Federal CARES Act Can HELP: Information for Our Nonprofit Partners
As many of you are aware, last month, the US federal government passed an unprecedented stimulus package of $2.2T (CARES Act) considered “Phase 3” after two much smaller packages. Probably one of the most important parts of these packages is that the nonprofit sector is included in these programs. We wanted to share a brief overview of the programs that are out there, some resources for additional information, and encourage each of you to act as quickly as possible in applying for these programs, as the funds will go quickly!
This includes the Paycheck Protection Program (PPP), the Expanded EIDL and Emergency Grants, and the Mid-size Loan Program. A chart outlining these three programs can be found here. As part of the Act, Congress also authorized an “above the line” charitable deduction of up to $300 for those taking the standard deduction in 2020.
- The PPP is administered through the Small Business Association and has been funded with $349B. It has been rumored that another $200B may be added to this program by Congress by the end of the week. This program covers payroll costs for companies, including any 501c3 organization, with less than 500 employees for a period of eight weeks. It also includes other expenses such as rent, mortgage, and utilities. As long as at least 75% of the funds are applied to the payment and retention of employees, the entire loan will be forgiven. Obviously, this is a very attractive opportunity and it’s pretty certain to be exhausted, even with additional funding. Many of the banks administering these loans are only taking applications from applicants who have a business account with them, so that could be a hurdle for some. If you run into this snag, you may want to approach your board to see if anyone may have a relationship with an SBA-participating bank that could help.
- Expanded EIDL: Emergency Grant: This program is also administered through the SBA, and makes $10K available within three days to organizations, including nonprofits. The application is very straightforward and relies solely on the organization’s credit score, with no other hoops to jump through. Organizations can then apply for an additional $25K. Although this program was rolled out in Phase 1, in Phase 3, it was decided to make the original $10K a grant, as long as the organization qualified for the emergency funds via credit score, even if they didn’t qualify for the additional $25K.
- Mid-Size Business Loans: While many of the specifics of this loan program still remain unclear, nonprofits are included in this program as well. There is a requirement that the organization retain 90% of their staff to qualify. This program will be implemented through the Federal Reserve and is funded with $454B.
- A $300 charitable donation option is now available for the 2020 tax year. For those taking the (much increased) standard deduction, instead of itemizing as they may have in the past, including charitable giving in that deduction, there is now up to a $300 (per person for those filing jointly) “above the line” charitable deduction for the tax year of 2020. This is an opportunity to inform your individual donors to make that donation and get the additional tax benefit. Also, there will likely be a Phase 4 of the federal government’s stimulus and it’s been discussed that this might be an opportunity for nonprofits to lobby their representatives to increase this amount above $300. If you track your donors’ response to this tax deduction opportunity and it’s positive, there’s an additional argument to put the deduction back in permanently.
There are also refundable payroll tax credits available to nonprofits and other businesses to help retain employees, giving up to 50% credit in payroll taxes. This may provide some serious relief to nonprofits.
With the potential for a Phase 4 round of funds, one thing nonprofits can do is to lobby Congress. It’s important that the nonprofit community be included in all future funding and not be left out, as in prior stimulus packages. Since this is emergency relief, let them know what you need right now and what’s happening on the ground for you. The stories you tell them about the work you are doing is very important.
Some Additional Resources
National Council of Nonprofits COVID-19 Webinar: This webinar is specifically about the CARES Act and how it impacts the nonprofits sector. Very informative if you didn’t catch it a few days ago.
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