What’s in the Proposed Second Stimulus Package “HEROES ACT” for the Nonprofits
The Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act) is a $3 trillion proposal for sweeping relief during the coronavirus pandemic. This legislation promises a second stimulus check, debt relief, student loan forgiveness, hazard pay, six more months of COVID-19 unemployment, housing and food assistance, and nearly $1 trillion in aid for state and local governments so they can pay vital workers at risk for losing their jobs due to budget shortfalls. The HEROES Act passed on May 15 in the House of Representatives; however, it is unlikely that this bill will become law in its current form.
The CARES Act shut out a significant portion of the nonprofit sector from accessing a grant under the PPP. Amendments proposed in the HEROES Act extend eligibility for the Paycheck Protection Program (PPP) to all 501(c) nonprofits, not just 501(c)(3) and 501(c)(19) veterans organizations opening the PPP to thousands more nonprofits.
This bill includes additional funding for government programs including local food banks, Violence Against Women programs, Tribal government relief, support for mental health and substance abuse treatment and outreach, Emergency Solutions Grants for homeless families and individuals, and more. There is no expectation that the eligibility rules will change for entities that are “primarily engaged in political or lobbying activities.”
The HEROES Act also lifts the cap of 500 employees so that nonprofits of all sizes can participate in the relief program and ensures 25 percent of PPP funding is set aside for nonprofits with half going to nonprofits with more than 500 employees and the other half going to smaller organizations. The HEROES Act eliminates the requirement that 75 percent of the loan through the CARES Act cover payroll expenses. The change means that the organization can use the money as needed to cover costs for operating and offers flexibility to adjust employee levels.
The Main Street Lending Program, also known as the Treasury Industry Stabilization Loan Program, provides low-interest loans to businesses with between 500 and 10,000 employees through December 31, 2020. The new Act ensures nonprofit organizations can qualify for a loan and eliminates the minimum loan size. It includes the ability to defer payment and loan forgiveness for nonprofits serving low-income communities.
As with any government grant or loan, there is a risk of audit, especially for loans over $2 million. Nonprofits should document and save written records of their PPP loan application in addition to any materials the organization relied on to prepare the application (PDFs, emails, internet searches, etc.). Following these guidelines will also serve the board if issues arise in the future.
The HEROES Act bill passed largely on a party-line vote and the Democratic Congressional leaders urged the Republican controlled Senate to pass the Act, but Senate GOP leaders rejected the bill, declaring it to be “dead on arrival.” There is pressure to pass something by July 31, which is when key elements of the CARES Act expire. As the pandemic worsens, GOP leadership is now signaling that a second stimulus package is likely, but it is still unclear what will be included and when it will pass.