Based on the information included in the special edition alert published by the Center of Non-Profits (www.njnonprofits.org), we have created an abbreviated version of some of the key provisions expected to be included in the $2 trillion legislation that are of specific interest to the nonprofit community. The Act itself is very complex and addresses many key provisions for small businesses and individuals that are not included in this condensed account. 

What’s of relevance in the Coronavirus Aid, Relief and Economic Security Act (CARES Act) for the nonprofit community?

The CARES Act provides significant funding for hospitals, schools, and social support programs, among many other things.  Here are some of the ways the CARES Act addresses nonprofit challenges:

  • Emergency Small Business Loans: Provides funding for special emergency 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 be forgiven in whole or in part under certain circumstances.

Of specific interest to the nonprofit community is that the loans will be available for charitable nonprofits with 500 or fewer employees (counting each individual – full time or part time and not FTEs). The final bill does not include a provision in earlier drafts that would have disqualified nonprofits that are eligible for payments under Title XIX of the Social Security Act (Medicaid).

Loan Use: Loan funds could be used to make payroll and associated costs, including health insurance premiums, facilities costs, and debt service.

Loan Forgiveness: Employers that maintain employment between March 1 and June 30 would be eligible to have their loans forgiven, essentially turning the loan into a grant.

  • Economic Injury Disaster Loans (EIDL): This loan eliminates creditworthiness requirements and appropriates an additional $10 billion to the EIDL program so that eligible nonprofits and other applicants can get checks for $10,000 within three days.
  • Charitable Giving Incentive: This includes 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 contributions made in 2020 and would be claimed on tax forms next year. (The bill 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 bill 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.
  • Self-Funded Nonprofits and Unemployment: This only reimburses self-funded nonprofits for half of the costs of benefits provided to their laid-off employees.
  • Employee Retention Payroll Tax Credit: This will create a refundable payroll tax credit of up to $5,000 for each employee on the payroll when certain conditions are met. The entity had to be an ongoing concern at the beginning of 2020 and had seen a drop in revenue of at least 50 percent in the first quarter compared to the first quarter of 2019. The availability of the credit would continue each quarter until the organization’s revenue exceeds 80 percent of the same quarter in 2019.

Of importance 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.

  • Expanded 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.

Significant Spending on Nonprofits

The CARES Act also calls for large infusions of cash to the following sectors:

  • $150 billion for a state, tribal, and local Coronavirus Relief fund
  • $130 billion for hospitals
  • $30 billion for education

If you have any questions about the impact of the CARES Act on your nonprofit, please do not hesitate to contact us!