Yesterday, May 12, Speaker Pelosi released the Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act). Below are some key elements to the proposal. Please keep in mind that this bill has yet to be voted on and negotiated by the Senate and the White House. We expect provisions to change over the course of the next few weeks. Forefront will keep you posted on information important to the sector. Here are some key elements:
Unemployment Insurance (p 687)
This section would extend the financial relief provided to reimbursable employers in the CARES Act through January 31, 2021, and make technical corrections to ensure that states can simply waive 50 percent of the amount owed by such employers.
What we’ve found so far (Sec. 50005):
- Although this bill does not raise the Unemployment Insurance cost from 50% to 100%, it does override the horrible guidance released by the Department of Labor asking nonprofits to pay for all 100% cost and be reimbursed later. This requires the state to pay 50% of the UI cost.
Protection Program Provisions (pp 821 – 878)
Supports small businesses and nonprofits by strengthening the Payroll Protection Program to ensure that it reaches underserved communities, nonprofits of all sizes and types, and responds flexibly to small businesses by providing $10 billion for COVID-19 emergency grants through the Economic Injury Disaster Loan program.
- Extends the covered period from June 30 to December 31, 2020.
- Makes critical access hospitals and nonprofit news outlets eligible for PPP loans
- Expands PPP to nonprofits of all sizes and types
- Removes the 500-employee cap
- Includes all 501(c) employers as eligible, e.g., social welfare, unions, chambers
- Interim Final Rule by:
- Setting minimum maturity at 5 years (up from 2 years in Rule)
- Banning forgiveness limits on non-payroll expenses – the 75%/25% rule (Sec. 90004)
- Mandating deferment of principal and interest for 1 year (up from 6 months) (Sec. 90008)
- Creates 25 percent set-aside for PPP funding for nonprofits
- Half for nonprofits with more than 500 employees
- Sets aside 25 percent of PPP funding for eligible employers with 10 or fewer employees, and for community financial institutions the bill would set aside the lesser of 25 percent or $10 billion from remaining funds under the interim funding bill passed in April.
- Loan Forgiveness Changes(Sec. 90004)
- Expands covered period from 8 weeks to the earlier of 24 weeks or December 31, 2020. It also extends the rehire exemption from June 30 to December 31, 2020.
- Makes technical corrections to expressly allow forgiveness of payments on interest on pre-existing debt.
- Alters application forms to require demographic information and reporting of full-time equivalents on Feb. 15, 2020, at date of application, and upon application for loan forgiveness.
- Mandates that SBA provide reports on loan approval and disbursement to nonprofits, provided on a state, congressional district, industry, and loan size. (Sec. 90016)
Loan Program for Mid-Sized Nonprofits (pp 1063-65)
House Summary: Main Street Lending Program requirements. This section mandates that the Federal Reserve’s Main Street Lending Program, which was established utilizing CARES Act funds and is backstopped by the Treasury Department, include nonprofit organizations as eligible borrowers. It also stipulates that the federal government immediately offer a low-cost loan option tailored to the unique needs of nonprofit organizations with deferred payments, and that the loan may be forgiven solely for nonprofits predominantly serving low-income communities that are ineligible for a PPP loan.
What we’ve found so far:
- Mandates creation of a low-cost loan program for nonprofits, one that includes the ability to defer payments. (Sec. 110604)
- For nonprofits that are ineligible for Paycheck Protection Program loans and that predominately serve low-income communities, loan forgiveness along the lines of CARES Act Sec. 1106 shall be granted.
- Only gives the Federal Reserve five days from date of enactment to implement the nonprofit lending program. (Sec. 110604)
- Also mandates that the Federal Reserve ensure that at least one loan option for which small nonprofits and small businesses are eligible has no minimum loan size. (Sec. 110605)
Emergency Paid Leave
- Extends the paid leave provisions under the Families First Coronavirus Response Act to nonprofits and other employers with more than 500 employees. Applying the paid leave provision only to smaller employers was a last-minute change to the Families First Act back in March. (Sec. 120117)
We thank the National Council of Nonprofits for providing thoughtful analysis on this proposal. As legislation changes over the course of the next few weeks, we will keep you updated as to how this pertains to our sector.