May 2020 Public Policy Update
Each month, SECF provides members with monthly updates on the latest public policy developments in Washington and state capitols around the region, analyzing their possible impact on the charitable sector. If you would like to see an issue featured in a future Public Policy Update, contact Jaci Bertrand, SECF's vice president of member engagement, at email@example.com.
Impact of Unemployment Insurance Provisions on Nonprofits
You may have seen commentary online concerned about the impact of regulations related to unemployment insurance on nonprofits. However, a close reading of these rules indicates the impact only applies to certain grantee organizations.
Labor Department guidance issued on April 27 instructs states to bill certain tax-exempt employers immediately for 100 percent of the costs of unemployment benefits paid to employees laid off as a result of the COVID-19 pandemic.
However, this provision applies only to a small group of tax-exempt organizations known as “reimbursing employers.” It appears only some of the nation’s largest charitable organizations will fall into this group, but the complete impact is unknown. Most either pay unemployment taxes directly into their state’s trust funds or are so small that they pay nothing.
We are continuing to track the impact of these regulations – if you are hearing concern from your grantees about any possible impact, please let us know!
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Paycheck Protection Program Replenished by Fourth Pandemic Relief Bill
The Paycheck Protection Program (PPP), established by the $2 trillion CARES Act passed in the first weeks of the COVID-19 program, was aimed at providing small businesses and nonprofit organizations with loans that could be partially or fully forgiven if money from them was spent to keep employees on payroll and maintain basic operations.
Once the Small Business Administration began accepting applications for PPP funds, the money allocated for the program ran out in a matter of days. This prompted Congress to pass new legislation, the Paycheck Protection Program and Health Care Enhancement Act, that provides an additional $321 billion for PPP, in addition to $60 billion for other loan programs.
Loans from the replenished PPP are still available to nonprofit organizations, but likely not for long. As of May 4, according to CBS News, 56 percent of PPP funds had already been approved for distribution.
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Preserving and Extending the Temporary Universal Charitable Deduction
The CARES act established a temporary universal charitable deduction, capped at $300, available to nonitemizers. This represented a victory for the charitable sector, which has pushed for a universal charitable deduction since the 2017 tax bill made the traditional charitable deduction unavailable to a large majority of filers.
The sector is now working to expand the universal charitable deduction and make it permanent. A proposed amendment to the CARES act that had bipartisan support in the Senate would have increased the cap to one-third of the standard deduction. In the House, Rep. Mark Walker (R-NC) has introduced legislation that would also increase the cap to one-third of the standard deduction and extend it through tax year 2022.
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SECF Signs onto Letters Urging Increased Giving Incentives and Emphasis on Equity in Pandemic Response
In the weeks since the COVID-19 pandemic commanded philanthropy’s attention, SECF has joined with colleagues across the country to stand in support of an equitable response to this crisis, as well as expanded incentives for charitable giving at a time when it is desperately needed.
On April 6, SECF signed onto a letter released by Asian Americans & Pacific Islanders in Philanthropy (AAPIP), standing in support of Chinese and Chinese American people who have been the targets of racism, bigotry and xenophobia. The letter also called on philanthropic organizations to:
- Include language in statements that denounce hate related to COVID-19 (and beyond).
- Include efforts that address viral racism as part of rapid response fund guidelines.
- Insert equity into outreach efforts and funding decisions to ensure that smaller organizations, especially those in harder hit communities and inclusive of AAPIs are part of that mix.
- Reach out to AAPI staff members and colleagues to see how they are doing and offer support.
- Speak out when you see racism and prejudice against any individual or community.
- Think of this moment as a “reset” button to imagine a more holistic approach to philanthropy that gains new traction toward racial and gender equity.
SECF has also signed a letter from the Charitable Giving Coalition, released to coincide with #GivingTuesdayNow, a campaign to promote charitable contributions to organizations supporting people and communities during the pandemic. (Giving Tuesday normally takes place the Tuesday after Thanksgiving.)
The letter encourages Congress to:
- Expand and extend the universal charitable deduction.
- Allow taxpayers to claim charitable contributions made since March 13 on their 2019 return.
- Extend the ability of donors to deduct 100 percent of their cash gifts through 2021, including gifts to donor-advised funds.
SECF continues to look for other ways we can join with colleagues throughout the philanthropic sector to work with lawmakers on policies that strengthen charitable giving during this unprecedented crisis.
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On the Horizon: Treasury Regulations Affecting Family Foundations
We continue to monitor pending regulations from the Treasury Department that could affect family foundations associated with a family business. The 2017 tax bill created a 21 percent tax on executive compensation over $1 million at nonprofits and “related organizations.” There is concern this provision could be interpreted to affect family foundations, even those that do not pay staff and trustees.
We expect proposed regulations to be released by October – once they are released, a public comment period will begin. When they are released, we will review their possible impact on family foundations to determine whether SECF and its members should weigh in.
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