COVID-19: 4/10/20 NAO Important Update

But the response to COVID-19, even well intended response efforts, are dramatically highlighting and exacerbating the damage and harm of the serious racial and social inequities in our nation. Lack of access to regular health care has compounded the pandemic for minorities, immigrant communities, the homeless and the poor. The ‘digital divide’ denies many people both in cities (due to income disparities) and in rural areas access to vital information about the pandemic, access to online portals for financial assistance and unemployment filing, ability to find resources for food or shelter, and even the opportunity for school children to socialize or participate in online classrooms.

While we fight the direct effects of COVID-19, we must recognize how the lack of diversity, equity and inclusiveness in policy making has increased our vulnerability to the health and economic miseries of the pandemic. The Oregon Health Authority is reporting that our Latinx communities are being disproportionately impacted by COVID-19. Without immediate attention and commitment of resources this will continue to impede our efforts to recover and move forward as a nation.

Even as creative as our sector has become in moving programs online, we are hearing from frontline organizations that they need more support in direct ongoing funding for these problems and immediate fiscal assistance to nonprofits providing our safety net. We also know that funding must be made available for UI ineligible immigrant workers through initiatives like the Oregon Workers Relief Fund. Just as important is much stronger assistance to state, county and municipal budgets that provide both infrastructure and critical funding for this work across the country. As tax revenues evaporate and without significantly greater support, unavoidable cuts in state and local budgets will offset much of the federal relief effort for people and communities in need.

There is hope, but it will need all of our advocacy!

NAO is participating in these efforts to secure four key improvements to the provisions of the CARES Act 2.0:

1. Expand Access to Credit. Expanding nonprofits’ access to credit to provide for immediate financial relief by expanding nonprofit eligibility for the Paycheck Protection Program (PPP) and by establishing a dedicated funding stream for PPP loans to nonprofit organizations.
2. Bolster Charitable Giving Incentives. Strengthening temporary above-the-line charitable deductions from the CARES Act by allowing taxpayers to use it on the 2019 taxes, significantly increasing the $300 cap, and extending it beyond 2020.
3. Protect Self-Funded Nonprofits. Holding harmless self-insured nonprofits and tribal nations by providing funding to cover 100% of the costs of these organizations’ unemployment claims. Without this change, many nonprofits and tribal departments that provide health care, food assistance, affordable housing, childcare, and other critical services will have to end or curtail services later.
4. Increase Emergency Funding. Increase emergency funding so that nonprofits can work with state, county and municipal governments to provide essential services to vulnerable families and frontline responders to the COVID-19 crisis.

Additionally, theSave Organizations that Serve (SOS) Act, H.R. 6408, is a bipartisan bill sponsored by Rep. Seth Moulton (D-MA) and Rep. Brian Fitzpatrick (R-PA) at the behest of national nonprofit groups. Its purpose is to generate attention for the work of nonprofits and the need for relief. It calls for an unlimited universal charitable deduction, establishes a $60 billion loan fund for nonprofits, and lifts the 500-employee cap on PPP loan eligibility:

1. Expressly provides charitable nonprofits with $60B for any emergency funding proposals. The charitable sector needs an immediate infusion of $60 billion and a mechanism must be constructed for a rapid infusion of cash to those organizations serving immediate needs in communities facing lost and declining revenue due to the pandemic.
2. Create a robust universal charitable deduction. Improve the proposed above-the-line charitable deduction by significantly raising the cap and allowing all taxpayers to immediately claim the deduction on their 2019 taxes and beyond.
3. Removes 500 employee cap to SBA loans. Once the CARES 2.0 Act is enacted into law, Rep. Moulton and Rep. Fitzpatrick plan to amend the bill to ensure all nonprofits qualify for the newly created small business loans and remove the 500-employee caps. They will clarify that charitable nonprofits of all sizes are able to participate in the emergency SBA loan program and remove the cap on the number of employees.

NAO strongly supports these recommendations. We are working with Oregon’s members of Congress to help include this additional relief to nonprofits in the next congressional stimulus bill.

The CARES Act helps nonprofits in several ways including:

1. Offering immediate financial assistance by making most 501(c)(3) nonprofits eligible for the forgivable Paycheck Protection Program loans;
2. Covering half of the cost of unemployment claims of self-insured nonprofits and extending unemployment benefits to laid-off and furloughed workers at nonprofits that are exempt from unemployment coverage (religious nonprofits and 501(c)(3) organizations with fewer than four employees);
3. Establishing a limited non-itemizer charitable deduction (capped at $300 per taxpayer) for 2020; and
4. Providing emergency funding for a variety of federal programs that support the work of nonprofits.

Over the past week, many 501(c)(3) nonprofits have applied (or attempted to apply) for the Paycheck Protection Program (PPP), a new forgivable loan that is available to help nonprofits and small businesses maintain their operations during the COVID-19 crisis. NAO has heard that many nonprofits have had difficulties applying for PPP loans or finding financial institutions through which to apply. We are working with national partners to collect information on the program. Please take two minutes to share your experience (good or bad) in applying for PPP loans with the National Council of Nonprofits. Your responses to this brief survey can help NAO and the National Council of Nonprofits more effectively advocate for changes to the PPP to ensure that nonprofits have access to financial assistance.

Nonprofits are encouraged to apply for PPP loans as soon as possible. Although the deadline is June 30, the CARES Act only authorized a total of $349 billion in Paycheck Protection Program loans, and financial experts suggest that this funding could run out soon. It is possible that Congress will appropriate additional funding for PPP loans, but a proposal to provide another $250 billion in immediate funding stalled in the U.S. Senate yesterday.

NAO has checked with several local banks that had earlier stopped receiving new applications believing they had reached maximum allocations for the loan program. We now have heard that several banks are able to expand their applications, first processing those that have already applied, but had not been processed. One community banker with over 30 years in the industry stated:

We would want to have some commercial account with the client, because getting through the Know Your Customer process and documentation, as well as opening up a checking account into which we would put the funds is really hard from both the client’s and the bank’s perspective.

NAO strongly suggests that if you have not yet been able to get confirmation of your application being processed, reach out again to your banker and see if they have re-opened processing.

On Wednesday, the U.S. Treasury Department published updated FAQs on the PPP. Last week, the Small Business Administration (SBA) issued interim regulations. This guidance provides clarification on many questions nonprofits have been asking about the PPP. For example, the Treasury FAQs explain that organizations with more than 500 employees may still be eligible for PPP loans if they meet the SBA’s size standards for their industry. The interim regulations clarify that borrowers may only use up to 25% of the forgivable portion of a loan for non-payroll expenses.

Charitable nonprofits with fewer than 500 employees that are struggling to maintain operations during the COVID-19 pandemic also can apply for the low-interest emergency SBA Economic Injury Disaster Loan (EIDL), which is not forgivable but carries a 2.75% interest rate and long-term financing options. Nonprofits can apply for EIDL loans directly through the SBA. As part of the applications, nonprofits also may request an Emergency Economic Injury Grant of up to $10,000. If approved, these grant funds are available within a few days of the application, even if the organization ultimately does not qualify for an EIDL loan. Applicants for the EIDL this week have reported that SBA is now limiting these grants to $1,000 per employee (for a maximum of $10,000). Nonprofits may apply for both Paycheck Protection Act and EIDL loans (and are encouraged to apply for both as soon as possible) but may not use both loans to cover the same expenses.

To help your nonprofit understand which of these loan programs is the best option to help maintain your operations and payroll during the COVID-19 crisis, check out the comparison chart from the National Council of Nonprofits.

IRS Extends Form 990 Due Date

As we reported earlier, the IRS announced that it is extending to July 15 relief to all taxpayers that have a filing or payment deadline falling on or after April 1, 2020, and before July 15, 2020. The announcement, Notice 2020-23, identifies the Form 990-T return for unrelated business income taxes, the Form 990-PF excise tax payments and return, and Form 990-W estimated UBIT form, among others. Although the news release and Notice don’t say so expressly, the annual Form 990 filing deadline is also delayed by operation of this notice and a pre-pandemic decision.

Mid-Size Loan Program

The Treasury Department announced the initial details about its progress in implementing the portion of Section 4003 of the CARES Act calling on the Secretary to “endeavor” to create a loan program for nonprofit and for-profit employers with between 500 and 10,000 employees. In a news release, Treasury said that it is setting up the Main Street Business Lending Program that will apply to employers with up to 10,000 employees or annual revenues of less than $2.5 billion. Notably, the Department is removing the 500-employee floor so smaller organizations can also apply. It’s setting up two programs, the Main Street New Loan Facility and the Main Street Expanded Loan Facility. The Federal Reserve would oversee loans of at least $1 million and a maximum of $25 million (New) or $150 million (Expanded). Loans would have a four-year maturity and would not be forgivable. Details of the program are still in process. The Fed is asking for recommendations/input up until April 16.

Check out these important upcoming online sessions to assist/support nonprofits:

Ask the Experts – Oregon Community Foundation and Funders’ Response to COVID-19, Tuesday, April 14, Noon – 1 p.m. PT: Max Williams, President and CEO of Oregon Community Foundation and Sonia Worcel, Chief Community Impact Officer will provide an update on what Oregon Community Foundation is doing to support the nonprofit sector. They will share information about the Oregon Community Recovery Fund and how that’s moving, what they’re hearing about and seeing firsthand from the philanthropic community, and the challenges and opportunities philanthropy and the nonprofit sector are facing together. Register for the session here.

A Conversation on the Impact of COVID-19 on Vulnerable Communities, Tuesday, April 14, Noon – 1:15 p.m. PT: Building Movement Project and Solidarity Is are hosting a webinar focused on what are the effects of COVID-19 on Black, indigenous, Latinx, and Asian communities? How are nonprofits, service providers, organizers, and advocates shifting their work in this moment? Tune in to better understand the challenges and possibilities of the current climate on community members, on organizational staff and programs – and on the possibilities for the future. Register for the session here.