The HEROES Act – How This Proposed Legislation Could Provide Relief to Social Good Organizations

On May 15, the U.S. House of Representatives passed H.R. 6800, also known as the HEROES Act. As with most legislation, it is unlikely that this bill will become a law in its current form as passed by the House, however it begins a conversation among the House, Senate and Administration on the next phase of COVID-19 relief. It is expected that negotiations will begin after the House and Senate return from the Memorial Day recess. It has also been reported that some lawmakers would like to see tangible results from previous relief bills, including the CARES Act, prior to implementing another relief package.

The HEROES Act, crafted by Democratic members of the House, is a $3 trillion package that includes additional funding for government programs, relief funding for state and local governments, and changes to CARES Act loan programs.

The following is by no means an exhaustive list of what is included in this bill. Rather, we are highlighting various provisions that, should it be passed, might be of interest to social good organizations.

Potential Changes to CARES Act Loan Programs:

Paycheck Protection Program

The Paycheck Protection Program (PPP) provides small businesses and nonprofit organizations with up to $10M or 2.5X (250%) of their average monthly payroll, whichever is less, to cover eight weeks of payroll expenses and for making payments toward debt obligations. Although it was not without its challenges, it stands to release $659B to small businesses and nonprofit organizations to assist them in weathering the COVID-19 pandemic. In the HEROES Act, changes are proposed for PPP that further expands its scope, especially for nonprofit organizations.

Here are a few of the amendments proposed by the HEROES Act –

• Eligibility is extended to all 501(c) nonprofit organizations, not just to 501(c)3 organizations
• The cap of 500 employees is lifted, opening the program up to nonprofit organizations of all sizes
• It includes a carve out of 25% of existing funds specifically for nonprofit organizations. This dedicated funding stream is to be split 50/50 between organizations with 500 or fewer employees and those with more than 500 employees.
• It lengthens the coverage period to December 31, 2020
• Borrowers would be able to take advantage of a PPP loan and the Employee Retention Tax Credit
• It allows businesses that received PPP loan forgiveness to defer payment of payroll taxes

Main Street Lending Program

The Main Street Lending Program, also known as the Treasury Industry Stabilization Loan Program, provides low interest loans to nonprofit organizations and businesses with between 500 and 10,000 employees through December 31, 2020. Guidance issued by the Federal Reserve on April 30 excluded nonprofit organizations from the Main Street Lending program. However, in their press release dated the same day, the Federal Reserve Board included the following statement, “The Board recognizes the critical role that nonprofit organizations play throughout the economy and is evaluating a separate approach to meet their unique needs.”

The HEROES Act mandates that nonprofit organizations be included in this program and eliminates the minimum loan size for nonprofit organizations and small businesses.

Potential Additional Funding for Government Programs and Individuals:

This bill also includes additional funding for government programs and payments for individuals. A sample of funding allocations are found below:

• $150M for local food banks plus $25M for the Farm to Food Bank program
• $100M for Violence Against Women programs
• $895B for state, local, and Tribal government relief
• $1.5B for broadband to assist in closing the homework gap
• $10M each for National Endowment for the Arts and National Endowment for the Humanities
• $5M for the Institute of Museum and Library Services
• $7.6B to support health care services for underserved populations
• $3B to support mental health and substance abuse treatment and outreach
• $90B to support states with their educational needs including public post-secondary institutions and $10B for HBCUs and other institutions of higher education
• $11.5B for Emergency Solutions Grants for homeless families and individuals or those who are at risk of homelessness

What Is Not Included in the HEROES Act

The CARES Act included a temporary universal charitable deduction that is capped at $300 and expires on December 31, 2020. Nonprofit sector supporters have advocated that the deduction become permanent and for the cap to be increased. Although this provision was not included in the HEROES Act, conversations are ongoing with lawmakers and it is possible it could be included in a future bill.

In the U.S. Senate, Senators James Lankford and Angus King successfully recruited 28 Senate colleagues to join them on a letter to Senate leadership expressing support for expanding access to capital through the Paycheck Protection Program, increasing the federal unemployment insurance reimbursement for self-funded nonprofit organizations to 100% of costs, and increasing the cap and extending the effective date of the universal charitable deduction.

And remember, while people are social distancing, keep social differencing™! We hope this highlight of the potential legislation is one way we can help. As this and other legislation related to COVID-19 relief for the social good community evolves, we will do our best to continue bringing you valuable updates.