Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

On Friday, March 27, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act.
 
The CARES Act comes at an opportune moment for many businesses around the country, but no more so than the U.S.’s nonprofit sector. Many nonprofits who have been operating on thin margins before the pandemic are currently facing new unprecedented struggles concerning issues surrounding financial viability, but efforts have been taken to aid struggling businesses in both the for-profit and nonprofit sectors. 

Learn how the CARES Act will apply to your nonprofit and how do you proceed with filing for assistance here.

Do you know what loan would work best for your organization? Learn more through this helpful chart provided by the National Council of Nonprofits. 

You can also  find details of how nonprofits will be affected by the CARES Act below:

Emergency support for Nonprofits ranging from small – midsize
 
The CARES Act has created an Emergency Small Business Loan program that has been established within the SBA 7(a) loan program. To be eligible, nonprofits must have 500 or less employees and must have received their 501c3 status on no later than March 1, 2020. An important provision that has been made to this section is that loans CAN be forgiven if the nonprofit or for-profit keeps staff on the payroll from February 15 - June 30. 

For nonprofits who are able to maintain their staff the loan will be treated as a general operating support grant. Loans that qualify for forgiveness can be taken out for as much as $10 million and can be used to meet payroll, facility costs, debt service, and help with health insurance premiums. 

Additionally, a new provision has been added to the stimulus package that allows nonprofits to be eligible for Medicaid payments.

• Eligibility: Must have been operating as March 1st, 2020 and had paid employees
  • Must have 500 or less employees
• Loan use: Loans may be used for payroll and all associated costs, including health insurance premiums, facility costs, and debt service
• Loan forgiveness: Employers who maintain employment between February 15th – June 30th will qualify for loan forgiveness.

 
 
Employee Retention Payroll Tax Credit

The new tax credit helps to create a refundable credit up to $5,000 for each employee on your payroll when certain conditions are met. The requirements for nonprofits are as follows:

• The entity had to be in an ongoing concern at the beginning of 2020 and had to have seen a drop in revenue of at least 50% within the first quarter, compared to the first quarter of 2019.
• The availability of the credit would continue each quarter until the organization’s Updated March 26, 2020 revenue exceeds 80 percent of the same quarter in 2019.
• For tax-exempt organizations, the entity’s whole operations must be taken into account when determining the decline in revenues.
  • Notably, employers receiving emergency SBA 7(a) loans would not be eligible for these credits. Section 2301.

 
Loan Support for Larger Entities with 500–10,000 Employees
 
Unlike the emergency SBA loan program, it does not provide loan forgiveness, but does mandate an interest rate of no higher than two percent and would not accrue interest or require repayments for the first six months. Nonprofits accepting the mid-size business loans must retain or rehire at least 90 percent of their staff at full compensation.
 
 
Benefits for Donors

The stimulus bill also contains a one-time, above-the-line deduction for member’s financial contributions of up to $300 made to certain qualifying charities. All taxpayers would be eligible to take the deduction, even people who use the standard deduction. The incentive applies to contributions made in 2020 and would be claimed on tax forms next year. The new deduction would not apply to non cash gifts or to gifts contributed to donor advised funds.
 
For the eight percent of individual taxpayers who itemize their deductions, the bill would suspend for 2020 the normal limit on deductions for contributions, ordinarily 50 percent of adjusted gross income (AGI) or 60 percent for cash. For corporations, the limit on deductions for contributions, ordinarily 10 percent of AGI, is elevated to 25 percent for 2020. Food donations from corporations would be available to 25 percent, up from the current 15 percent cap.
 
Other Benefits

According the Council of Nonprofits other major provisions that have been addressed within the CARES Act Include:
 

• Direct Payments
  • Payments will be made to adults of $1,200 or less and $500 per child ($3,400 for a family of four) to be sent out in weeks. The amount of the payments phases out based on earnings of between $75,000 and $99,000 ($150,000 / $198,000 for couples).

 

• Expanding Unemployment Insurance
  • Includes coverage for workers who are furloughed, gig workers, and freelancers. Increases payments by $600 per week for four months on top of what state unemployment programs pay.

 

• Amendments to the New Paid Leave Mandates
  • Lowers the amounts that employers must pay for paid sick and family leave under the Families First Coronavirus Response Act* (enacted March 19) to the amounts covered by the refundable payroll tax credit – i.e., $511 per day for employee sick leave or $200 per day for family leave.