The American Rescue Plan – How does the Biden Stimulus Package Help Nonprofits?

Both the stimulus plan enacted in December 2020 and the Biden Administration’s proposed plan contain measures aimed at relieving stress on nonprofits that are providing critical services during the COVID-19 pandemic.

What’s in the December 2020 Stimulus Package?

The main highlights from the December stimulus package include the extension of the temporary charitable deduction available to people who don’t itemize their taxes and a second round of forgivable Paycheck Protection Program (PPP) loans. While these actions are intended to relieve financial strain placed on nonprofits, they are still flawed.

One major caveat in the second round of PPP loans is that the eligibility criteria is more limited than the first round. The new second round provision specifies that PPP loan recipients must demonstrate that they had at least a 25% drop in revenue to qualify. Under that provision, many of the 180,000 nonprofits that received PPP loans in round one will no longer qualify.

What could be next? The American Rescue Plan

Days after the second stimulus package was implemented, the Biden Administration unveiled their stimulus proposal, the American Rescue Plan. This $1.9 trillion stimulus plan offers a list of spending measures meant to help people and the economy recover from the COVID-19 pandemic. The stimulus package includes state and local aid, more generous unemployment benefits, and mass vaccination plans.

The Byrne Pelofsky team breaks down four key ways that the American Rescue Plan will impact nonprofits.

  1. Economic Development Administration (EDA) Allocation – $3 billion would be allocated to the Economic Development Administration (EDA). This allocation would be used for grants to various entities including state and local government, higher education institutions, nonprofits, and other initiatives that support “bottom’s up economic development and enable good-paying jobs.” This American Rescue Plan EDA allocation is twice as much as provided by the CARES Act.
  2. Small Business Financing Programs – $35 billion would be available to nonprofits for small business financing programs. The Biden Administration said that this would generate as much as $175 billion in low-interest loans and venture capital.
  3. Government Benefit Programs would be expanded and extended, reaching a wider audience of individuals served by nonprofits. A 15% increase in SNAP benefits would be extended through September and $3 billion would be available to increase enrollment for the Special Supplemental Nutrition Program for WIC participants. Additionally, a $35 billion emergency stabilization fund would cover costs of childcare providers that are in danger of closing, as well as a $1 billion increase for states to cover the additional cash assistance that TANF recipients needed because of the pandemic.
  4. Higher Education Emergency Relief Fund – Public institutions would receive a $35 billion increase through The Higher Education Emergency Relief Fund, which would provide an additional $1,700 in financial assistance.

Byrne Pelofsky will continue to report on and analyze developments in a new stimulus plan, and how it will affect the nonprofit sector. It has yet to be determined when Congress will act, and how, on this proposal.

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