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How Nonprofits Can Benefit From the CARES Act

cares act coronavirus causemic

On Friday, March 25th, the House passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the President signed it into law on Sunday, March 27th. This $2 trillion economic stimulus package will provide immediate relief for nonprofits, businesses, individuals and state and local governments. This is the largest federal relief package in history. There’s a lot of jargon surrounding the house bill, so we’ve broken  it down and kept the focus on nonprofit aid.

1. Paycheck Protection Program

The Paycheck Protection Program (Section 1102) is an emergency loan program for nonprofit and for-profit organizations with 500 employees or fewer to secure funds to pay staff and operating costs for two months, and secure full loan forgiveness under certain circumstances. 

Need for the loan must be based on financial conditions, and the funds must be used to retain workers and maintain payroll or make mortgage, lease, and utility payments; without duplicate application or receipt of funds for same purposes. The Paycheck Protection Program cannot be used for compensation of individual employees, independent contractors, or sole proprietors in excess of an annual salary of $100,000. 

This program is expressly made available for nonprofits with 500 or fewer employees, but it requires that employees of affiliated nonprofits be counted toward the 500 employee cap. The law does not disqualify nonprofits that are eligible for payments under Title XIX of the Social Security Act. 

The Small Business Administration has until April 11 to announce its guidance before organizations can begin the application process. Congress appropriated $349 billion for this program.

2. Expanded Economic Injury Disaster Loan (EIDL) & Emergency Grants

The Expanded Economic Injury Disaster Loan (EIDL) (Section 1110) is a loan built off of the existing EIDL and expanded to more for-profit entities. It also applies looser credit standards, with a rapid grant procedure that could put $10,000 in a nonprofit’s hands within three days to cover sick leave, meeting payroll, increased costs due to disrupted supply chain, mortgage, and debt service.

Not every charitable organization qualifies for the EIDL program, but it’s a valid option for many. Eligible private nonprofits include, without limitation: nursing homes, food kitchens, educational facilities, senior citizen centers, daycare centers, playhouses, and shelters, among others. The CARES Act set aside $10 billion total for the coronavirus disaster EIDL.

3. Mid-Size Loan Program

The Mid-Size Loan Program (Section 4003) has yet to be designed and built, so this option will take longer to access than the Paycheck Protection Program or the Expanded EIDL, but may be the right fit for nonprofit entities with between 500 and 10,000 employees. This loan was designed to ensure organizations can retain at least 90 percent of their workforce. 

Like the Paycheck Protection Program, need for the loan must be based on financial conditions, to be used to retain and restore employment, without collective bargaining agreements, and will remain neutral in union organizing efforts. 

Loan forgiveness is expressly prohibited in statute Section 4003(d)(3).  

4. Tax Deductions for Charitable Contributions

There is a temporary one-year charitable tax deduction of up to $300 available to taxpayers who claim the standard deduction (i.e. not itemize) when filing taxes, applicable for 2020 and beyond. 

Charitable contributions made by corporations will be limited to 25 percent of taxable income, as opposed to the current 10 percent limitation, and food donations from corporations would be available to 25 percent, up from the current 15 percent cap.

5. Enhanced Charitable Deduction For Taxpayers Who Itemize

Individuals who itemize their taxes are now able to deduct up to 100 percent of their charitable contributions in 2020, rather than the usual 50 percent limitation. 

We are seeing continued charitable support from individuals in three campaigns we’ve helped stand-up for our clients responding to the coronavirus. We are here to help you pivot your fundraising strategy during these uncertain times. 


 

Check your eligibility, learn more about benefits, and explore answers to the frequently asked questions in our free CARES Act guide designed specifically for nonprofits.