Federal Nonprofit Policy Updates

Posted By: Madeleine McGee Covid-19 Response, Speaking Together,

Updates on Congressional legislative action.

Based on material from the National Council of Nonprofits and the North Carolina Council for Nonprofits. Any calls to advocate for pending legislation can be found on Speaking Together.

Update Jan. 29, 2021

Federal COVID Relief Plans Vague on Nonprofit Issues
President Biden’s framework for a $1.9 trillion COVID relief bill does not make clear if it would address four issues that would help ensure nonprofits have the resources needed to continue to provide essential services in our communities during and after the pandemic:
  1. Providing nonprofit-specific grants, forgivable loans, and refundable tax credits for all nonprofits. Some nonprofits are unable to take advantage of the second-draw Paycheck Protection Program (PPP) loans because they have more than 500 employees and/or they did not experience a 25% decline in revenue during any quarter of 2020. Nonprofits are seeking a special version of the PPP that is more closely tailored to nonprofits’ finances and operations, as well as passage of the updated WORK NOW Act (to provide grants to help frontline nonprofit service providers maintain and expand their work forces) and other emergency grants.
  2. Strengthening charitable giving incentives by increasing and extending the above-the-line deduction while preserving the itemized charitable contribution deduction. Currently, the universal charitable deduction expires after 2021 and is capped at $300 for individuals and $600 for married couples.
  3. Providing 100% unemployment benefit reimbursement to nonprofits that self-insure these benefits, both retroactively to 2020 and extended through the first three quarters of 2021. Currently, the federal government is covering 50% of these costs, and North Carolina is covering the other 50%. Federal legislation holding nonprofits harmless for these costs would provide certainty that organizations will not face an additional wave of financial hardship later in 2021.
  4. Providing substantial financial aid to state and local governments to avoid layoffs and cuts to essential programs and services, and to prevent governments from imposing new costs and burdens on their nonprofit partners. 
Leaders in Congress are beginning to work on details of the legislation and still determining whether to negotiate a bipartisan COVID relief package or to include additional pandemic relief as part of a budget reconciliation bill that Democrats could pass in party-line votes in the U.S. Senate and U.S. House of Representatives.

Update Jan. 17, 2021

President-Elect Biden Release COVID-19 Response Proposal
His $1.9 trillion plan would focus on:
  1. Creating a national strategy for vaccinations, limiting the spread of COVID-19, and re-opening schools;
  2. Providing immediate relief to working families; and
  3. Providing economic relief for businesses.
Some highlights of the plan, which would require congressional approval, include:
  • Developing a national vaccination program in partnership with state and local governments;
  • Providing for significant increases in testing to control the spread of COVID-19;
  • Addressing racial disparities in COVID-19 resources by expanding health care services in communities of color and other areas with disproportionally high rates of COVID-19;
  • Providing resources to reduce and manage COVID-19 outbreaks in long-term care facilities and prisons;
  • Providing resources to help schools reopen safely;
  • Reinstating paid leave mandates for employers with 500 or fewer employees and extending the tax credits to employers for providing paid leave through September 30, 2021;
  • Extending expanded federal unemployment benefits through September 30, 2021 and increasing the federal weekly supplement to $400 (it is currently $300);
  • Providing additional stimulus checks of $1,400 for most Americans;
  • Extending moratoriums on evictions and foreclosures through September 30, 2021;
  • Increasing federal assistance for affordable housing, food assistance, and child care;
  • Raising the federal minimum wage from $7.25 per hour to $15 per hour;
  • Continuing health coverage for unemployed workers through September 30, 2021;
  • Providing new grants and loans to small businesses that have been particularly harmed by the economic effects of the pandemic; and
  • Providing $350 billion in new funding for state and local government to protect the pay of frontline workers, at least $3 billion of which would be for a grant program that could be used to help some nonprofits have the staff they need to meet essential community needs.
The 19-page framework does not provide details on whether the plan would address some of nonprofits’ ongoing needs, including expansion of the temporary universal charitable deduction and extension and expansion of the partial federal forgiveness of unemployment expenses for reimbursing nonprofits. The Biden Administration will likely work with Congress to fill in the details of this plan and to pass it soon after President-elect Biden’s inauguration.
SBA Re-Opens PPP Application Process and Begins Receiving Second-Draw PPP Applications
The COVID-19 relief bill that Congress passed late last month creates new opportunities for nonprofits that did not previously receive a Paycheck Protection Program (PPP) loan to apply for a first-draw loan and for nonprofits that already received a PPP loan to apply for a second-draw loan. The SBA has established a three-phase schedule for processing new PPP loan applications:
  • On Monday, January 11, the Small Business Administration (SBA) re-opened applications for first-draw PPP loans, but only for a small number of financial institutions. Nonprofits applying for the PPP for the first time can use Form 2483.
  • On Wednesday, January 13, participating community financial institutions with less than $1 billion in assets began processing applications for second-draw PPP loans. Nonprofits are generally eligible for forgivable second-draw PPP loans if they received PPP loans last year, have fewer than 300 employees, and had a decline in gross receipts (as calculated for Form 990) of at least 25% in any calendar quarter of 2020 (relative to the same quarter in 2019). Nonprofits applying for second-draw PPP loans can use Form 2483 SD.
  • Tuesday, January 19, the SBA will open up the application for first-draw and second-draw PPP loans to all lenders.
The SBA has posted a variety of information and guidance on PPP loans and is expected to continue to update this information in the coming weeks. The deadline for applying for new PPP loans is March 31, 2021.
For more information about changes to the PPP and other parts of the recently-passed COVID-19 relief legislation, check out the NC Council for Nonprofits' analysis of provisions affecting nonprofits and a recording of the recent Nonprofit Town Hall briefing from the National Council of Nonprofits.
Federal Court Stops Executive Order Limiting Race and Gender Equity Trainings
Late last month, a federal court issued a preliminary injunction blocking Executive Order 13950 that sought to undermine workplace trainings on equity, diversity, and inclusion. As a result of the court order, the Office of Federal Contract Compliance Programs (OFCCP) issued a notice announcing that it will not enforce clauses that were included in recent federal contracts or subcontracts as a result of the executive order and that is has shut down the hotline for complaints about noncompliance. There is a strong chance that the Biden administration will rescind the executive order next week.
As a result of the court decision, nonprofits with federal grants or contracts should be able to resume all workplace trainings on topics related to race and gender equity, diversity, and inclusion without any fear of repercussions from the federal government.
Update Jan. 10, 2021
Nonprofits Using Contractors Must File New IRS Form 1099-NEC by February 1
Nonprofits that paid individuals $600 or more as independent contractors in 2020 must file the new IRS Form 1023-NEC with the IRS and with these contractors by February 1. In the past, nonprofits used IRS Form 1023-MISC to report non-employee compensation to contractors. For 2020, nonprofits should still use Form 1023-MISC to report compensation of $600 or more paid to attorneys and for raffle prizes of $600 or more. The Form 1023-MISC is also due by February 1.
U.S. Supreme Court to Consider Donor Disclosure Cases
The U.S. Supreme Court will soon consider two cases challenging a California law that requires charitable nonprofits to disclose donor information to state officials. The cases argue that the California disclosure rule infringes nonprofits’ First Amendment rights. The California law requires nonprofits to disclose to the state – but not to the public – donor information from Schedule B of Form 990.

Update Jan. 3, 2021

In late December, the President signed a $900 billion COVID-19 relief package as part of an omnibus federal spending bill. Thanks to advocacy from the National Council of Nonprofits and many others, the legislation includes several forms of relief for charitable nonprofits, including:

  • Expanding nonprofit access to Paycheck Protection Program (PPP) loans. The bill creates a second round of PPP funding for nonprofits and businesses with fewer than 300 employees that had a 25% reduction in gross receipts in any quarter of 2020. It also expands the types of expenses that are allowable for PPP loans to include personal protective equipment, certain supplier costs, facilities modifications, and certain workplace protection expenses. It appropriates $284 billion in additional funding for new PPP loans. Nonprofits with more than 500 employees are still not eligible for PPP loans.
  • Improving the Employee Retention Tax Credit (ERTC). The bill makes the ERTC available to more nonprofits by expanding it and changing eligibility requirements. Specifically, nonprofits that suffered a reduction in gross receipts of 20% or more in any quarter of 2020 are eligible for a 70% refundable tax credit covering wages of up to $10,000 per employee in each quarter (with a maximum of $14,000 per employee). For example, a nonprofit with 10 employees who each make $10,000 or more per quarter could qualify for a $70,000 refundable payroll tax credit (70% of $100,000). Nonprofits that received PPP loans can now qualify for the ERTC for wages not paid for by forgiven amounts of PPP loans.
  • Strengthening incentives for charitable giving. The bill extends the temporary universal charitable deduction through 2021. For 2021, it also expands the cap on this non-itemizer charitable deduction for married couples filing jointly from $300 to $600. Individual taxpayers who use the standard deduction will still be able to deduct up to $300 for their charitable contributions next year. In addition, the bill extends two temporary increases in charitable giving incentives through 2021. Specifically, for 2021, it increases the limits on deductible charitable contributions for corporations to 25% of taxable income (up from 10%) and it removes the 60% of adjusted gross income cap on deductible charitable contributions for individuals who itemize their deductions.
  • Increasing and extending federal unemployment insurance reimbursement for self-insured nonprofits. The bill extends federal funding to cover 50% of the COVID-related unemployment costs of self-insured nonprofits through March14, 2021.
  • Extending unemployment benefits. The bill extends the Pandemic Unemployment Assistance program – which provides unemployment benefits to self-employed individuals and laid-off or furloughed workers at small and religious nonprofits that are exempt from unemployment requirements – through March 14, 2021. It also provides $300 per week in supplemental federal unemployment benefits for individuals who are out of work due to the pandemic, through March 14, 2021. This spring and summer, individuals had received $600 per week in supplemental benefits if they had been furloughed or laid off due to COVID-19. The bill also extends other CARES Act unemployment benefits through March 14, 2021. Without this legislative action, all of these unemployment benefits would have expired on December 30, 2020.
  • Extending the Coronavirus Relief Fund (CRF) deadline. Under the CARES Act, all CRF expenditures were required to have been spent by December 31, 2020. Because of this deadline, the U.S. Treasury Department was requiring nonprofits and state agencies to submit final CRF reports by January 8, 2021. The new COVID-19 relief package extends the deadline for CRF expenditures through December 31, 2021, which should prevent nonprofits from having to return unspent funds to the federal government and make final grant reports in the next few weeks.
Some other highlights and omissions of the COVID-19 relief negotiations include:
  • Additional economic stimulus payments of $600 per person for individuals with adjusted gross income up to $75,000 and married couples with adjusted gross income up to $150,000.
  • A one-month extension of the Centers for Disease Control and Prevention eviction moratorium through January 31, 2021.
  • A $15 billion “Save Our Stages” grant program that will provide support to many nonprofit performing arts organizations and museums.
  • Expansion of the PPP program to 501(c)(6) trade associations.
  • Simplification of PPP loan forgiveness applications for borrowers – including nonprofits – with loans of $150,000 or less.
  • Extension of the paid sick leave and paid family and medical leave requirements from the Families First Coronavirus Response Act – and the federal tax credit to cover employers’ cost of providing paid leave – through March 31, 2021. These paid leave provisions were set to expire on December 31, 2020.
  • Allowance for individuals to carry over unused amount of health and dependent care flexible spending arrangement (FSA) benefits from 2020 into 2021.
  • No new direct aid for state and local governments. 
  • No liability protections against COVID-related claims for businesses, nonprofits, or individuals.

The National Council of Nonprofits has prepared a summary of the main nonprofit provisions in the COVID-19 relief package.

IRS Decreases Standard Business Mileage Rate for 2021
The IRS has announced that the standard business mileage rate will decrease to 56 cents per mile in 2021 (down from 57.5 cents per mile in 2020). Many nonprofits use this rate when reimbursing their employees for work-related driving.
The volunteer mileage rate – the amount that's tax-deductible when your nonprofit's volunteers drive on behalf of your organization – remains at 14 cents per mile and can only be changed by Congress.