State Policy Network
CARES Act funding considerations for the nonprofit community

Since the announcement of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, SPN has taken time to confer with legal counsel and our board. We also sought input from trust partners throughout the freedom movement, as we carefully reviewed our long-time policies. After thoughtful consideration, we concluded that we will not seek government support. We are fortunate not to need such aid and we do not want to accept any funding—from government or private entities—which could compromise our independence.

While we respect that other organizations may reach a different conclusion about the merits of accepting CARES Act funding, we want to share SPN’s reasoning for our own decision: A big part of the decision harkens back to SPN’s original mission to stand by the power of private, voluntary solutions to address society’s needs. In addition, there remains a high level of uncertainty uncovered in our analysis of the Paycheck Protection Program Loans and the Economic Injury Disaster Loan.

There are some important unknowns that should be addressed by any leader considering the Small Business Administration (SBA) as a solution to potential fundraising challenges. For instance, while there is no specific guidance on public disclosure, it will likely be reported in the financial portions of the Form 990. In addition, the SBA may have to release the names of borrowers, amounts of loans, purposes of loan, date of maturity, and names of officers and directors.

In talking with other leaders in our Network, many have expressed principled arguments against taking CARES SBA loans, and others have discussed concerns about what this might mean for the future of an organization’s strategic position when it comes to pushing back on other government programs. As we all know, in disasters government shekels inevitably come with government shackles. All in all, the CARES Act program is not easy nor certain money, and likely a longshot for nonprofits.

An alternative for a nonprofit to consider is to dramatically ramp up fundraising from individuals, especially since the CARES Act allows for increased deductions for charitable contributions to Section 501(c)(3) organizations other than private foundations and donor-advised funds. Individuals choosing to itemize deductions will be able to deduct up to 100 percent of charitable contributions from their adjusted gross income. Now is a great time for nonprofits to educate donors about this opportunity to support an organization whose work they value, while helping them keep some of their hard-earned dollars out of government coffers.