Dear clients, better known as friends and colleagues:
We know this is a difficult time for so many, personally, as well as for your organizations. Know that we’re concerned and thinking of you!
We are keeping track of opportunities for assistance for nonprofits and will keep providing information as it becomes available (and we have the chance to digest it). For today, below is a brief summary of provisions of the federal Coronavirus, Aid, Relief, and Economic Security (CARES) Act that apply to nonprofits. As we learn more details, we will keep updating the Scholz Nonprofit Law blog.
The National Council of Nonprofits has released a helpful summary of the CARES Act here.
Below are some CARES Act highlights:
TAX PROVISIONS:
New Tax Deduction for Charitable Contributions — New deduction for charitable contributions of up to $300 in 2020. This benefit is “above the line” so taxpayers don’t have to itemize to benefit from the deduction.
Employee Retention Payroll Tax Credit —As an alternative to Paycheck Protection Program (see below), 501c3s may be eligible for a refundable payroll tax credit of up to $5,000 for each employee on the payroll, if it experienced a drop in revenue of at least 50 percent when compared to the same quarter of the previous year (e.g., Q1 2020 versus Q1 2019). The credit may be available for each quarter until organization’s revenue exceeds 80% of the 2019 quarterly amounts.
Delayed Payment of Payroll Taxes — Employers allowed to delay payment of employer portion of payroll taxes in 2020, until 2021 and 2022 (50/50).
LOANS & GRANTS:
Convertible Loans for 501c3s — The Paycheck Protection Program gives 501c3s and 501c19s with <500 employees access to loans that may convert to grants. Loans can be used for payroll for employees (earning <$100,000), rent, mortgage payment, and utilities. A 501c3 may borrow up to 2.5 times its average total monthly payroll costs from 2019. To receive the loan, the organizations must certify that the loan is necessary because of uncertainty of current economic conditions and that funds will be used to retain workers, maintain payroll, or make lease, mortgage and utility payments.
Principal and interest payments deferred 6 months and up to 1 year. Borrowers may be eligible for loan forgiveness, depending on the amount of employment retained in 8 weeks from date of loan. (Note: not penalized for reduction in payroll for employees that are rehired after receipt of the loan proceeds.) For balances that aren’t converted to a grant, loan converts to a note with up to a 10-year maturity date. See a good summary by another firm here.
Emergency Advance and Economic Injury Disaster Loans (EIDL) — Emergency grants for eligible nonprofits and other employers with <500 employees enabling them to receive checks for $10,000 within three days of applying for an EIDL.
EMPLOYMENT PROVISIONS:
Nonprofits Self-Insured for Unemployment Benefits — Reimburses nonprofits for half of Unemployment Insurance Benefits through the end of 2020.
As we learn about more resources for nonprofits, we will provide updates. The CARES Act also includes many more provisions related to loans for businesses and direct payments for individuals, which are beyond the scope of this update.
Thank you to everyone who is out there on the front lines, in so many different ways.
All our best,
Melissa Scholz on behalf of the Scholz Nonprofit Law team, Jeff, Jessica, Melanie and Sarah
Also see: COVID-19 Resources Page