Last week, the U.S. House of Representatives passed the Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act), a $3 trillion COVID-19 recovery bill. While the HEROES Act passed mostly along party lines, it includes several provisions with broad bipartisan support that would be helpful to nonprofits, including:

The Senate is unlikely to take up the HEROES Act in its current form, but it could include some of its provisions – potentially including those that help nonprofits – in its next COVID-19 relief legislation. 

So far, the Senate has not displayed the urgency of the House in passing the next round of COVID-19 recovery legislation. The Center encourages nonprofits to email and Tweet Senator Thom Tillis and Senator Richard Burr and urge the Senate to take action by supporting another recovery bill sooner rather than later. The National Council of Nonprofits has sample Tweets and talking points. You can reach Senator Burr by email or on Twitter (@SenatorBurr) and Senator Tillis by email or on Twitter (@SenThomTillis).

Does your nonprofit self-insure for your unemployment insurance (UI) claims? Is your organization now facing burdensome payments to the state unemployment trust fund due to coronavirus-related layoffs and furloughs? If so, please take five minutes to complete a confidential survey from the National Council of Nonprofits. The information from this survey will help the Center and our partner organizations advocate for Congress and state policy makers to provide relief to nonprofits for their COVID-19 related UI claims. 

To keep the survey as simple as possible, here are a few tips for North Carolina nonprofits:

A few weeks ago, the Center identified several problems with guidance that the U.S. Department of Labor issued on the way states should administer the CARES Act provision that covers half of the COVID-19 related UI claims of self-insured nonprofits. This week, the National Council of Nonprofits and 30 other national organizations asked Secretary of Labor Eugene Scalia to rescind this guidance and replace it with guidance that would: 

On Tuesday, the NC House of Representatives approved a bill ( H.B. 1079) that would exempt many types of remote services provided by nonprofits from the sales tax on digital property that took effect on October 1, 2019. Under current law, nonprofits and businesses must collect and remit sales tax on any sale of digital property, which includes online learnings like classes, webinars, and conferences. The Center has advocated for legislators to amend this law so that nonprofits would not need to charge sales tax on their educational offerings if the same types of learnings would not be taxable if offered as in-person events. Nonprofits’ concern over this issue has become much more significant over the past two months, as almost all in-person educational events have had to be conducted as webinars or other types of online events.

The bill passed by the House addresses most of nonprofits’ concerns by providing an exemption from sales tax for any digital audio or audiovisual work that consists of the contemporaneous electronic transmission of a nontaxable service. To translate that from legalese: If this legislation is enacted, nonprofits won’t need to charge sales tax on fees for attending online conferences, webinars, or workshops or for providing real-time online services like exercise or wellness classes or telemedicine. Note that nonprofits or businesses would still need to charge sales tax if they sell the recordings of events. This exemption would be retroactive to October 1, 2019. The Center is appreciative of Senator Paul Newton (R-Cabarrus) and Representative Julia Howard (R-Davie) for listening to nonprofits’ concerns in developing this exemption. Two Senate committees approved the bill this week, and the full Senate is expected to vote on it next Tuesday.

Last Friday, the Small Business Administration (SBA) released the application and instructions for loan forgiveness under the Paycheck Protection Program (PPP). The SBA document includes step-by-step instructions for nonprofits and other PPP borrowers to perform the calculations required for loan forgiveness. The instructions provide more flexibility by: (a) allowing borrowers to use an “alternative payroll covered period” that aligns with their actual pay periods to calculate payroll expenses; (b) clarifying that mortgage or rent forgiveness can include payments for real or personal property; and (c) ensuring that borrowers won’t be penalized if some employees decline a “good-faith written offer to rehire workers.” The SBA still plans to release formal guidance answering more questions about PPP loan forgiveness.

Next week, the U.S. House of Representatives is scheduled to vote on a bipartisan bill to strengthen the PPP. Among other things, the bill would allow forgiveness of PPP loans beyond the eight-week period permitted in the CARES Act, eliminate the SBA’s rule that at least 75% of the funds from PPP loans must go to payroll expenses, and extend the deadline for nonprofits and businesses to rehire employees beyond June 30, 2020. The bill would address some, but not all, of the issues that the Center identified in its public comments to the SBA on the PPP last week. 

A bipartisan U.S. Senate bill to extend the PPP is more troubling for nonprofits since it would allow for-profit businesses with up to 5,000 employees to access PPP loans and loan forgiveness but would only allow for partial loan forgiveness for nonprofits with 500 or fewer employees.

On Wednesday, Governor Roy Cooper issued Executive Order No. 141 which ends the statewide “stay-at-home” order and begins Phase 2 of the re-opening of the state’s economy, starting today at 5 p.m. Many more businesses and nonprofits are able to resume in-person operations – with social distancing practices in place – during Phase 2. Some notable provisions for nonprofits include:

This executive order will remain in place through June 26.

On Tuesday, the NC House Finance Committee approved a bill ( H.B. 1080) that would decouple the state tax code from the Internal Revenue Code on most of the new tax provisions from the CARES Act. Notably for nonprofits, this would mean that:

The bill was changed this week to follow federal law so that businesses would not have to pay state corporate income tax on the forgivable portion of their PPP loans. This provision should not affect nonprofits receiving PPP loans, since 501(c)(3) organizations are exempt from state corporate income tax. 

A separate provision of the bill would make a technical change to ensure that nonprofits are able to receive refunds of the sales tax they pay on digital property.

Last week, Rep. Brandon Lofton (D-Mecklenburg) introduced a bill ( H.B. 1137) in the NC House of Representatives to allow 501(c)(3) nonprofits to be exempt from sales tax – rather than paying tax on their purchases and seeking semi-annual refunds from the NC Department of Revenue – during the COVID-19 crisis. This temporary sales tax exemption bill, which would continue through June 30, 2021, would significantly improve nonprofits’ cash flow at a time when many organizations’ financial reserves have been depleted. The Center is appreciative of Representative Lofton for introducing this bill and to the 36 House members who have signed on as co-sponsors. Thank you if your nonprofit contacted your NC House member asking them to co-sponsor the bill!

On Wednesday, several appropriations bills were introduced in the NC Senate. One of these bills ( S.808) would provide funding for Medicaid transformation – the state's planned transition of Medicaid to a managed care network. If enacted, this bill would plan for Medicaid transformation to begin on January 1, 2021. Last fall, the NC Department of Health and Human Services (DHHS) indefinitely suspended its Medicaid transformation plans after the General Assembly and Governor Cooper were unable to agree on a state budget that included necessary funding for this transition.

Voter registration is more important than ever this year. With DMVs shuttered because of COVID-19 and field-based registration drives on hold, millions of voter registrations are no longer being collected or updated. At the same time, eligible voters need to be registered at their current addresses well ahead of Election Day to be able to vote by absentee ballot or other ways that enable social distancing. Nonprofit VOTE is offering a free webinar today (Friday, May 22) at 2 p.m. on ways nonprofits can promote voter registration digitally.

Under current law, most North Carolinians must have either two witnesses or a notary attest to their signature when submitting an absentee ballot. This requirement, which is stricter than most other states, makes it challenging for many North Carolinians – particularly homebound seniors and individuals with disabilities – to request absentee ballots. A bill ( S.828) filed in the NC Senate yesterday would allow all North Carolinians to use the simplified absentee voting request rule currently reserved for members of the military living overseas, which allows for voters to self-certify to their signature rather than requiring two witnesses or a notary. Many nonprofits are working to ensure that North Carolinians are able to vote by mail this fall if COVID-19 remains a problem, and this legislation would help make this process simpler.

Last week, the Internal Revenue Service issued two notices giving employees greater flexibility in accessing their employer-sponsored health plans and flexible spending accounts (FSAs) for 2020. Specifically:

Early this month, National Voter Registration Day (September 22) launched its partner sign-on for 2020. National Voter Registration Day is a great opportunity for nonprofits to ensure that their staff, volunteers, and community members are registered to vote. Sign up today to join the nationwide effort to register hundreds of thousands of voters on September 22. As an official partner, your nonprofit will receive a free voter registration kit and access to other opportunities to support your nonpartisan voter registration work.