employees’ UI claims. While this will still leave significant costs for self-insured nonprofits, it is an important first step. The Center is continuing to advocate for the state of North Carolina to hold harmless these nonprofits for Coronavirus-related UI claims (see below). For more details on self-insured nonprofits, see the Center’s blog post.
  3. In addition to state UI benefits, unemployed workers would receive $600 per week for up to four months. As context, the maximum weekly UI benefits in North Carolina are currently $350 per week, so North Carolinians who are out of work could receive up to $950 per week in UI benefits.
CARES Act Includes (Limited) Universal Charitable Deduction
After significant advocacy by the Center and other nonprofits over the past three years, the CARES Act includes a temporary, above-the-line deduction for total charitable contributions (also known as a universal or non-itemizer charitable deduction), which would be capped at $300. The incentive applies to contributions made in 2020 and would be claimed on tax forms next year. While the cap is lower than most nonprofits would prefer, it will nonetheless help encourage many more Americans to make charitable contributions this year at a time when nonprofits have never had greater revenue challenges.

The bill also lifts the existing cap on annual contributions for those who itemize, raising it from 60% of adjusted gross income to 100% (meaning high-income taxpayers could receive a full tax deduction if they donate all of their income to nonprofits). For corporations, the bill raises the annual limit from 10% to 25%. Food donations from corporations would be available up to 25%, up from the current 15% cap.
Many Appropriations in CARES Act Would Benefit Nonprofits
To help preserve jobs and businesses, the CARES Act also provides direct appropriations for several programs that directly support nonprofits. Some of these appropriations include: 
  • $130 billion for hospitals;
  • $15.5 billion in additional funding for the Supplemental Nutrition Assistance Program (SNAP);
  • $8.8 billion for child nutrition programs;
  • $450 million for nonprofit food banks through The Emergency Food Assistance Program (TEFAP);
  • $50 million for legal services;
  • $400 million in election grants to states to help with vote by mail and expansion of early voting and online voter registration programs;
  • $75 million for the National Endowment for the Arts and $75 million for the National Endowment for the Humanities, much of which will go to support the operations of nonprofit arts and cultural organizations;
  • $3.5 billion for the Child Care Development Block Grant program;
  • $750 million for Head Start; 
  • $1 billion for the Community Service Block Grant;
  • $5 billion for the Community Development Block Grant;
  • $4 billion in Emergency Solutions Grants to help families who are experiencing homelessness or are at risk of losing their homes; and
  • $3 billion in rental assistance for low-income Americans.
Center Provides Input as NC House Begins Developing COVID-19 Relief Solutions
This week, the NC House of Representatives began its process of providing support to individuals, businesses, and nonprofits affected by the COVID-19 pandemic. The House has formed four working groups on health care, economic support, education, and continuity of state operations to develop policy solutions to provide immediate and long-term relief to North Carolinians. All of the working groups have bipartisan chairs. The Economic Support working group met for the first time yesterday, and two other working groups are scheduled to meet today as remote meetings. If your nonprofit has suggestions for ways the state can help your organization, your community, or those you serve, please share this input with these working groups through the House’s online comments portal. We encourage you to share your input with the Center so we can help with your advocacy.

The Center continues to work with the Governor’s Office and legislative leaders to ensure that the state includes the needs of nonprofits in its COVID-19 relief efforts. Specifically, the Center has asked the COVID-19 Economic Support working group to help nonprofits in six important ways:
  1. Continue to pay nonprofits fully on their state grants and contracts, even if nonprofits are unable to fulfill their deliverables due to circumstances related to the COVID-19 pandemic. Let us know if your nonprofit has a state grant or contract and may be unable to fulfill your deliverables because of COVID-19.
  2. Apply any expansion of unemployment insurance (UI) benefits to all nonprofit employees and ensure that all nonprofits are fully held harmless for temporarily expanded benefits. Specifically, the Center is asking the state to hold harmless reimbursing nonprofits for the full amounts of their Coronavirus-related UI claims, since the CARES Act would only cover half of these amounts. 
  3. Ensure equitable treatment of nonprofits in any small business assistance provided by the state.
  4. Consider creating a temporary non-itemizer deduction or credit for charitable contributions on state taxes to encourage more North Carolinians to give generously to nonprofits in this time of extreme need.
  5. Provide nonprofits automatic extension of their charitable solicitation license filing and renewal deadlines.
  6. Seek regular input from nonprofits about the needs of the communities they serve.

The Center continues to refine and expand these suggestions for legislators and the Governor as we get additional information about the specific needs of nonprofits and those they serve.
Learn More About the Families First Coronavirus Response Act
Last week, President Donald Trump signed into law the Families First Coronavirus Response Act ( H.R. 6201). Among other things, the law provides significant refundable emergency paid sick leave and family and medical leave benefits, which should provide some immediate help to nonprofits and their employees. Details include:
  • Two weeks of emergency paid sick leave: The law requires employers with fewer than 500 employees (including nonprofits) to provide their employees two weeks of paid sick leave, paid at the employee’s regular rate, to quarantine or seek a diagnosis or preventive care for the Coronavirus. It also requires payment at 2/3 the employee’s regular rate to care for a family member for those purposes or to care for a child whose school has closed or child care provider is unavailable due to the Coronavirus. These provisions expire at the end of December 2020.
  • 12 weeks of emergency family and medical leave: The law expands the number of workers who can take up to 12 weeks of job-protected leave under the Family and Medical Leave Act for Coronavirus-related reasons. After the two weeks of emergency paid leave (above), employees of employers with fewer than 500 employees will be eligible to receive at least 2/3 of each employee’s usual pay. Employees must have been employed for at least 30 days to qualify and meet a “qualifying need related to a public health emergency.” The qualifying reasons for the emergency paid leave are caring for a child if the child’s school or childcare center is closed due to Coronavirus. The provisions also expire at the end of 2020.
  • Reimbursable payroll tax credits: Employers – including nonprofits – paying for the mandated paid leave are entitled to claim a refundable tax credit. Specifically, the tax credit is allowed against the employer portion of payroll taxes, and any paid leave costs that exceed the amount of payroll taxes owed will be refundable to the employer at the end of each quarter. 

Lisa Gordon Stella, a Durham attorney who is part of the Center’s pro bono referral network, has provided an extremely useful FAQs with answers to dozens of questions nonprofits have been asking about these new paid sick leave and emergency family medical leave provisions.
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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