Much of the economy is reeling from the novel coronavirus (COVID-19) crisis, and the nonprofit sector is no different. Fortunately, Congress recognized this while drafting the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The law, enacted in late March 2020, contains several provisions that might help distressed nonprofits weather the storm. 

Charitable and veterans’ nonprofits with 500 or fewer employees are among the organizations that qualify for the Small Business Administration’s Paycheck Protection Program (PPP). The program extends two-year, low-interest loans that are subject to 100% forgiveness if certain requirements are met.

The program was set up on a “first-come, first-served basis,” and the first round of funding was claimed in less than two weeks. On April 24, President Trump signed legislation that provides $310 billion in additional funding. That includes $60 billion designated for smaller lenders, such as community banks and credit unions, with the aim of helping smaller organizations that lack relationships with big banks. But, without even more funding, it’s still possible the program could be out of money by the time you’re reading this.

The CARES Act also expands the existing SBA Economic Injury Disaster Loan (EIDL) program to provide small businesses (generally with less than 500 employees) suffering a temporary revenue loss an immediate $10,000 advance upon applying for the EIDL loan. If the loan application is denied, the applicant keeps the advance as a grant. The SBA has simplified the application process and relaxed credit standards.

The program is available to “private nonprofit organizations,” including faith-based organizations. Nonprofits can apply EIDL funds to cover paid sick leave, payroll, mortgage, rent and other debts, as well as increased costs due to disrupted supply chains.

Unlike PPP loans, these loans aren’t subject to forgiveness. The interest rate is 2.75% for nonprofits, and you can receive as much as $2 million. Repayment periods up to 30 years are determined on a case-by-case basis, and payments are automatically deferred for one year.

This program also quickly ran out of money and was also bolstered by the CARES Act amendments, which added $50 billion in loans and $10 billion in grants. But, again, without even more funding, this program may also be out of money by the time you’re reading this.

The CARES Act also creates an Industry Stabilization Fund for nonprofits with between 500 and 10,000 employees that retain or rehire at least 90% of their workforces at full compensation and benefits. The fund will provide loans at an interest rate of no more than 2%, with no interest accrual or repayments for the first six months. 

The law establishes a new refundable credit against payroll tax available to employers whose:

Employers, including 501(c) organizations, with more than 100 employees are eligible for the credit for employees not providing services (or whose hours have been reduced) because of the previously mentioned suspension of operations or reduction in gross receipts. Those with 100 or fewer employees can qualify for the credit whether or not employees are providing services.

The credit equals 50% of up to $10,000 in compensation — including health care benefits — paid to an eligible employee from March 13, 2020, through December 31, 2020. But employers that receive a PPP loan don’t qualify for the retention tax credit.

The CARES Act lets you defer your payment of the employer share (6.2% of wages) of the Social Security payroll tax if you haven’t had debt forgiven through the PPP. You can pay half of the tax by December 31 of each of the following two years: 2021 and 2022.

Some nonprofits will receive reimbursement for 50% of the costs incurred from March 13, 2020, through December 31, 2020, to pay unemployment benefits. The benefit applies to organizations that reimburse their states for benefits paid to former employees, instead of paying unemployment taxes.

The CARES Act temporarily expands the availability of business and individual charitable contribution deductions. Individual taxpayers who don’t itemize deductions can take advantage of a new $300 deduction for cash contributions to qualified charities in 2020. Contributions to donor-advised funds (DAFs) don’t qualify, though.

The CARES Act also loosens the limitations on charitable deductions for individuals’ cash contributions made in 2020, boosting it from 60% to 100% of adjusted gross income. (Again, donations to DAFs are ineligible.) The limit for business rises from 10% to 25% of taxable income. 

These programs are only pieces of a larger puzzle many nonprofits have needed to assemble to make it through these challenging times. Your CPA can help you develop the short- and long-term plans you need to continue your mission and come out healthy on the other side.