Coronavirus Aid, Relief, and Economic Security Act CARES Act (Pub. L. 116-136) and the Nonprofit Sector:
The CARES Act provides significant funding for charitable nonprofit organizations.
Nonprofit support includes:
Paycheck Protection Program Loans (emergency SBA 7(a) loans): Creates an emergency loan program providing loans of up to $10 million for eligible nonprofits and small businesses, permitting them to cover costs of payroll, operations, and debt service, and provides that the loans will be forgiven in whole or in part under certain circumstances.
General Eligibility: Available to entities that existed on February 15, 2020 and had paid employees or paid independent contractors.
Nonprofit Eligibility: Available for charitable nonprofits with 500 or fewer employees (counting each individual – full time or part time and not FTEs). The law does not disqualify nonprofits that are eligible for payments under Title XIX of the Social Security Act (Medicaid), but does require that employees of affiliated nonprofits may be counted toward the 500 employee cap, depending on the degree of control of the parent organization.
No Personal Guarantee: No personal guarantee or collateral will be required in securing a loan.
Loan Amount: The lesser of $10 million or 2.5 times the average total monthly payroll (including benefits) costs from the one-year period prior to the date of application.
Loan Use: Loan funds can be used to make payroll and associated costs, including health and retirement benefits, facilities costs, and debt service.
Loan Forgiveness: Employers that maintain employment for the eight weeks after the origination of the loan, or rehire employees by June 30, would be eligible to have their loans forgiven, essentially turning the loan into a grant.
Economic Injury Disaster Loans (EIDL): Creates emergency grants for eligible nonprofits and other applicants with 500 or fewer employees enabling them to receive checks for $10,000 within three days.
Self-Funded Nonprofits and Unemployment: Only reimburses self-funded nonprofits for half of the costs of benefits provided to their laid-off employees.
Charitable Giving Incentive: Creates a new above-the-line deduction (universal or non-itemizer deduction that applies to all taxpayers) for total charitable contributions of up to $300. The incentive applies to cash contributions made in 2020 and can be claimed on tax forms next year. The law also lifts the existing cap on annual contributions for those who itemize, raising it from 60 percent of adjusted gross income to 100 percent. For corporations, the law raises the annual limit from 10 percent to 25 percent. Food donations from corporations would be available to 25 percent, up from the current 15 percent cap.
Employee Retention Payroll Tax Credit: Available to small businesses and nonprofit organizations.
Program and Eligibility Terms: Employers fully or partially shut down or with 50% drop in gross receipts in a quarter compared to the same quarter in the prior year (until a return to 80%). Fully or partially suspended operations in any 2020 quarter due to COVID-19 governmental orders (“partially suspended” means operations continue but not at a “normal capacity”); it is a quarter-by-quarter determination.
Payroll tax credit of up to 50% of the qualified wages (salaries plus allocated health plan expenses) paid by the employer in a covered quarter, up to $10,000 in wages per employee; maximum $5,000 tax credit per employee for 2020 for the period of March 13, 2020 until December 31, 2020. The tax credit is refundable if credit exceeds payroll taxes due that quarter. If 100 or more employees, the tax credit covers wages only for employees not providing services to the employer during that quarter (e.g., those on paid leave); if less than 100 employees, the tax credit covers the qualified wages of all employees that quarter.
Wages for Families First Coronavirus Response Act tax credits are excluded. If an employer received a PPP loan, they are not eligible for this tax credit.
Delay of Payroll Tax Remittance: Amounts of the employer portion of the Social Security payroll tax that would normally be due for the period from March 27 to December 31, 2020 may be delayed. If an employer chooses to delay the payment of the employer portion of the Social Security payroll tax that would be due during this period, it would follow the below payment schedule for the payment to be considered timely: 50% due 12/31/2021 and 50% due 12/31/2022. This payment does not apply to the employer’s share of the Medicare payroll tax. Those payments, as well as depositing the employee’s withholdings, must still be made on time. If an employer received a PPP loan, they are not eligible for this delay.
Checklists for Loans:
The SBA checklist available at https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources
The U.S. Chamber of Commerce checklist available at https://www.uschamberfoundation.org/reports/coronavirus-emergency-loans-guide-and-checklist-small-businesses-and-nonprofits.
Additional Information for Nonprofits:
Please click here for more information on Faith-based organizations: https://www.sba.gov/sites/default/files/2020-04/SBA%20Faith-Based%20FAQ%20Final.pdf
Coronavirus Aid, Relief, and Economic Security Act CARES Act (Pub. L. 116-136) and the Nonprofit Sector: https://www.councilofnonprofits.org/sites/default/files/documents/cares-act-analysis.pdf
Federal Covid Legislation and Nonprofits:
FAQ sheet for Nonprofits:
Sources: https://www.councilofnonprofits.org/trends-policy-issues/initial-analysis-of-the-coronavirus-aid-relief-and-economic-security-act-cares and https://www.butlersnow.com/2020/05/the-cares-act-and-nonprofit-organizations/
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