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What's in the year-end stimulus bill for nonprofits and communities?

Dec 21, 2020

After months of negotiations, Congress passed legislation that authorizes $2.3 billion in spending to stimulate the U.S economy and help communities recover from the COVID-19 pandemic. The president signed the bill on December 28.

This summary is based on preliminary analyses of key provisions of the bill affecting the work of nonprofits from Independent Sector and National Council of Nonprofits.

The legislation continues and enhances key policies from COVID-19 relief laws passed in 2020, particularly the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Families First Coronavirus Response Act.

Our reaction

Although the year-end stimulus falls short of assistance requested in the nationwide Nonprofit Community Letter, the bill continues beneficial policies from the CARES Act and the Families First Act. This includes continuing enhanced charitable giving incentives as well as availability of federal loans, grants, and employment benefits to nonprofits of most sizes and their employees. For families and communities, the bill continues support for needed public services including distribution of COVID-19 vaccines, enhanced benefits for people who are unemployed, rental assistance and protections against eviction, childcare, and schools. 

In 2021, Congress should expand on the supports provided by this bill by:

  • Providing a larger above-the-line charitable deduction;
  • Offering loan and grant assistance for nonprofits with more than 300 employees;
  • Covering 100% of unemployment benefits for nonprofits that directly reimburse states instead of paying premiums; 
  • Expanding relief funds for state and local governments; and
  • Providing more help for people and families experiencing employment, facing eviction, or otherwise facing challenges in meeting their basic needs.      

Summary

Key issues for nonprofit organizations and employees

Charitable giving tax incentives

  • Continues the $300 above-the-line charitable deduction for 2021 with a $600 deduction for couples filing jointly
  • Imposes a penalty for taxpayers who overstate their charitable contributions
  • One year extension of increased limits on deductible charitable contributions for corporations and individuals who itemize and for corporations

Grants and loans

  • Continues and makes the following changes to the Paycheck Protection Program (PPP) 
    • Establishes PPP Second Draw loans allowing up to $2 million of borrowing for:
      • Nonprofits and other businesses with 300 or fewer employees
      • Borrowers must experience a decline in revenue (gross receipts) of 25% or more in a quarter of 2020 compared to the same quarter in 2019
      • $15 billion set aside for borrowers from community lending institutions
      • Set asides for nonprofits and small businesses with 10 or fewer employees in economically distressed areas
      • Forgivable PPP expenses include the costs of Personal Protective Equipment and workplace modifications
      • A short-form will be use for approval of loans of $150,000 or less
  • Provides $20 billion of funding for additional Economic Injury Disaster Loan (EIDL) Grants up to $10,000.
    • EIDL grants may no longer be deducted from PPP loan forgiveness 

Employment and benefits

  • Continues the Employee Retention Tax Credit (ERTC) until 7/1/20201 and makes the following changes:
    • Reduces the required decline in revenues (gross receipts) to 20% (previously 50%)
    • Increases the refundable payroll tax credit percentage from 50% to 70%
    • Covers up to two quarters for a total benefit up to $14,000 per covered employee
    • Employers receiving PPP loans may qualify for ERTC with respect to wages not paid for with forgiven PPP proceeds
  • Continues the Paid Sick Leave Tax Credit from the Families First Act through 3/31/2021
  • Extends the paid family and medical leave act income tax credit (ranging from 12.5% to 25%) through 2025
  • Extends 50% federal coverage of costs for employers that directly reimburse states for unemployment benefits (in lieu of premiums) until 3/14/2021

Disaster Relief

  • Employee retention tax credit for employers affected by qualified disasters
    • 40 percent of employee wages up to $6,000 
    • Certain tax-exempt entities may claim the credit against payroll taxes.
  • Temporarily suspends charitable deduction limits for contributions associated with disaster relief 

Save Our Stages Act

  • $15 billion to help performance venues, independent movie theaters, and arts and cultural institutions

Relief for families and communities

  • Provides a $300 per week enhancement to unemployment benefits for the first 11 weeks of 2021
  • Extends the Pandemic Unemployment Assistance (PUA) program for self-employed, freelancers, gig workers and other non-traditional employment.
    • Increases benefits from 39 weeks to 50 weeks.
  • $600 stimulus checks for each adult and child in households earning up to $150,000 a year
  • Increases Supplemental Nutrition Assistance Program (SNAP) benefit level by 15%
    • $100 million for state administration of SNAP
  • $400 million for emergency food assistance for food banks
  • $7 billion for broadband infrastructure
  • $10 billion for the Child Care Development Block Grant 
  • $250 million for Head Start providers
  • $22.7 billion for public and private colleges and universities
    • $1.7 billion for Historically Black Colleges and Universities, Tribal Colleges and Universities, Hispanic Serving Institutions, and certain other institutions.
  • One-month extension of the federal eviction moratorium
  • Continuation of student loan forbearance
  • Funding for schools, hospitals and vaccine distribution 

Support for governments and agencies

  • Funds the federal government through Sept. 30, 2021
  • Continues use of Coronavirus Relief Fund through Dec. 31, 2021
  • $10 billion for the postal service
  • $14 billion for transit infrastructure

More information

 

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