Supporting Nonprofits During the Coronavirus Emergency
- In March, Congress passed three laws to help respond to the coronavirus emergency: the Coronavirus Preparedness and Response Supplemental Appropriations Act; the Families First Coronavirus Response Act; and the Coronavirus Aid, Relief, and Economic Security Act.
- These three laws include important resources to support our country’s nonprofits.
- The CARES Act allows 501(c)3 nonprofits to access important programs like the Paycheck Protection Program and encourages people to donate to charities by allowing deductions of cash contributions whether you itemize your taxes or not.
Congress continues to respond to the coronavirus national emergency. In early March, Congress provided $7.8 billion in discretionary supplemental funds to target research and development of vaccines and treatments and to support state and local public health departments. Congress also passed the Families First Coronavirus Response Act, which sets up emergency paid sick leave and family leave requirements for certain employers, offset by refundable tax credits. The law increases funds for food aid and administering jobless benefits. Congress also passed and President Trump signed the Coronavirus Aid, Relief, and Economic Security Act, which includes provisions to aid the economy and ensures additional support is available to health care providers.
Coronavirus Response Resources for Nonprofits Provided by Congress
There are more than 1 million nonprofit organizations in the United States. Organizations that register with the IRS as 501(c)(3) nonprofits must operate exclusively for a charitable, religious, educational, or other exempt purpose. The new laws have provided key resources to nonprofits during the coronavirus emergency.
RESOURCES fOR 501(c)(3) NONPROFITS
Paycheck Protection Program. Under the CARES Act, 501(c)(3) nonprofits are eligible for the Paycheck Protection Program. This program authorized about $350 billion to support federally guaranteed loans through the Small Business Administration to help small business, including 501(c)(3) nonprofits, meet cash flow needs and keep their workers employed. Through the program, the federal government will forgive amounts that employers spend on payroll, rent, leases, mortgage interest, and utilities. The program’s purpose is to help businesses retain and pay workers during the pandemic. Banks already participating in the SBA’s 7(a) lending program will issue the loans, along with additional lenders the Treasury Department approves. Businesses and 501(c)(3) nonprofits with 500 or fewer employees are eligible. The maximum loan amount is 250% of a borrower’s average monthly payroll expenses – excluding compensation in excess of an annual rate of salary of $100,000 for an individual – up to a total of $10 million.
Emergency Economic Injury Disaster Loan Grants. The CARES Act provides $10 billion to support the expanded SBA Economic Injury Disaster Loan program. The new law allows businesses – including private nonprofits – that received an EIDL loan prior to passage of the CARES Act to refinance into a forgivable Paycheck Protection Program loan. It also allows businesses applying for an EIDL to receive an emergency grant advance of up to $10,000 to pay for employees’ sick leave, retain workers on payroll, and for other necessary obligations.
Charitable Giving. The CARES Act encourages people to donate to charities by allowing them to deduct up to $300 of cash contributions on their taxes even if they do not itemize. The new law also suspends the limit on charitable deductions for cash contributions by people who itemize, and it increases corporations’ limitation on deductions for charitable contributions from 10% to 25% of taxable income. It increases the limitation on deductions for qualifying food contributions from 15% to 25%.
Employee Retention Tax Credit. The CARES Act provides businesses, including nonprofits, with a refundable payroll tax credit known as the employee retention credit. To be eligible, the business must be suspended completely or partially by a government order related to COVID-19, or have experienced a decrease of more than 50% in its gross receipts from the same quarter in 2019. The credit is equal to 50% of wages paid by employers, up to $10,000, for a maximum credit of $5,000 per employee.
Payroll Tax Credits for Paid Leave. The Families First Coronavirus Response Act requires certain government employers and businesses with fewer than 500 employees, including nonprofits, to provide paid sick leave and paid family and medical leave related to the coronavirus emergency. Businesses with fewer than 50 employees can seek an exemption. The law pairs these paid leave requirements with refundable payroll tax credits to cover the costs employers will bear. The emergency paid sick leave credit provides up to $511 per day, for up to 10 days, for employees on leave because they have the virus or are in quarantine. The credit is up to $200 per day for employees on leave to care for a child whose school or daycare closed, or to care for someone else who is in quarantine or seeking medical care. The payroll tax credit for paid family leave applies to the leave employees are eligible for beyond 10 sick days, but it only covers wages paid to an employee on leave to take care of a child whose school or day care facility is closed. It provides a maximum credit of $200 per day, for 10 weeks, with a maximum credit of $10,000 per employee. Both credits apply against the employer’s portion of the Social Security tax and cover 100% of wages required to be paid. The law sets up refundable sick leave and family leave income tax credits for self-employed workers.
Emergency Unemployment Relief for Nonprofit Organizations. The CARES Act provides payments to states to reimburse nonprofits for half of their costs associated with paying unemployment benefits, through December 31.
Economic Stabilization and Assistance to Severely Distressed Sectors of the U.S. Economy: The CARES Act includes up to $454 billion for loans, loan guarantees, and other investments that the Federal Reserve can leverage through its 13(3) programs and facilities in support of businesses, states, and municipalities. This will provide liquidity to the financial system and help businesses maintain operations and keep workers employed. Under the new law, the Treasury Department will implement a special 13(3) facility through the Federal Reserve specifically for nonprofit organizations and businesses that have between 500 and 10,000 workers. The terms of this facility include requiring employers to use the funding to keep at least 90% of their workers through September 30.
Delay Payroll Taxes. The CARES Act allows businesses, including nonprofits, to defer the employer share of payroll taxes – 6.2% Social Security tax on employee wages – and instead pay the employment tax over the following two years.
Small Business Administration Funding. The Coronavirus Preparedness and Response Supplemental Appropriations Act includes$20 million for the SBA to address the increased loan volume to help businesses, including private nonprofits, affected by the coronavirus emergency. The CARES Act includes $562 million for SBA administrative expenses.
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