Senate Stimulus Bill Would Expand Loan for Charities but Omit Other Nonprofit Priorities

The Senate Republicans’ new economic stimulus bill would allow some nonprofits to apply for a second round of Paycheck Protection Program loans and provide other benefits to charities, according to a preliminary analysis by the National Council of Nonprofits.

While nonprofits cheered the addition of loans, many advocates were frustrated that the Senate rejected any effort to add charitable-giving incentives in the new measure.

Under the Senate bill, a new round of loans would be limited to nonprofits with 300 or fewer employees. The legislation that originally created the Paycheck Protection Program had a 500-employee limit. Nonprofit advocates have been fighting to remove that cap entirely, saying that many midsize charities have been unfairly left out.

As in the original Paycheck Protection Program law, the loans under the Senate bill would be based on 2.5 times the average monthly payroll. However, the maximum loan size would be $2 million; the first round of loans allowed organizations to receive up to $10 million. Under the Senate proposal, borrowers that previously received a loan would be able to get no more than $10 million total in Paycheck Protection Program lending. So if you got a $9 million PPP loan the first time around, the most you could get in round two would be $1 million.

According to records released by the Treasury Department, more than 42,000 nonprofits received loans that exceeded $150,000 in the first round.

Paycheck Protection Program loans can be forgiven if recipients avoid layoffs.

Negotiations between the House and Senate over a new stimulus package are underway this week, and lawmakers hope to reach a deal quickly, although big disagreements remain.

What Was Left Out

In stimulus legislation enacted this spring, Congress created a “universal deduction” that allows taxpayers who don’t itemize to deduct up to $300 in charitable donations. The provision applies to tax year 2020.

Nonprofit advocates were dismayed that the new Senate legislation doesn’t include an expansion of that provision. The Alliance for Charitable Reform, a project of the Philanthropy Roundtable, and other nonprofit advocates are urging Congress to increase the universal deduction to one-third of the standard deduction — about $4,000 for individuals and $8,000 for married couples — for the 2020 tax year

A coalition of more than 4,000 nonprofits from across the country sent a letter to Congress urging expansion of the Paycheck Protection Program and increasing the universal deduction to one-third of the standard deduction and extending it through 2021.

No Spending Rule for Foundations

Nonprofit advocates are divided on one key issue that could come up during negotiations over the stimulus legislation.

Alan Davis, president of the Leonard and Sophie Davis Fund, and others have called on Congress to require foundations and donor-advised funds to distribute at least 10 percent of their assets for the next three years.

Currently foundations must pay out roughly 5 percent of assets annually; there is no payout requirement for donor-advised funds.

Other nonprofit advocates, including the Alliance for Charitable Reform, oppose efforts to expand payout requirements.

In a recent opinion article in the Chronicle, Joanne Florino, vice president of philanthropic services at the Philanthropy Roundtable, argued foundations should decide whether to boost payout amid the current crisis, as many have done. For some foundations, preserving assets for future crises may make more sense, says Florino.

“Determinations about how much foundations give beyond the mandatory 5 percent should be left to those who understand their missions, are obligated to honor them, and have the authority to change direction as conditions warrant,” she wrote.

More Details of Senate Bill

According to the National Council of Nonprofits, the Senate bill also would:

• Make group insurance costs an eligible expense for the purposes of Paycheck Protection Program loan forgiveness and expand other types of expenses eligible for forgiveness.
• Simplify the application process for Paycheck Protection Program loans.
• Clarify that Paycheck Protection Program loans cannot be used for lobbying.
• Provide 75 percent federal reimbursement for nonprofits that self-insure their unemployment costs, up from 50 percent in previous stimulus legislation.
• Expand the employee retention tax credit to as much as $19,500 per employee per year, compared with $5,000 under current law. The credits could be claimed for up to 500 workers, compared with 100 workers under current law. Larger employers could use the credit, but only for a portion of their work force.
• Create a refundable payroll tax credit for Covid-19 testing, purchasing personal protective equipment for employees, disinfecting work spaces, and reconfiguring office space.