In response to the recent COVID-19 pandemic, the federal government has passed legislation to assist businesses, including nonprofit organizations, cope with the current economic disruption.
This webpage will be regularly updated to provide nonprofits with information they will need to avail themselves of this relief.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act creates several loan programs that certain nonprofits are eligible for. The loan programs are intended to help businesses continue to operate during this financially difficult time. Additionally, they are meant to help businesses continue to employ their workers so that individuals can keep their jobs during this time of uncertainty.
In Addition to loan programs, the CARES Act and the Families First Coronavirus Response (FFCR) Act create additional benefits to nonprofit organizations in the form of payroll tax credits, tax filing and deposit extensions, reimbursements for unemployment benefits given to employees, and tax relief to individuals and corporations to encourage donations to charitable organizations. In response to these Acts, California has also created a program to assist employers in maintaining their workforce and has extended tax filing and deposit deadlines.
The programs available to nonprofit organizations described below are:
- Paycheck Protection Program
- Economic Injury Disaster Loan Program
- Mid-Size Loan Program
- Payroll Tax Credits
- Tax Filing and Deposit Extensions
- Unemployment Benefits
- Charitable Donation Incentives
The Law Firm for Non-Profits is here to help you through this difficult time. If you your organization would like assistance with any of the loan programs or other benefits available to nonprofits, please feel free to reach out to us for assistance.
Paycheck Protection Program for Nonprofits
What is it?
- A forgivable loan program available to nonprofits created by the CARES Act
Who is eligible?
- 501(c)(3) and 501(c)(19) Nonprofit organizations with 500 or fewer employees (including both part-time and full-time employees)
- Self-employed individuals
What are lenders looking for?
- The COVID-19 pandemic has made the loan request necessary to support your organization’s ongoing operations
- Your organization will use the loan proceeds to retain workers and maintain payroll or make mortgage interest, lease, and utility payments
- Your organization doesn’t have a loan application pending to help pay for the same expenses that this loan will pay for
- Your organization has not, or will not receive a loan to pay for the same expenses from February 15, 2020 to December 31, 2020
How much can be borrowed?
- Nonprofits can borrow up to 250% of their average monthly payroll costs
- The amount borrowed cannot to exceed $10,000,000
What is included in monthly payroll expenses?
- Salaries, wages, commissions, or similar compensation
- Cash tips or the equivalent
- Payments for vacation, parental, family, medical, or sick leave
- Separation or dismissal allowances
- Payments of retirement benefits
- Payments of state or local taxes assessed on employee compensation.
- The following are not included in this calculation:
- Compensation of an individual employee in excess of an annual salary of $100,000 (prorated for the period February 15, 2020 to June 20, 2020)
- Federal payroll and income taxes
- Compensation of employees who reside outside of the United States
- Qualified leave wages for which a credit is allowed under the Families First Coronavirus Response Act
- For self-employed individuals, the amount is capped at a yearly income of $100,000, pro-rated for the covered period
What can the loan be used for?
- Payroll, including health care benefits
- Interest payments for mortgages and other debt obligations incurred prior to February 15, 2020
- Rent and utilities
When must the loan be paid back?
- The loan term is 2 years
- Payments can be deferred for 6 months
What is the interest rate on the loan?
- The interest rate is 1%
Will the loan be forgiven?
- Loan forgiveness is available for the amount spent on the following during the 8-week period beginning on the date of the origination of the loan (not to exceed the principal balance of the loan):
- Payroll costs (using the calculation set forth below)
- Interest on mortgage obligations
- Rent
- Utilities
- Additional wages paid to tipped employees
- Loan forgiveness is dependent on maintaining your organization’s staff and payroll
- The amount of loan forgiveness will be reduced proportionally if your organization decreases the number of full-time employees it has
- The amount of loan forgiveness will also be reduced dollar-for-dollar if your organization decreases the salaries and wages of its employees by more than 25% for any employee making less than $100,000 annually
- Your organization has until June 30, 2020 to restore its full-time employment and salary levels, if it made any changes between February 15, 2020 and April 26, 2020
How does my organization apply?
- Applications will be processed through SBA-approved lenders (i.e., banks)
- Individual lenders will have different application requirements
- Reach out to your bank to request loan applications
Economic Injury Disaster Loans
What is it?
- An existing SBA-administered loan program made available to nonprofits by the CARES Act
- Although this loan is not forgivable in its entirety, an organization can request a $10,000 advance upon applying that does not have to be repaid
Who is eligible?
- Nonprofit organizations that are tax-exempt under Section 501(c) and that:
- Have been directly affected by the pandemic
- Offer services directly related to the pandemic or
- Are indirectly related to businesses that are likely to be harmed by the pandemic
- Self-employed individuals who:
- Have been directly affected by the pandemic
- Offers services directly related to the pandemic or
- Are indirectly related to businesses that are likely to be harmed by the pandemic
How much can my organization borrow?
- The SBA will determine how much each organization can borrow based upon perceived need
- The amount cannot exceed $2,000,000
What can the loan be used for?
- Payroll
- Fixed debt payments
- Accounts payable
- Other extraordinary expenses caused by the disaster
When must the loan be paid back?
- The payback period is a maximum of 30 years
- A one-year payment deferral is available
What is the interest rate on the loan?
- The maximum interest rate for nonprofits is 2.75%
How does my organization apply?
- Organizations will need to apply directly with the SBA
What will the SBA be looking for?
- The organization’s credit history,
- Its ability to repay the loan,
- How much collateral the organization has, and
- Its financial statements, tax returns, and other requested financial information.
How soon can my organization get funds?
- Organizations may request an emergency advance from the SBA of up to $10,000 within 3 days of the application
- The advance does not have to be repaid, even if the loan application is later denied
Mid-Size Loan Program
What is it?
- A loan program created by the CARES Act available to mid-size nonprofit organizations
Who is eligible?
- Mid-size businesses, including nonprofits, that have between 500 and 10,000 employees
- Organizations must retain 90% of their workforce at full wages and benefits through 9/20/2020
How much can my organization borrow?
- The government has not yet defined how much will be available to organizations
What can the loan be used for?
- The funds will need to be used to retain and restore employment
When must the loan be paid back?
- The government has not yet defined the maximum payback period
- A 6-month payment deferral will be available
What is the interest rate on the loan?
- Interest will be capped at 2%
How does my organization apply?
- Applications will be with approved financial institutions
- More regarding the application and documentation needed will be announced at a later time
Payroll Tax Credits
What payroll tax credits are available to my organization?
- The FFCR Act created additional paid leave for employees and additional payroll tax credits for employers
- Employers required to provide their employees with paid leave under the FFCR can receive payroll tax credits in the amount of paid leave given
- The CARES Act creates an employee retention credit for employers who had to shut their businesses down or who have lost 50% of their revenues as a result of the coronavirus
How much can my organization receive in payroll tax credits?
- Under the FFCR Act, an employer can receive three types of payroll credits
- Employers can receive a credit for paid sick leave given to an employee who has personally been affected by coronavirus, up to $5,110 per employee
- Employer can receive a credit for paid sick leave given to an employee who has missed work to care for another individual or a child whose school was closed, up to $2,000 per employee
- Employers can receive a credit for paid family medical leave for employees who have missed work for a child whose school was closed, up to $10,000 per employee
- See our blog post for more information regarding these credits
- Under the CARES Act employee retention credit, employers can receive up to $5,000 per employee (calculated based upon 50% of an employee’s wages and healthcare benefits)
Tax Filing and Deposit Extensions
What are my tax filing and deposit requirements with the IRS?
- The tax filing date on Form 990 this form remains the same, however, you can request an extension using Form 8868
- If your organization has closed temporarily or has had a significant decrease in revenues, you can delay depositing the employer portion of Social Security taxes for 60 days
- This does not apply to the employee portion of Social Security taxes or Medicare taxes
What are my tax filing and deposit requirements with the state of California?
- Form 199 is due on May 15, however, you can request an extension with the Franchise Tax Board
- Employers experiencing a hardship can request a 60-day extension to file state payroll returns and deposit state payroll taxes
Unemployment Benefits
What Unemployment Insurance benefits are available to my organization?
- The California Employment Development Department (EDD) has created a work sharing program to help employers maintain their workforce
- Through the work sharing program, the EDD will supplement employees’ salaries with UI benefits for employees who have had their hours reduced or who have been temporarily suspended
Charitable Donation Incentives
How do the charitable donation Incentives help my organization?
- The CARES Act allows above-the-line deductions for individuals up to $300, with the intent that this will encourage individuals to donate
- The CARES Act also removes the cap on annual contributions for individuals who itemize and raises the annual limit from 10% to 25% for corporations