May 15, 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...
Group of 460 nonprofits ask state legislators for COVID-19 relief
New bill would provide sales tax relief for nonprofits
U.S. House of Representatives likely to pass HEROES Act today
U.S. Senate bill would provide $50 billion in support for frontline nonprofits
Center submits public comments on Paycheck Protection Act guidance
SBA creates safe harbor for PPP loans of $2 million or less
State legislation would exempt online educational events and services from sales tax
New state bills would limit state tax benefits for enhanced charitable giving incentives
NC legislation would provide emergency funding to arts nonprofits
Reminder: IRS has extended filing date for 990s through July 15
NC Senate legislation would create tax credit for donation of gleaned crops
Several new state bills respond to nonprofits’ needs
Legislative study committee to review nonprofit issues
Join a free webinar on nonprofit voter registration work in the time of COVID-19
It’s not too early to become a National Voter Registration Day partner
Congressional bill would expand national service programs
Group of 460 Nonprofits Ask State Legislators for COVID-19 Relief
On Monday, the Center shared with all 170 state legislators a letter from a group of 460 nonprofits with six concrete policy solutions that the NC General Assembly can implement to help charitable organizations and the communities they serve during the COVID-19 crisis:

  1. Protect Self-Insured Nonprofits from Unemployment Liability. Many 501(c)(3) nonprofits elect to reimburse the state for the cost of their employees’ unemployment claims rather than pay state unemployment tax. The CARES Act provides funding to cover half of the costs of these nonprofits’ COVID-19 related unemployment claims, but still leaves these organizations with significant financial liability. Without assistance in covering the costs of these unemployment claims, many nonprofits that provide health care, food assistance, affordable housing, childcare, and other critical services will have to end or curtail services later this year. State legislators can prevent further economic harm to these nonprofits either by covering the other half of the costs of their COVID-19 related unemployment claims or by giving them more time to reimburse the state. 
  2. Exempt Charitable Nonprofits from Paying Sales Tax in 2020. The COVID-19 crisis has forced many nonprofits to exhaust their financial reserves. A temporary provision allowing for point-of-sale exemption from sales tax would help improve nonprofits’ immediate cash flow. 
  3. Include Nonprofits in Small Business Relief. Like small businesses, many nonprofits need immediate financial support to continue to operate and provide services. As the General Assembly develops or expands loan programs, grants, or other measures to help small businesses, it is essential that nonprofits have full access to these programs. 
  4. Bolster Charitable Giving Incentives. The CARES Act created a temporary above-the-line charitable deduction for 2020, capped at $300. While nonprofits appreciate this measure, the $300 cap is unlikely to generate nearly enough new or increased donations to help nonprofits weather this crisis. A temporary non-itemizer state tax credit for charitable contributions would help increase private giving this year.
  5. Facilitate Remote Meetings of Nonprofit Boards. Some nonprofits are unable to conduct board meetings remotely and therefore are unable to take essential actions to ensure that their organizations can continue to provide programs and services. Legislators can solve this problem by temporarily amending the NC Nonprofit Corporation Act to allow all nonprofit boards to take action by email by unanimous written consent and to conduct meetings by remote communications such as conference calls. 
  6. Seek Input from Nonprofits. Charitable nonprofits work directly with a wide range of people in all 100 counties of the state. As legislators consider additional state policy changes and funding to address the COVID-19 crisis, it is essential that they consult with nonprofits to fully understand the current needs of communities throughout North Carolina.

The Center has heard from many legislators – including several in leadership roles in the House and Senate – who are interested in developing solutions to some or all of these issues. Thank you if your nonprofit signed on to the letter!
New Bill Would Provide Sales Tax Relief for Nonprofits
Yesterday, Rep. Brandon Lofton (D-Mecklenburg) introduced a bill ( H.B. 1137) in the NC House of Representatives to allow 501(c)(3) nonprofits to be exempt from sales tax – rather than paying tax on their purchases and seeking semi-annual refunds from the NC Department of Revenue – during the COVID-19 crisis. This temporary sales tax exemption bill, which would continue through June 30, 2021, would significantly improve nonprofits’ cash flow at a time when many organizations’ financial reserves have been depleted. The Center is appreciative of Representative Lofton for introducing this bill, and we will continue to advocate for the General Assembly to pass it. Your nonprofit can help gain traction for this bill by contacting your NC House member (or other House members you know personally) and asking them to co-sponsor H.B. 1137). If you aren’t sure who represents you in the NC House of Representatives, you can enter your home address into this simple search form.
U.S. House of Representatives Likely to Pass HEROES Act Today
On Tuesday, the Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act) was introduced in the U.S. House of Representatives. The $3 trillion COVID-19 stimulus bill includes several provisions that would be helpful to nonprofits, including:

  • Paycheck Protection Program (PPP) Expansion. The HEROES Act sets aside 25% of PPP funding for nonprofits and expands eligibility to non-501(c)(3) nonprofits and to nonprofits with more than 500 employees. It also eliminates the current requirement that at least 75% of the forgivable amount of loans must be used for payroll expenses, extends the covered period through December 31, 2020, and extends the deferment of payment and interest to one year (up from six months).
  • Unemployment Insurance (UI) for Self-Insured Nonprofits. While the HEROES Act still only provides federal funds to cover half of the COVID-19 related UI costs of self-insured nonprofits, it fixes a procedural problem from the U.S. Department of Labor’s guidance. Specifically, the HEROES Act provides that nonprofits’ liability for the claims will be reduced by 50% instead of requiring nonprofits’ to reimburse state UI trust funds for the full cost of their claims and then seek reimbursement of their reimbursement (not a typo!). Note that in North Carolina, a recent state law holds reimbursing nonprofits harmless for the costs of their COVID-19 related UI claims, so the procedural change in the HEROES Act may fully address the UI issue for North Carolina nonprofits.
  • Employee Retention Credit. The HEROES Act strengthens the refundable tax credit available to nonprofits and businesses that maintain their employees and don’t use the PPP by significantly increasing the amount of the credit for each employee and by allowing credits for some non-payroll expenses like rent or mortgage. With these changes, the employee retention credit may be a better option than the PPP for financial relief for some nonprofits.
  • Main Street Lending Program. The HEROES Act requires the Federal Reserve to make larger nonprofits (up to 10,000 employees) eligible for this low-interest loan program and creates forgivable loans for nonprofits serving low-income communities.
  • Appropriations. The HEROES Act includes a wide range of appropriations, including increased funding for the Supplemental Nutrition Assistance Program (SNAP), food banks, the 2020 U.S. Census, arts and humanities nonprofits, domestic violence organizations, legal services nonprofits, hospitals, mental health service providers, and the Community Development Block Grant.

The National Council of Nonprofits has prepared an excellent analysis of the nonprofit provisions in the HEROES Act. The House will vote on, and likely approve, the bill later today. The Senate is unlikely to take up the HEROES Act in its current form, but it could include some of its provisions – potentially including those that help nonprofits – in its next COVID-19 relief legislation.
U.S. Senate Bill Would Provide $50 Billion in Support for Frontline Nonprofits
Yesterday, several U.S. Senators introduced the Work Opportunities and Resources to Keep Nonprofit Organizations Well Act (WORK NOW Act) ( S.3747). The bill seeks to inject $50 billion into frontline nonprofits over the next six months to generate employment for laid-off workers and to address the skyrocketing needs in communities for COVID-19 relief and recovery. The grants program would help nonprofit organizations whose workers serve public needs that are growing due to the current crisis retain their employees, scale their service delivery, and hire more workers to meet these essential needs.
Center Submits Public Comments on Paycheck Protection Act Guidance
Yesterday, the Center submitted public comments to the Small Business Administration (SBA) on its interim rulemaking on the Paycheck Protection Program (PPP). The Center's comments endorsed the more extensive public comments of the National Council of Nonprofits and addressed four specific issues that North Carolina nonprofits have had with PPP applications and loans:

  1. Eligibility. The Center asked the SBA to use its greatest possible flexibility to expand eligibility to nonprofits with more than 500 employees in a manner similar to the "alternative size standard" that it has applied to for-profit businesses. This would increase access to capital for larger organizations that are suffering economic harm due to COVID-19. 
  2. Need for Nonprofit PPP Data. The Center has heard from many nonprofits that some lenders appear to have prioritized the PPP applications of for-profit businesses over those of nonprofits. If true, this is very troubling. The Center asked the SBA to publish data comparing the number of PPP applications, number of loans issued, and average loan amounts of nonprofit and for-profit loan applicants. The Center also asked the SBA to publish this data by state so nonprofits and policymakers can assess whether there is inequitable treatment of charitable organizations in North Carolina or other states.
  3. Certifications. As the SBA has begun to provide guidance and government officials have made public statements about the certification of necessity, nonprofits are struggling to understand the evidence of economic distress they need to demonstrate to feel comfortable making this certification in good faith. The Center asked the SBA to be understanding that the vast majority of nonprofits seeking PPP loans are making this certification in good faith based on the best available evidence of actual or prospective economic harm due to COVID-19 and that nonprofits’ circumstances are evolving as the crisis and its impact continue to evolve.
  4. Need for Nonprofit-Specific Guidance. The Center encouraged the SBA to address a variety of nonprofit-specific questions in its final rulemaking and other future guidance on the PPP.
SBA Creates Safe Harbor for PPP Loans of $2 Million or Less
On Wednesday, the SBA updated its Frequently Asked Questions on the PPP by adding a new response on the certification of necessity for seeking the PPP loan. The SBA requires nonprofits and businesses seeking PPP loans to make this certification in good faith to demonstrate that they need this financial assistance because they have suffered economic harm due to COVID-19. Many nonprofits and businesses have been uncertain about how to provide adequate documentation to demonstrate that they have made this certification in good faith after recent media reports and statements by government officials about potential abuse of PPP loans by businesses that may not have actually needed this financial assistance. In its answer to Question #46, the SBA created a safe harbor that nonprofits or small businesses with PPP loans of $2 million or less are deemed to have made this certification of necessity in good faith. This safe harbor provides important legal protection for many nonprofits seeking PPP loans.

Also, a bill introduced in the U.S. Senate yesterday would extend the forgivable portion of PPP loans from eight weeks of expenses to 16 weeks of expenses.
State Legislation Would Exempt Online Educational Events and Services from Sales Tax
Legislation filed this week in the NC Senate ( S.718) and NC House of Representatives ( H.B. 1079) would make changes to the sales tax on digital property that took effect on October 1, 2019. Under current law, nonprofits and businesses must collect and remit sales tax on any sale of digital property, which includes online learning like classes, webinars, and conferences. The Center has advocated for legislators to amend this law so that nonprofits would not need to charge sales tax on their educational offerings if the same types of learning would not be taxable if offered as in-person events. Nonprofits’ concern over this issue has become much more significant over the past two months, as almost all in-person educational events have had to be conducted as webinars or other types of online events.

The bills introduced this week – which were recommended by the Revenue Laws Study Committee on Wednesday – addresses nonprofits’ concern by providing an exemption from sales tax for any digital audio or audiovisual work that consists of the contemporaneous electronic transmission of a nontaxable service. To translate that from legalese: If this legislation is enacted, nonprofits won’t need to charge sales tax on fees for attending online conferences, webinars, or workshops, or for providing real-time online services like exercise or wellness classes or telemedicine. Note that nonprofits or businesses would still need to charge sales tax if they sell the recordings of events. This exemption would be retroactive to October 1, 2019. The Center is appreciative of Senator Paul Newton (R-Cabarrus) and Representative Julia Howard (R-Davie) for listening to nonprofits’ concerns in developing this exemption.
New State Bills Would Limit State Tax Benefits for Enhanced Charitable Giving Incentives
This week, bills were introduced in the NC House of Representatives ( H.B. 1080) and NC Senate ( S.727) to implement a variety of tax law changes recommended by the Revenue Laws Study Committee on Wednesday. The bills 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.

Potentially, both of these could reduce the enhanced incentives for charitable giving from the CARES Act. The Center is working with legislators to try to change these limitations before the bill is passed.

The bill also would make the forgivable portion of PPP loans taxable on state corporate income taxes. This provision should not affect nonprofit receiving PPP loans, since 501(c)(3) organizations are exempt from state corporate income tax. 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.
NC Legislation Would Provide Emergency Funding to Arts Nonprofits
Bills filed this week in the NC Senate ( S.738) and NC House of Representatives ( H.B. 1068) would provide $3 million in emergency funding to local arts councils to help arts nonprofits that have been financially harmed by the COVID-19 pandemic. This bill, which was introduced thanks to the advocacy of Arts North Carolina, is important because many arts organizations (like many other types of nonprofits) have suffered significant economic losses over the past few months as they have lost almost all of their earned revenue.
Reminder: IRS Has Extended Filing Date for 990s through July 15
If you are frantically completing your Form 990 today, don’t panic! Last month, the IRS extended until July 15, 2020 the filing deadline for Form 990, Form 990-T, and other nonprofit tax returns and information returns typically due on May 15, 2020. The IRS took this action through a combination of a new notice related to COVID-19 and previous IRS guidance for extension of filing deadlines during federally-declared disasters. Many nonprofits with May 15 filing deadlines for their 990s already were planning to file for automatic extensions.
NC Senate Legislation Would Create Tax Credit for Donation of Gleaned Crops
A bill ( S.785) filed yesterday in the NC Senate would create a new state tax credit for taxpayers who grow crops and allowed them to be harvested for donation to 501(c)(3) nonprofits during or within 180 days after the time of a disaster. The tax credit would be for 50% of the market value of the gleaned crops and could not exceed $15,000.
Several New State Bills Respond to Nonprofits’ Needs
Yesterday was the deadline for bills to be filed in the NC Senate and NC House of Representatives for consideration during the 2020 session. Several new bills would help address needs of nonprofits and the communities they serve. These include:

  • House (H.B. 1075) and Senate (S.792) bills to bolster UI benefits for North Carolinians. Both bills would increase the maximum weekly benefits from $350 to $450, extend the duration of benefits from 12 weeks to 26 weeks, and allow North Carolinians to access UI benefits (with liability for their employers) if they are out of work due to spousal relocation, undue family hardship, or health issues. Many nonprofits have advocated for these types of changes to North Carolina’s UI system.
  • A Senate bill (S.734) to reinstate North Carolina’s earned income tax credit, which helps provide more financial stability for working families.
  • Legislation to increase access to broadband services across the state either by expanding the Growing Rural Economies with Access to Technology (GREAT) grant program (H.B. 1105), by allowing municipalities to provide broadband services more directly (S.769), or through a combination of changes to the GREAT program, increased ability of municipalities to provide broadband, and other changes (H.B. 1122). As more services are being provided through the Internet with North Carolina’s “stay-at-home” order, inadequate access to broadband is creating greater inequities in many rural and low-income communities.
  • A Senate bill (S.776) that would require the NC Department of Agriculture and Consumer Services to establish partnerships with nonprofits that connect small family farms to food banks.
  • A House bill (H.B. 1134) establishing a new Emergency Housing Office within the N.C. Department of Health and Human Services. This new agency would, among other roles, provide resources and referrals to nonprofits providing services to individuals experiencing homelessness and individuals at risk of becoming homeless.
Legislative Study Committee to Review Nonprofit Issues
On Monday, the Joint Legislative Program Evaluation Oversight Committee met to discuss studies that the legislative Program Evaluation Division is conducting during the remainder of the year. Two of these studies could ultimately lead to legislation affecting the work of nonprofits:

  1. The Program Evaluation Division is currently studying the NC Department of Public Safety coordination with nonprofits in disaster recovery planning. Some legislators had expressed concerns last year that some disaster grants to nonprofits were used for services unrelated to hurricane recovery.
  2. The Division will soon study the efficiency of the NC Department of Revenue’s processes for the administration of sales and use tax. This study may shed light on potential cost savings from replacing the nonprofit sales tax refund process with a point-of-sale exemption.
Join a Free Webinar on Nonprofit Voter Registration Work in the Time of COVID-19
Voter registration is more important than ever this year. With DMVs shuttered because of COVID-19 and field-based registration drives on hold, millions of voter registrations are no longer being collected or updated. At the same time, eligible voters need to be registered at their current addresses well ahead of Election Day to be able to vote by absentee ballot or other ways that enable social distancing. Nonprofit VOTE is offering a free webinar on Friday, May 22 at 2 p.m. on ways nonprofits can promote voter registration digitally.
It’s Not Too Early to Become a National Voter Registration Day Partner
Last week, National Voter Registration Day (September 22) launched its partner sign-on for 2020. National Voter Registration Day is a great opportunity for nonprofits to ensure that their staff, volunteers, and community members are registered to vote. Sign up today to join the nationwide effort to register hundreds of thousands of voters on September 22. As an official partner, your nonprofit will receive a free voter registration kit and access to other opportunities to support your nonpartisan voter registration work.
Congressional Bill Would Expand National Service Programs
Last week, Congressman David Price (D-NC) introduced the Pandemic Response and Opportunity Through Public Service Act, which would establish 750,000 new national service positions over the next three years to help with COVID-19 response and recovery. The bill would also help encourage service by increasing the AmeriCorps living allowance to 175% of the federal poverty level, providing support to enable SeniorCorps volunteers to work online and increasing public awareness of response and recovery service opportunities.
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.

Your Center membership allows each staff member, board member, and key volunteer in your organization to set up their own online account to access member resources, benefits and services. Encourage everyone to create an account .