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Financial Programs for Nonprofits Under the CARES Act
Blog Feature

Financial Programs for Nonprofits Under the CARES Act

Nonprofit

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law. This $2+ trillion package provides emergency relief to businesses, individuals and nonprofits who face economic hardship as a result of the COVID-19 pandemic.

Here are a few financial programs for nonprofits that were created under the CARES Act.

Paycheck Protection Program

If your nonprofit is a 501(c)(3) or 501(c)(19) organization with less than 500 employees, your organization is eligible for Small Business Administration loans of up to $10 million and expedited loans of up to $1 million. It is limited to 2.5 times the average total monthly payroll costs from the prior year. These loans can be used to pay for expenses including:

  • Payroll costs
  • Interest payments on mortgage obligations
  • Rent
  • Utilities

These loans cannot be used for:

  • Compensation of individual employees, contractors or sole proprietors who make over $100,000 in annual salary
  • Compensation of an employee primarily residing outside of the United States
  • To cover leave wages already covered by the Families First Coronavirus Response Act

If your nonprofit retains its employees instead of laying off or furloughing employees throughout the pandemic, eight weeks of average payroll and other costs from the date of the loan will be forgiven from the loan amount.

Charitable Giving Incentives

The CARES Act offers charitable giving incentives for donors to 501(c)(3) organizations. The package includes a new above the line (pre-adjusted gross income-AGI) deduction of up to $300 for charitable contributions made in 2020, which can be claimed on tax forms in 2021.

In addition, the existing cap on annual contributions for those who itemize has been raised from 60% to 100% of AGI. The limit for corporations was raised from 10% to 25% of taxable income, with food donations from corporations being raised from 15% to 25% of taxable income.

Economic Injury Disaster Loans

Nonprofits who face severe economic implications as a result of the COVID-19 pandemic may be eligible for economic injury disaster loans (EIDL). Nonprofits can apply for up to $2 million in assistance. The interest rate is 2.75% for nonprofits.

Borrowers may receive $10,000 as an emergency advance within three days of applying for an EIDL, which can be used to pay for payroll, rent or obligations that can’t be met due to revenue losses. If your application is denied, you’re not required to repay those advance funds.

Only 501(c)(3) and 501(c)(19) organizations are eligible to receive an EIDL in addition to receiving a loan under the Paycheck Protection Program.

Employee Retention Payroll Credits

Nonprofits who continue operations throughout 2020 and meet one of the following criteria may be eligible for a payroll tax credit of $5,000 per employee.

  1. Business operations were fully or partially suspended because of order from a government authority limiting commerce, travel or group meetings due to COVID-19.
  2. Organization has had a reduction in revenue of at least 50% in the first quarter of 2020 compared to the first quarter of 2019. For nonprofits, the organization’s entire operations must be taken into account when determining the decline in revenue.

501(c)(3) and 501(c)(19) organizations enrolled in the Paycheck Protection Program are not eligible for these payroll tax credits.

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Published on April 02, 2020