May 22, 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...
Ask Senators Burr and Tillis to take action to help nonprofits
Take 5 minutes to provide confidential information to help advocate for nonprofit UI relief
National nonprofits ask DOL to rescind problematic guidance on UI 
NC House approves sales tax exemption for online educational events and services 
SBA releases PPP loan forgiveness application and instructions
Congress looks to extend and improve on PPP 
North Carolina begins Phase 2 of easing COVID-19 restrictions today
NC House committee approves limits on state tax benefits for enhanced charitable giving incentives
New bill would provide sales tax relief for nonprofits
NC Senate bill would fund Medicaid transformation
Join a free webinar on nonprofit voter registration work in the time of COVID-19
NC Senate bill would simplify absentee voting requirements
IRS allows greater flexibility for employee benefit plans in 2020 
It’s not too early to become a National Voter Registration Day partner
Ask Senators Burr and Tillis to Take Action to Help Nonprofits
Last week, the U.S. House of Representatives passed the Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act), a $3 trillion COVID-19 recovery bill. While the HEROES Act passed mostly along party lines, it includes several provisions with broad bipartisan support 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.
  • 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.

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. 

So far, the Senate has not displayed the urgency of the House in passing the next round of COVID-19 recovery legislation. The Center encourages nonprofits to email and Tweet Senator Thom Tillis and Senator Richard Burr and urge the Senate to take action by supporting another recovery bill sooner rather than later. The National Council of Nonprofits has sample Tweets and talking points. You can reach Senator Burr by email or on Twitter (@SenatorBurr) and Senator Tillis by email or on Twitter (@SenThomTillis).
Take 5 Minutes to Provide Confidential Information to Help Advocate for Nonprofit UI Relief
Does your nonprofit self-insure for your unemployment insurance (UI) claims? Is your organization now facing burdensome payments to the state unemployment trust fund due to coronavirus-related layoffs and furloughs? If so, please take five minutes to complete a confidential survey from the National Council of Nonprofits. The information from this survey will help the Center and our partner organizations advocate for Congress and state policy makers to provide relief to nonprofits for their COVID-19 related UI claims. 

To keep the survey as simple as possible, here are a few tips for North Carolina nonprofits:
  1. North Carolina is the only state where the state unemployment agency bills nonprofits annually instead of monthly or quarterly (this is a good thing!), so you can answer “Other” to that question.
  2. North Carolina is providing additional relief to reimbursing nonprofits (again, that is a good thing!), so you can answer “Yes” to that question.
  3. Since North Carolina nonprofits should not yet have received a bill from the Division of Employment Security for their COVID-19 related UI claims, you just need to fill in the box with the estimate of the cost of your claims.
National Nonprofits Ask DOL to Rescind Problematic Guidance on UI
A few weeks ago, the Center identified several problems with guidance that the U.S. Department of Labor issued on the way states should administer the CARES Act provision that covers half of the COVID-19 related UI claims of self-insured nonprofits. This week, the National Council of Nonprofits and 30 other national organizations asked Secretary of Labor Eugene Scalia to rescind this guidance and replace it with guidance that would: 
  1. Have states use CARES Act funding to reduce the actual bills to reimbursing nonprofits for COVID-19 related UI claims by 50% rather than forcing nonprofits to reimburse for the full amount of claims and then seek reimbursement of their reimbursement from the state; and 
  2. Allow states (like North Carolina) that are not charging reimbursing nonprofits for their COVID-19 related UI claims to access the full CARES Act funding to cover half of the cost of these claims. 
NC House Approves Sales Tax Exemption for Online Educational Events and Services
On Tuesday, the NC House of Representatives approved a bill ( H.B. 1079) that would exempt many types of remote services provided by nonprofits from 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 learnings 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 learnings 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 bill passed by the House addresses most of nonprofits’ concerns 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. Two Senate committees approved the bill this week, and the full Senate is expected to vote on it next Tuesday.
SBA Releases PPP Loan Forgiveness Application and Instructions
Last Friday, the Small Business Administration (SBA) released the application and instructions for loan forgiveness under the Paycheck Protection Program (PPP). The SBA document includes step-by-step instructions for nonprofits and other PPP borrowers to perform the calculations required for loan forgiveness. The instructions provide more flexibility by: (a) allowing borrowers to use an “alternative payroll covered period” that aligns with their actual pay periods to calculate payroll expenses; (b) clarifying that mortgage or rent forgiveness can include payments for real or personal property; and (c) ensuring that borrowers won’t be penalized if some employees decline a “good-faith written offer to rehire workers.” The SBA still plans to release formal guidance answering more questions about PPP loan forgiveness.
Congress Looks to Extend and Improve on PPP
Next week, the U.S. House of Representatives is scheduled to vote on a bipartisan bill to strengthen the PPP. Among other things, the bill would allow forgiveness of PPP loans beyond the eight-week period permitted in the CARES Act, eliminate the SBA’s rule that at least 75% of the funds from PPP loans must go to payroll expenses, and extend the deadline for nonprofits and businesses to rehire employees beyond June 30, 2020. The bill would address some, but not all, of the issues that the Center identified in its public comments to the SBA on the PPP last week. 

A bipartisan U.S. Senate bill to extend the PPP is more troubling for nonprofits since it would allow for-profit businesses with up to 5,000 employees to access PPP loans and loan forgiveness but would only allow for partial loan forgiveness for nonprofits with 500 or fewer employees.
North Carolina Begins Phase 2 of Easing COVID-19 Restrictions Today
On Wednesday, Governor Roy Cooper issued Executive Order No. 141 which ends the statewide “stay-at-home” order and begins Phase 2 of the re-opening of the state’s economy, starting today at 5 p.m. Many more businesses and nonprofits are able to resume in-person operations – with social distancing practices in place – during Phase 2. 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.
  • 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 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.

This executive order will remain in place through June 26.
NC House Committee Approves Limits on State Tax Benefits for Enhanced Charitable Giving Incentives
On Tuesday, the NC House Finance Committee approved 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.

The bill was changed this week to follow federal law so that businesses would not have to pay state corporate income tax on the forgivable portion of their PPP loans. This provision should not affect nonprofits 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.
New Bill Would Provide Sales Tax Relief for Nonprofits
Last week, 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 to the 36 House members who have signed on as co-sponsors. Thank you if your nonprofit contacted your NC House member asking them to co-sponsor the bill!
NC Senate Bill Would Fund Medicaid Transformation
On Wednesday, several appropriations bills were introduced in the NC Senate. One of these bills ( S.808) would provide funding for Medicaid transformation – the state's planned transition of Medicaid to a managed care network. If enacted, this bill would plan for Medicaid transformation to begin on January 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.
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 today (Friday, May 22) at 2 p.m. on ways nonprofits can promote voter registration digitally.
NC Senate Bill Would Simplify Absentee Voting Requirements
Under current law, most North Carolinians must have either two witnesses or a notary attest to their signature when submitting an absentee ballot. This requirement, which is stricter than most other states, makes it challenging for many North Carolinians – particularly homebound seniors and individuals with disabilities – to request absentee ballots. A bill ( S.828) filed in the NC Senate yesterday would allow all North Carolinians to use the simplified absentee voting request rule currently reserved for members of the military living overseas, which allows for voters to self-certify to their signature rather than requiring two witnesses or a notary. Many nonprofits are working to ensure that North Carolinians are able to vote by mail this fall if COVID-19 remains a problem, and this legislation would help make this process simpler.
IRS Allows Greater Flexibility for Employee Benefit Plans in 2020
Last week, the Internal Revenue Service issued two notices giving employees greater flexibility in accessing their employer-sponsored health plans and flexible spending accounts (FSAs) for 2020. Specifically:
  1. IRS Notice 2020-29 allows employers to make changes to their cafeteria plans and FSAs to allow their employees to enroll in group health plans or make adjustments to their pre-tax contributions to healthcare and dependent care FSAs during the year.
  2. IRS Notice 2020-33 allows employees to carry over more of their healthcare FSA elections for 2020.
It’s Not Too Early to Become a National Voter Registration Day Partner
Early this month, 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.
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 .