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Major Nonprofits Seek Small Business Loans During Pandemic

April 3, 2020, 5:43 PM

Some large nonprofits want Congress to let them access funds available through a new small business relief program as they face the impact of the new coronavirus.

Eligible companies could receive up to $10 million in loans under a stimulus package (Public Law 116-136) that became law late last month, but the benefit is limited to businesses with 500 employees or fewer. The nonprofit sector hopes some large organizations with more than 500 employees will be given access, as they struggle with closures and revenue dropoffs just like for-profit businesses while the pandemic continues.

These nonprofits are talking to lawmakers to try and fix the issue, most likely in a fourth Covid-19 relief package that Congress is expected to take up. Rep. Seth Moulton (D-Mass.) has introduced a bill (H.R. 6408) that would give loans to public charities. The bill currently has eight co-sponsors including Reps. Darin LaHood (R-Ill.) and Brian Fitzpatrick (R-Pa.).

Without the change, organizations like the American Heart Association will miss out on important support amid the pandemic, said Dan Cardinali, CEO and president of Independent Sector, a trade group that includes nonprofits, foundations, and corporations.

The American Heart Association, YMCA of the USA, and American Cancer Society Cancer Action Network back the House measure, according to a statement from Larry D. Cannon, chief administrative officer and corporate secretary for the American Heart Association.

“The economic instability caused by COVID-19 will reduce charitable giving to AHA and other nonprofits. We don’t yet know the full extent of that impact, but we know we need the federal government’s support to stabilize the nonprofit sector so that we can continue our missions and continue to be frontline responders to this pandemic,” Cannon said Friday.

The loan provision authorizes $349 billion for the Small Business Administration to fully guarantee loans from Feb. 15 to June 30. The loans could be as large as $10 million or 250% of the average monthly payroll cost of the recipient.

The American Red Cross, with more than 19,000 employees, said while it appreciates the efforts of Congress, it isn’t taking on debt at this time.

Legislation In

The loan provision is meant to incentivize companies to retain their staff while the pandemic continues. Without the assistance, the YMCA, for example, wouldn’t be able to retain the employees who care for the children of doctors, nurses, and first responders, said Neal Denton, a senior vice president and chief government affairs officer at the YMCA of the USA.

The ability for some nonprofits to access these loans is great news but larger nonprofits in metropolitan areas could also benefit from similar treatment, Denton said.

“A lot of these larger metropolitan areas where so many services are ongoing today, it leaves them without access to resources,” he said.

Moulton’s bill, introduced at the end of March, would also create a universal charitable deduction. The law created an above-the-line charitable deduction for individuals who claim the standard deduction, but its benefit is expected to be limited.

“The focus of our efforts to save America’s small businesses must include all of our nonprofit organizations,” Fitzpatrick said in a news release. “Our community and our nation, and those most in need, cannot survive without them.”

To contact the reporter on this story: Kaustuv Basu in Washington at kbasu@bloombergtax.com

To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Colleen Murphy at cmurphy@bloombergtax.com

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