SHRM to Congress: All Nonprofits Need Access to Paycheck Protection Program

 

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Although some nonprofit organizations are eligible for payroll-protection loans to help them stay afloat during the coronavirus pandemic, certain membership-based nonprofits—such as SHRM chapters and state councils and regional chambers of commerce—are not eligible, even though they are equally impacted by the crisis.

Thus, the Society for Human Resource Management (SHRM) has asked Congress to support the inclusion of all nonprofit organizations in emergency relief legislation.

"Nonprofit organizations, like SHRM Chapters and State Councils, provide important services to their communities," wrote Johnny C. Taylor, Jr., SHRM-SCP, SHRM's president and chief executive officer, and Emily M. Dickens, SHRM's corporate secretary, chief of staff and head of Government Affairs, in a letter to lawmakers.

"Absent congressional action, small businesses and nonprofits will be forced to discontinue their services and reduce or eliminate employment," they said.

As part of the $2.2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act, Congress allocated $349 billion to the Paycheck Protection Program (PPP) to help small businesses keep workers on their payrolls. The fund was depleted in less than two weeks, so lawmakers recently added $310 billion to help meet high demand.

In a letter to their colleagues, Sens. Mark Warner, D-Va., and Tim Kaine, D-Va., also urged Congress to include membership-based nonprofits in the PPP and underscored the critical role they are playing during the coronavirus pandemic.

"Throughout this pandemic, Congress has recognized that a whole of society effort is needed to combat COVID-19 and to mitigate its devastating economic impacts," the senators wrote. "Local chambers, for example, have been valuable partners in helping small business owners get up-to-date information about the assistance programs passed under the CARES Act."

Covered Businesses

The U.S. Small Business Administration (SBA) is managing payroll-protection loans for qualifying organizations. Most businesses are only eligible if they employ less than 500 employees. However, businesses that employ more than 500 workers may be eligible if they meet the SBA's size standards for their industry.

Loans can be applied to expenses incurred in an eight-week period between Feb. 15 and June 30 and may be used for payroll costs, health care, rent, utilities and other business debts.

The Paycheck Protection Program is meant to encourage businesses to keep their workers employed or quickly rehire them, so the SBA will forgive loans if all employees remain on payroll for eight weeks and the money is used for covered expenses.

"The purpose of the loan must be two-fold," said Ashley Cuttino, an attorney with Ogletree Deakins in Greenville, S.C. The loan must be necessary to support ongoing operations, and proceeds must be used to retain workers and maintain payroll. 

The program generally covers nonprofits that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code and veterans organizations that are tax-exempt under Section 501(c)(19), if they have fewer than 500 employees.

PPP loans, however, are not available to 501(c)(6) business associations and certain other nonprofits, such as 501(c)(4) social welfare organizations and 501(c)(7) social clubs.

The Chamber of Commerce for Greater Philadelphia noted in a letter to Congress that local chambers of commerce are a "critical resource" for area businesses and "important employers and direct contributors" to the economy.

"We are each facing sizeable current and projected losses to our organizations' event and membership revenues," according to the letter. "These losses can have a devastating impact on our business operations and our ability to retain family-sustaining jobs."

What's Next?

So far, Congress has allocated about $3 trillion in emergency spending to combat the economic consequences of the coronavirus crisis. After a period of isolation, the U.S. Senate is expected to reconvene May 4 to begin crafting the next round of relief measures, though the U.S. House of Representatives hasn't set a date to return to Washington, D.C.

"We will modify routines in ways that are smart and safe, but we will honor our constitutional duty to the American people and conduct critical business in person," said Sen. Mitch McConnell, R-Ky. "The Senate must focus on concrete steps to strengthen our response to this complex crisis," he added.

Democrats are seeking more aid for state and local governments, food-assistance programs and vote-by-mail initiatives, reported The Hill, and Republicans may aim to shield businesses from lawsuits.

"While our nation is asking everyone from front-line healthcare professionals to essential small-business owners to major employers to adapt in new ways and keep serving, a massive tangle of federal and state laws could easily mean their heroic efforts are met with years of endless lawsuits," McConnell said.

Kaine and Warner want to see lawmakers expand eligibility for the PPP. "Many 501(c)(6)s are struggling because of significant declines or uncertainty in their membership dues resulting from COVID-19, and many have had to cancel major events that they rely on for funding," they said, noting that Virginia is home to a significant number of such nonprofits.

"We're proud of the work these Virginians do to support their communities and local businesses and do not believe they should be excluded from the PPP, which might be the deciding factor in whether their organization can keep its doors open." 


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