As DC recently entered phase two of its reopening plan, Congress continues to enforce social distancing, with many staffers teleworking and virtual committee hearings. If you have not been following the latest issues on Capitol Hill affecting nonprofits, do not panic! Here is a brief overview of the latest legislative issues impacting nonprofits during these challenging times:
Charitable giving is down for Q1 2020
Giving to charities dropped 6 percent in the first quarter of 2020 compared to the same time last year, including an 11-percent drop in March as the country headed into the COVID-19 pandemic, according to the 2020 First Quarter Report by the Fundraising Effectiveness Project (FEP).
While donations of less than $250 increased, mid-level gifts of $250 to $999 decreased by 2.2 percent. Higher-level gifts, those of $1,000 or more, dropped by 7.4 percent.
The number of overall donors also continues to drop, diving 5.3 percent during the first quarter. The percentage of donors who gave last year and have already given in 2020, the donor retention rate, dipped 3 points to 16.4 percent.
The FEP numbers for the first quarter of 2020 provide a worrisome scenario for charitable giving, which according to Giving USA 2020: The Annual Report on Philanthropy for the Year 2019. reported a minimal increase in giving of 2.4 percent (adjusted for inflation) for last year.
Bill to expand charitable giving introduced
On Monday a group of Senators, including James Lankford (R-OK), Chris Coons (D-DE), Mike Lee (R-UT), Jeanne Shaheen (D-NH), Tim Scott (R-SC), and Amy Klobuchar (D-MN), introduced the bipartisan Universal Giving Pandemic Response Act (S. 4032) to expand the current above-the-line deduction for charitable giving of $300 included in the CARES Act in March. This legislation would make available—for tax years 2019 and 2020—an above-the-line deduction for charitable giving on federal income taxes valued at up to one-third of the standard deduction (around $4,000 for an individual filer and $8,000 for married joint filers).
Yesterday, Representatives Mark Walker (R-NC) and Chris Pappas (D-NH) introduced the House companion (H.R. 7324). It is critical that we build support in favor of expanding the charitable deduction, please take 60 seconds to send a letter urging your Members of Congress to cosponsor this legislation.
At a time when nonprofits have seen an increase in demand from their services due to the COVID-19 pandemic and the economic downturn, and a decrease in revenue from charitable contributions and cancelled events, this legislation could generate up to $17 billion in new annual giving if the provision were made permanent, according to Independent Sector’s commissioned research.
Earlier this month, Independent Sector submitted written testimony for the record in favor of expanding the charitable deduction for the Joint Economic Committee hearing titled “Supporting Charitable Giving during the COVID-19 Crisis.”
Main Street Loan Program expanded to nonprofits
Last week the Federal Reserve announced a proposed framework to extend the Main Street Lending Program to nonprofit organizations. Unfortunately, the proposed requirements issued by the Federal Reserve are incompatible with the way nonprofit organizations are set up and operate, and it does not include loan forgiveness.
Early this week Independent Sector submitted comments on the Federal Reserve’s Nonprofit Organization Loan Facilities, outlining the need to tailor the lenders’ requirements to nonprofit organizations that rely on individual donations as opposed to other types of nonprofit organizations that operate similarly to a business.
Independent Sector and the National Council of Nonprofits (NCN) issued a statement welcoming the expansion of the Main Street Lending program to nonprofits and calling for the Federal Reserve to include loan forgiveness for nonprofits.
Research shows the impact of COVID-19 on large and mid-sized nonprofits
This month Independent Sector released the results of a survey on the impact of COVID-19 on large and mid-sized nonprofit organizations with between 500 and 5,000 employees. The survey clearly illustrates that the pandemic and the resulting economic shutdown have had significant effects on the services, operations, and the people working in the nonprofit sector.
Among the key findings of the survey, 51% of participants reported they have laid off employees and 67% have furloughed employees; 71% reported a reduction in services or available operations; and 83% of organizations had a reduction in contributions/revenue as of April 2020 compared to April 2019, including a drop of 53% from individual charitable giving. When asked what types of assistance would be most helpful, 92% suggested additional loan options, such as forgivable loans.
Congress can help reverse the trending loss of revenue and contributions to the nonprofit sector and the resulting loss of jobs by enacting legislation to provide an expanded above-the-line tax deduction for all individuals to give to charity, and expand loan programs for nonprofits with favorable terms, including the availability of loan forgiveness.
Bill on nonprofit unemployment insurance introduced
Last week Senators Tim Scott (R-SC), Sherrod Brown (D-OH), Chuck Grassley (R-IA), and Ron Wyden (D-OR) introduced the Protecting Nonprofits from Catastrophic Cash Flow Strain Act (S.4001), bipartisan legislation to help nonprofits, state and local governments and federally recognized Tribes remain financially viable during the COVID-19 pandemic.
Many nonprofits pay their share of unemployment taxes by reimbursing states for 100 percent of the unemployment benefits collected by their former employees. Recognizing that reimbursing employers would be unable to cover all of their unemployment costs, the CARES Act allows nonprofits to reimburse only 50 percent to the states while the federal government covered the other half.
Guidance issued by the Department of Labor in April, however, requires states to collect 100 percent of unemployment costs from nonprofits up front and reimburse them later, putting a further strain on organizations hit hard by COVID-19. The Senators’ bill would clarify that nonprofits are only required to provide 50 percent in payments up front. The net cost to the employer and the federal government would remain the same, but it would free up much needed money to help nonprofits stay afloat.
