Last week, Congress passed, and President Trump signed, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2 trillion economic stimulus bill aimed at reinvigorating the tumbling economy and providing direct financial relief to most Americans. This was the third and largest rescue package signed into law in the past month.
Of the hundreds of provisions in the three relief bills, several would help foundations and grantees deal with the impact from the virus, both for donors and for nonprofit employees.
Government agencies are working on swift implementation of the new policies. Up next, Democratic lawmakers led by House Speaker Nancy Pelosi (D-CA) are eagerly looking ahead to a fourth relief package.
Just yesterday, Senate Majority Leader Mitch McConnell (R-KY) threw cold water on Democrats’ hopes to address the crisis by boosting infrastructure spending and social programs, saying “I’m not going to allow this to be an opportunity for the Democrats to achieve unrelated policy items they wouldn’t otherwise be able to pass.” So, a rumble could be coming.
In the interim, ACR is gathering feedback from foundations and donors to help lawmakers understand how the first round of relief is landing in the sector and identify where the gaps might be.
The Philanthropy Roundtable held a webinar on the response bills on Friday, March 27th, which you can find here. WEBINAR CLARIFICATION: Nonprofits with 500 employees or fewer are eligible for the emergency small business loans and economic injury disaster loans, for which organizations can receive $10,000 in three days. Both can be forgiven. Nonprofits with more than 500 employees are eligible for mid-sized business loans, but those loans are not eligible for forgiveness.
Below is an overview of new laws aimed at incentivizing more cash gifts and easing financial strain on nonprofits to keep workers on the payroll.
Encouraging Gifts of Cash
Temporary Universal Charitable Deduction for All Taxpayers
All taxpayers who don’t itemize their deductions will now have access to an above-the-line charitable deduction, up to $300, for cash gifts made in 2020, meaning all taxpayers now have an incentive to give to charity in a year when it’s badly needed.
ACR has been advocating for a universal charitable deduction for several years, along with the Charitable Giving Coalition that ACR helped start. As you may recall, only about 10 percent of taxpayers have access to the charitable deduction, so this provision, while only temporary for now, extends at least some benefit to all taxpayers.
Donors Who Itemize Can Take a Bigger Charitable Deduction
For 2020, individuals who itemize their taxes can now deduct up to 100 percent of their AGI for cash gifts, up from the previous cap of 60 percent. For example, if your income is $1 million, you were previously allowed to deduct up to $600,000 in cash gifts, but now you can deduct up to $1 million in 2020.
Easing Financial Strain on Nonprofit Employers
Emergency Paid Sick and Paid Family Leave
Nonprofit employers with fewer than 500 employees are now required to provide paid sick leave of two weeks for full-time employees and average hours for part-time employees directly affected by the virus. In return, they will receive a refundable tax credit for 100 percent of the wages paid, capped at $511 per day and $7,156 total per employee. Eligible employees include:
- An employee who contracts the virus
- An employee receiving preventative care for the virus
- An employee who has a family member meeting either condition previously listed
- An employee who has a child whose school or childcare provider is unavailable due to the virus
Nonprofit employers with fewer than 500 employees are also required to provide 12 weeks (10 weeks paid at two-thirds of their wages) of job-protected leave to employees to care for a child whose school or place of care is unavailable. In return, employers will receive a 100 percent tax credit for wages required to be paid, capped at $200 a day for up to 50 days.
These credits can be applied against payroll taxes, so nonprofits will receive the benefit. Nonprofits with more than 500 employees are exempt, and nonprofits with 50 employees or less can be granted an exemption from the Department of Labor. For more information on these credits, visit the IRS website at https://www.irs.gov/.
Emergency Loans to Keep Nonprofits Open
Nonprofits with 500 employees or fewer have access to special Emergency Small Business Administration loans, up to $10 million, to cover payroll and associated costs. Nonprofits who maintain employment in the second quarter can have their loans at least partially, if not fully, forgiven. Nonprofits that opt for an Employee Retention Payroll Tax Credit are not eligible for this loan program. You can check out an overview of the program from Treasury here.
Nonprofits also have access to an additional $10 billion in Economic Injury Disaster Loans, and eligible applicants can get a check for $10,000 in three days of application. Creditworthiness requirements are eliminated for this program.
For more information on these programs, visit the SBA website at https://www.sba.gov/.
Loans to Keep Larger Nonprofits Afloat
The CARES Act created an Industry Stabilization Fund, a loan and loan guarantee program to help industries remain solvent, including $425 billion for businesses that have yet to receive loans or loan guarantees in from other parts of the legislation. Nonprofits that have between 500 and 10,000 employees are expressly eligible for mid-sized business loans in this section if they retain at least 90 percent of their staff at full compensation. These loans are not eligible for forgiveness and nonprofits that take advantage of other assistance measures in the bill are not eligible for these loans. For more information on this program, visit the Treasury website at https://treasury.gov/.
So to clarify, nonprofits with 500 employees or fewer are eligible for the emergency small business loans, and economic injury disaster loans for which organizations can receive $10,000 in three days. Both can be forgiven. Nonprofits with more than 500 employees are eligible for mid-sized business loans, but those loans are not eligible for forgiveness.
Tax Credits to Encourage Nonprofit Employers to Maintain Their Payroll
Nonprofits are eligible for a refundable payroll tax credit if the organization saw a 50 percent drop in revenue in the first quarter of 2020 compared to the first quarter of 2019. The credit eligibility would continue each quarter until revenue exceeds 80 percent of the same quarter in 2019. The credit is equal to 50 percent of the employee’s wages, up to $10,000 in wages. Nonprofits that receive emergency SBA loans are not eligible for this credit. For more information on this program, visit the IRS website at https://www.irs.gov/.
Delay in Payroll Tax Payments for Nonprofits
Nonprofit employers can stretch out payments of their share of Social Security payroll taxes owed from the time between enactment (March 27th) and December 31, 2020, with half of the amount due by December 31, 2021 and the other half due December 31, 2022. Nonprofits who receive payroll protection loans that are forgiven under the act are not eligible for this delay. For more information on this program, visit the IRS website at https://www.irs.gov/.