Nonprofits Coming Up Short So Far in Congressional Stimulus Negotiations

The stimulus legislation taking shape in Congress is likely to leave many nonprofits deeply disappointed, according to advocates closely watching the negotiations. Expanded charitable deductions and expanded access to Paycheck Protection Program loans for nonprofits appear unlikely to be adopted.

Details were sparse as intense negotiations dragged on through the day Wednesday, but reports indicate that lawmakers will leave out direct aid for state and local governments, a high priority for nonprofits with government contracts. Contract payments from states to nonprofits have been delayed or reduced as states struggle with shrinking revenue. For example, New York State is holding back 20 percent of its contract payments to nonprofits until its balance sheet improves.

“More than 30 percent of the nonprofit revenue comes from performing services for governments, and when state governments make cuts because they don’t have the funds they need, nonprofits are on the chopping block,” said Rick Cohen, chief communications officer at the National Council of Nonprofits. “Making sure that state and local governments are able to continue to operate at the same level as before is so vital. Without it, it exacerbates the opposing forces that nonprofits face, which is that revenues are taking a hit when demand for their services is at their highest.”

Paycheck Protection Loans

Also, lawmakers appear to be moving toward shrinking the number of nonprofits eligible for a new round of Paycheck Protection Program loans. Under stimulus legislation enacted in the spring, nonprofits with 500 or fewer employees (counting all full-time and part-time employees equally) were eligible for Small Business Administration loans. Nonprofit lobbyists have been pushing to eliminate the 500 employee cap. But instead, negotiators have lowered it to 300 employees, said Steve Taylor, senior vice president and counsel for public policy at the United Way Worldwide.

“That’s rubbing salt in the wound,” Taylor said.

Negotiators also have included a provision that Paycheck Protection Program recipients must show they have lost at least 30 percent of their revenue to qualify for a loan. Many of the 180,000 nonprofits that received loans in the first go-round would no longer qualify, Taylor said.

Eric Fingerhut, president of the Jewish Federations of North America, said that demonstrating a revenue loss to qualify for a loan may make sense for a business, but it doesn’t for a nonprofit. Many nonprofits have seen their revenue plunge, but even for those that have seen increases, revenue doesn’t tell the whole story, he said.

“They are experiencing increased demand, which on a relative basis puts them in a very precarious financial situation,” Fingerhut said. (The Chronicle of Higher Education, the organization that publishes the Chronicle of Philanthropy, has received a loan under the Paycheck Protection Program.)

Charitable Deductions

Another key omission from the bill: an extension of the temporary charitable deduction available to people who don’t itemize, according to Anthony Granado, vice president for government relations at Catholic Charities USA. The previous stimulus legislation, known as the Cares Act, allowed deductions of up to $300 in charitable gifts in 2020, providing a new tax incentive to give for a broad swath of Americans.

Calls for offering deductions to people who don’t itemize grew more intense after enactment of Trump’s tax cut, which generally doubled the standard deduction, meaning that millions of taxpayers no longer had any reason to itemize and therefore lost a financial incentive to give to charity.

Key negotiators were trying to keep the price tag of the legislation to around $900 billion, a middle ground between Democratic leaders who wanted to spend more than double that amount and Republicans leaders who wanted to spend far less. That de facto spending cap created a formidable obstacle for lobbyists trying to squeeze in additional spending that would help nonprofits.

There were a few potential bright spots for nonprofits and advocates for the poor. The draft legislation would give recipients of relief funds provided under the Cares Act until the end of 2021, rather than the end of this year, to use the money. It also would allow recipients of the Earned Income Tax Credit to claim 2019 income for the credit, which will help people who lost jobs in 2020 and would otherwise no longer qualified.