H.R. 6161/S.3625: Employee Retention Tax Credit

Overview
• Nonprofit organizations are social and economic drivers in Pennsylvania. Nonprofits have over 800K employees, or 15% of the Pennsylvania workforce. We generate $116.7 billion in annual revenue, and serve millions of state residents.
• Pennsylvania’s nonprofits have long partnered with state government to meet mandated, basic needs for our most vulnerable citizens. Nonprofits provided frontline support through the pandemic. To date, Pennsylvania nonprofits have had little success in accessing dollars from the American Rescue Plan Act, and the Commonwealth has not specifically designated dollars to nonprofits, though they are critical partners in providing services to our most vulnerable.

Funding Needs
• 87% of nonprofits experienced a negative financial impact due to COVID-19, including an increase in expenses (reported by nearly 75% of survey respondents) coupled with a decrease in donations (experienced by 50% of organizations).
• 92% of nonprofits in Pennsylvania have budgets of <$1 Million. Most nonprofits have experienced decreased donations; smaller organizations have experienced more significant impact vs. those with larger budgets.
• 40% of nonprofits reported decreased staffing levels. At the same time, 75% reported an increase in demand for services, and 45% reported an inability to meet those demands.
• According to the New York Times, the nonprofit sector is not keeping pace with other sectors in pandemic recovery, looking a nearly another year before reaching 2019 employment levels.
2021 Federal Reserve, 2021 National COVID Community Impact Survey ; 2021 Nonprofit Trends & Impacts, Urban Institute 2021, New York Times, Apr 2022

Most Pressing Need: Workforce Recruitment/Retention – Increasing Demand for Nonprofit Services
Like other sectors, nonprofits are experiencing challenges related to recruitment and retention. Of respondents to a National Council for Nonprofit Survey, 60% shared job vacancy rates of 1-30% in their organizations. Top reasons for recruitment difficulty included salary competition (79%) and the inability of staff to find childcare (23%). Unlike their for-profit counterparts, nonprofits are not able to offer sign-on bonuses and other incentives to entice highly qualified individuals to what is often stressful work. This is an issue that predated and was exacerbated by the pandemic, and must be mitigated to offset future adverse impacts on nonprofits and the communities they serve.

“[We] cannot compete with service industries for direct care workers as our rates are set by state and
federal governments. Our wages are below that of service sectors and we compete with Walmarts, Starbucks, etc. who outpace us on wages and benefits.” – Pennsylvania-Based Human Services Provider

26% of nonprofits report having waiting lists of one month or more. As or more important, those without waiting lists have stopped taking on new clients; this crisis will only increase with the increase in inflation and an anticipated recession. (2021 National COVID Community Impact Survey)

The Ask: Reinstate the Employee Retention Tax Credit
The Employee Retention Tax Credit (ERTC), one of the most successful forms of relief during the pandemic, enabled nonprofit and for-profit employers to retain and hire staff with a $7,000 refundable payroll tax per employee per quarter. Overall, employers’ use of the ERTC tripled between 2020 and 2021.

One way legislators can help retain Pennsylvania’s nonprofit workforce is by reinstating this assistance which was repealed in the fourth quarter of 2021. Encourage your elected official to:

• Cosponsor the Employee Retention Tax Credit Reinstatement Act (H.R. 6161/S.3625) including but not limited to the following modifications: 1) Extend this refundable payroll tax credit through 2022, and 2) Modify nonprofit eligibility beyond the current “gross receipts” test and definition of eligible payroll expenses to make more nonprofits eligible.
• Support additional ERTC relief for charitable nonprofits – such as extending the ERTC through 2022 and fixing provisions to ensure more nonprofits are eligible.