Nonprofit Relief Under FFCRA & CARES Act

As of May 18, 2020, the PPP Loan Forgiveness Application is now available on the SBA site. Apply here.

Significant relief in the COVID-19 legislation aims to help nonprofits keep programs on track, provide quick access to cash and support employees.

While you focus on your mission and meet growing demands with already tight budgets and staff, we’ve put together a centralized resource that summarizes the programs available to nonprofits and provides links to applications, rules and regulations. The government’s rapid response to getting these programs in place means details are evolving and mechanisms of implementation are still being built. We hope you’ll check back here frequently for updates as our nonprofit team seeks to support you and your mission during this uncertain time.

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Keep Your Programs and Administration On Track

1. New and increased charitable giving deductions for donors
2. Unemployment claims payment relief
3. Waivers to relax Federal (OMB) grant reporting and administration
4. However, tax filing deadlines for nonprofits were not extended

Keep Your Cash Flowing

1. Paycheck Protection Program
2. Economic Injury Disaster Loan Program
3. Mid-Size Business Loans

Keep Your Employees On Board

1. Refundable payroll tax credits for paid sick and family leave
2. Employee retention tax credits
3. Student loan forbearance and interest reductions

Contact these professionals: Insurance representative, the Department of Labor, Federal award agencies

Charitable Giving Deductions Increase

Dozens of corporations are mobilizing for COVID relief efforts. Nike has pledged $15 million in support to food banks and medical research. AT&T is donating $10 million to keep students connected for distance learning. Time permitting, nonprofits should connect with local foundations where several COVID-specific funds have been established.

Donors are being encouraged under the CARES Act to give. Individuals taking the standard deduction will receive a tax benefit of up to $300 ($600 for couples) for donations made in 2020. For itemized filers, the previous 60% AGI limitation was increased to 100%, effectively suspending the limit on the deduction amount available.

For corporations, the general donation cap increased from 10% to 25% and the food donation cap increased from 15% to 25%, further allowing companies to maximize their charitable good.

All of these changes are applicable for the 2020 tax year and provide a great opportunity to connect with donors and show them the impact of those funds.

Unemployment Insurance and Claims Relief

While the CARES Act extends benefits for employees – including a waiting period waiver, $600 per week more than the state benefit for up to 4 months, and up to 13 additional weeks of payments after state benefits are exhausted – many nonprofit employers are self-insured and could face skyrocketing costs if much of their workforce is laid-off.

Due to this potential, if you are a reimbursing employer, the federal government will offset 50% of the cost of those unemployment claims.

Unemployment laws vary by state and sometimes municipality, so make sure to visit your respective state’s website for the most up-to-date processes and procedures.

• Alaska
• California
• Oregon

Federal Assistance Recipients Receive Relief

Recipients of Federal assistance awards that face cash flow shortages and a loss of operational capacity are receiving relief in the form of reduced administrative burden.

The Office of Management and Budget (OMB) directed federal grantors to continue funding organizations and enacted the following provisions:

• No-cost extensions on expiring awards for up to 12 months
• Continued allowable costs for salaries and activities required to resume projects
• Relaxed allowable cost requirements (costs for cancellation of events, travel, etc.)
• Grant reporting extensions up to 3 months
• Single audit submission extension of 6 months

Additional items within the full memorandum can be viewed here. These provisions are aimed at offering short-term relief and will be reassessed by OMB in 90 days. Contact your grantor or awarding agency should any of these waivers become necessary.

IRS Informational Filings

It is important to know that while the IRS extended filing and payment deadlines for individuals and other filers, there is currently no additional extension for submitting the Form 990 informational returns due to COVID-19. However, organizations may still apply for the traditional, automatic six-month extension.

Contact these professionals: Your banker, CPA, and attorney

Three loan programs in the CARES Act aim to bolster bank accounts and incentivize you to keep employees working. The Council of Nonprofits prepared a clear summary of these programs here.

Paycheck Protection Program

The program getting the most attention is a forgivable loan designed to help you keep employees on payroll. Apply here for the Paycheck Protection Program. Your local, FDIC-insured bank will facilitate this forgivable loan program. It is available to businesses and 501(c)3 nonprofits with fewer than 500 employees, as measured by headcount, and provides 2.5 times your total monthly payroll up to $10 million. Complete loan forgiveness of principal is possible if you maintain employment levels for eight weeks after loan origination. Interest rates are fixed at 0.5% with a six-month payment deferral, although interest will accrue during this time.

Economic Injury Disaster Loan Program

Finding yourself in a sudden cash crunch? A second program puts cash in your account in three days. The SBA Economic Injury Disaster Loan (EIDL) program allows you to take a $10,000 advance on a traditional SBA loan, with a 3.75% interest rate on up to $2 million. Up to $200,000 is available without a personal guarantee. Apply here for the EIDL Program.

Mid-Size Business Loans

Nonprofits larger than 500 employees can access the Industry Stabilization Fund. Unlike the emergency SBA loan program, this loan does not provide forgiveness but does mandate an interest rate of no higher than 2%, not to accrue or be required to pay for the first six months. Nonprofits accepting these loans must retain or rehire at least 90% of staff at full compensation.

Keep in mind, regulations and rules related to these programs continue to be written and updated. Continue checking here for updates.

Contact these professional: Payroll provider, CPA, attorney, and Department of Labor

Paid Sick and Family Leave & Refundable Payroll Tax Credits

As of April 1, 2020, COVID-related family and sick leave rules are in effect under the Families First Coronavirus Response Act (FFCRA). You must post this notice in a conspicuous place, and if your employees are working remotely, then consider email or direct mail to your employees, or an internal or external website.

Tax credits related to the FFCRA are allowed against the employer portion of payroll taxes and any paid leave costs that exceed the amount of payroll taxes owed and will be refunded to the employer at the end of each quarter. In other words, the federal government will cover all or a portion of the costs of the FFCRA paid leave requirements.

While there are specific eligibility requirements for each credit, general guidelines are:

• Paid Sick and Family Leave Credit – Credits up to $511 per day for employees in self-isolation or up to $200 per day for employees caring for a family member or with a closed school or child care center for a maximum of 10 days
• Paid Family Leave Credit – Capped at $200 per day and $10,000 each quarter

Read more on the IRS website.

Also, organizations may delay payment of the employer’s share of payroll taxes from March 27, 2020, through the end of the year as long as half of the amount due is paid by December 31, 2021, and the other half is paid by December 31, 2022.

Employee Retention Tax Credits

As a way of providing longer-term relief, the employee retention credit is equal to 50% of the first $10,000 of qualified wages, up to $5,000 per employee per quarter.

Eligibility requirements state that you must:

• Be an ongoing concern at beginning of 2020
• Experience whole or partial shutdown
• Experience a revenue drop of at least 50% in Q1 2020 compared to Q1 2019

The refundable amount would be treated as a refundable overpayment and you may not receive credits for the same wages if claimed under the FFCRA. It is also important to know that you are not eligible for this credit if receiving a PPP loan, so it is important to determine which is more advantageous to your organization.

Read more on the IRS website.

Student Loan Relief

Student loans are a burden for many so effective automatically, these federal loans are reduced to a 0% interest rate and wage garnishment and debt collections have stopped through September 30, 2020. Additionally, borrowers can talk to their loan servicer and go into forbearance through September 30, 2020, meaning that payments are paused and interest will not accrue. This also means that for those utilizing public service loan forgiveness (PSLF) who may be your employees, payments are reduced from 120 to 114 as a way to keep goals on track. This does not apply to some federal loans or private student loans.

There are many choices that nonprofits can make and it is important to analyze all the options based on your specific circumstances. Make sure you ask your team of advisors the following questions:

• Is it better to obtain a loan or receive payroll tax credits?
• To what extent should the Board be involved in these decisions?
• What is our communication plan to employees and stakeholders?

We will continue updating this information and sharing insights in support of you and your mission. The Aldrich Nonprofit team is here to be a trusted resource and help you navigate these uncertain times. If you have any questions or would like to run through the options for your organization, please contact your Aldrich Advisor.