Public Policy Update - June 2020


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 jaci@secf.org.

 

Pandemic Response Legislation

Congress Weighing Changes to Paycheck Protection Program: In the wake of the House nearly unanimously passing a bill that would provide more flexibility for businesses and nonprofit organizations taking Paycheck Protection Program (PPP) loans, Senate Republicans have voiced concerns. However, there is still a strong possibility of changes ultimately becoming law.

On May 28, the House, by a 417-1 vote, passed the Paycheck Protection Program Flexibility Act. The bill would extend the loan forgiveness window to 24 weeks, up from 8 weeks. The measure would also give recipients more flexibility in how they can use the loans by changing the so-called 75/25 rule. The new rule would require only 60 percent of the loan to go toward payroll to still qualify for forgiveness, down from the current 75 percent threshold. This legislation would also allow loan recipients to defer payroll taxes for a longer period of time.

Senate Small Business Committee Chairman Marco Rubio (R-FL) says there are technical errors in the House bill that could make it more difficult for recipients to get their loans forgiven, making it unlikely the Senate passes the House bill unchanged. The Senate is expected to move forward with its own set of changes to PPP, possibly extending the forgiveness window to 16 weeks.

Changes to PPP may also be folded into the so-called RESTART Act, which has been proposed by Sens. Todd Young (R-IN) and Michael Bennet (D-CO). This measure would extend the PPP loan forgiveness window to 16 weeks for businesses that have seen their revenues decline at least 25 percent during the original 8-week window. 

The bill would also create a new loan program to serve businesses and nonprofits with fewer than 5,000 employees. These loans – capped at $10 million – would be available to 501(c)(3) organizations and several other types of tax-exempt organizations. The loans would cover payroll, benefits and fixed operating expenses for recipients that have experienced significant revenue losses during the pandemic. Loan recipients with fewer than 500 employees would have an opportunity to have their loans forgiven, while nonprofit employers with more than 500 employees would receive more favorable loan terms without forgiveness.

A detailed summary of the RESTART Act with loan and repayment examples can be found here.

Second Round of Direct Payments Appears Unlikely: On May 15, the House passed the $3 trillion HEROES Act, mostly along party lines. The bill, supported by Democrats, included a second round of direct stimulus payments nearly identical to those included in the CARES Act.

Senate Republican leaders have indicated they have no intention of taking up the HEROES Act. Meanwhile, Democrats on the Senate Finance Committee have also said they are skeptical whether another round of stimulus payments would be effective. The lead Democrat on the Senate Finance Committee, Sen. Ron Wyden (D-OR), and fellow panel members Sen. Ben Cardin (D-MD) and Sen. Debbie Stabenow (D-MI) are reluctant to include another round of direct payments in any future package. Wyden specifically said he’d prioritize extending the enhanced unemployment benefits included in the CARES Act ahead of offering another round of direct payments.

McConnell Says Next COVID Package Will be Final COVID Bill: Senate Majority Leader Mitch McConnell (R-KY) said this week the next relief package will be the final COVID stimulus bill, adding that the timeline for legislation is in “about a month.” McConnell followed by saying Senate Republicans would take the lead, promising it will be “narrowly crafted.” Overall, the next bill is expected to be acted on in both chambers by the August recess.

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Some Individual Donors Calling for Increased Payout Requirements

A group supported by several major individual donors, billing itself as “Patriotic Millionaires,” is attracting attention for its call to increase the payout requirement for private foundations to 10 percent, double the current 5 percent requirement. The coalition also supports extending this payout requirement to donor-advised funds.

According to a May report from Bloomberg, Walt Disney Co. heiress Abigail Disney, Susan and Regan Pritzker of the billionaire Pritzker family, and early Google software developer Ning Mosberger-Tang are among more than 260 philanthropists asking Congress to increase the minimum amounts that private foundations and donor-advised funds donate to charities each year.

“Foundations which are losing assets on Wall Street will cut their grant-making correspondingly – as they did in the years after the 2009 recession – forcing many nonprofit organizations they fund to reduce budgets, lay off staff, and cut back on their charitable work,” the Patriotic Millionaires group said in a letter to Congress. “This will cause additional problems for an economy which is already in trouble.”

These efforts have so far not resulted in any legislative action from Congress. Notably, many foundations, including SECF members, have already voluntarily boosted their payouts in response to the COVID-19 pandemic.

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California DAF Legislation Update

As you may recall, the California State Assembly last year was considering legislation that would direct the state’s attorney general to collect information on donor-advised funds (DAFs), including information that could identify the donor. The bill, which had the support of California’s nonprofit association, was pulled from consideration but resurrected in early 2020. However, the legislation was pulled once more soon after.

In February, a new bill, AB 2936, was introduced that would create a new classification for DAFs and sponsoring organizations, allowing the attorney general to engage in rulemaking to implement reporting requirements. The bill passed the Assembly’s Judiciary Committee in early May and now must be considered by the Appropriations Committee. Assembly rules require the bill must pass the chamber by June 17 to be considered by the state Senate this term. 

However, California’s state Senate has strict rules in place requiring all legislation considered to be related to pandemic response, so it’s unclear whether leadership will deem this bill to be eligible for consideration. Additionally, like earlier bills, this legislation would be costly to state government at a time of severe budget deficits.

National philanthropic organizations have been keeping an eye on the California bill since it may inspire similar action in other states, including within the Southeast. California's size can also result in its legislation having an effect well beyond its borders – organizations often tailor their policies and practices to suit California law rather than have two sets of rules.

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