Thursday, August 10, 2023

An Update on the Streamlining Federal Grants Act - Streamlining? Sure...

In a post I made earlier this week on the Streamlining Federal Grants Act of 2023, I discussed the Act's peculiar definition of "nonprofit."   As a reminder, the Act's definition of nonprofit is as follows:

any corporation, trust, association, cooperative, or other organization that—

(A) is operated primarily for scientific, educational, service, charitable, or similar purposes in the public interest;

(B) is not organized primarily for profit;

(C) uses net proceeds to maintain, improve, or expand the operations of the organization; and

(D) is not an institution of higher education.

While the definition reverberates with the echoes of Section 501(c)(3), it is clearly not the same.  So in my original post, I posed a question to the universe about the origins of this language.

And the universe answered!

David Thompson, the Vice President of Public Policy at the National Council of Nonprofits (the source of the article I linked in the original post) wrote me with the following information:

The definition of nonprofit organization in the legislation actually tracks ... the definition in the OMB Uniform Guidance, 2 CFR Sec. 200.1 Nonprofit Organization. Since the bill deals with the grantmaking process, it makes sense to use the definition upon which the federal grantmaking agencies rely. This also explains why Institution of Higher Education is defined separately too – the Uniform Guidance has distinct rules for Eds that are different from the ones governing grants to nonprofits.

So many thanks to David for that assist!

It does leave me to wonder, however, if this isn't a place where we could have some streamlining, which is ostensibly the purpose of the Act (I mean, just look at the title, friends!). The committee hearing testimony of all of the participants highlighted the capacity issues facing organizations applying for grants - cost, expertise, training, just having enough warm bodies, etc. For nonprofits, having to deal with two definitions certainly makes life more (and IMHO, unnecessarily) complicated. I'd certainly advocate for using the 501(c)(3) definition, something that nonprofit grantees are already going to be pretty used to dealing with on a regular basis.

I can see, however, two issues: (1) this definition may already be so embedded in Federal contracting lingo that changing it could have collateral impacts, and (2) the definition  seems broader than just Section 501(c)(3). So here's my compromise, Senate Homeland Security Committee: what about a safe harbor? Can we just say, explicitly, that any organization holding a current 501(c)(3) determination letter automatically meets the contracting definition - assuming that doesn't exists already somewhere in the Federal contracting guidelines. That keeps your original contracting definition in play, makes life easier for your 501(c)(3) grantees, and preserves the ability of non-501(c)(3)s to qualify under the Federal contracting definition, if it is in fact broader? You might have to deal with churches separately, as some have their determination letter but others do not... but we deal with churches separate all the time for this reason.

Anyway, thanks again to David for his good work and the work of the Council, and thanks for participating in this conversation.

Clarified, eww

 

 

 

 

https://lawprofessors.typepad.com/nonprofit/2023/08/an-update-on-the-streamlining-federal-grants-act-streamlining-sure-.html

Current Affairs, Federal – Legislative, In the News | Permalink

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