The SBA announced on April 16 that all of the PPP’s initial funds have been exhausted. Banks may not accept PPP applications unless Congress provides more funding for the program.
The coronavirus pandemic is having a significant impact on our country. From unemployment to government-mandated closings, our nation is suffering. Unfortunately, nonprofits are being hit particularly hard with the fallout from COVID-19. To help lessen the implications, the federal government passed the CARES Act on Friday, March 27. Included in the Act are loan programs and tax provisions to help nonprofit organizations. We’re running a series of articles to help you make sense of the CARES Act and its impact on you.
What Programs Are Available?
The Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) are two loan programs that can help most nonprofits during this crisis. Each program has its own set of guidelines.
First, Who Qualifies?
According to the Act, only certain nonprofit organizations are eligible for the PPP including Section 501(c)(3) charitable organizations and 501(c)(19) veterans organizations.
All 501(c) organizations are eligible for the EIDL program, including trade associations, social clubs, and advocacy organizations that are not otherwise eligible for the PPP. In addition, certain organizations that are tax-exempt under 501(d) (apostolic organizations), or 501(e) (cooperative hospital service organizations) are eligible for the EIDL program.
The terms of the loans are different, and it’s best to review the table we included in our article CARES Act, the PPP and EIDL Explained.
Tax Provisions Which Benefit Nonprofits
Since events, fundraisers and program operations are severely impacted by social distancing, there are additional provisions for nonprofits.
Employee Retention Credit for Employers
All 501(c) organizations are eligible for a partially refundable credit. The credit is calculated as 50% of the first $10,000 of compensation for each employee when certain conditions are met.
- Operations were fully or partially suspended due to a COVID-19 shut down by a government order or
- Gross receipts declined more than 50% when compared to the same quarter in the prior year
The federal government will provide this credit for wages paid or incurred from March 13, 2020 through December 31, 2020.
Payroll Tax Payments Can Be Delayed
As a way to help with cash flow, the CARES Act allows employers, including all nonprofit organizations, to delay their portion of the Social Security tax with respect to their employees. The organization then pays this deferment over the course of two years, with the employer paying the first half by December 31, 2021 and the second half by December 31, 2022.
Benefits for Donors Through CARES Act
All donors, whether they itemize their tax deductions or not, can now deduct $300 for charitable donations. The CARES Act has also lifted the existing cap on annual contribution deductions for those who itemize, raising it from 60% of adjusted gross income to 100%. The Act also raises the cap for corporations from 10% to 25% of taxable income.
We know there is a lot to digest in these rapidly changing times. That’s why we are here to help you. Reach out to your Hantzmon Wiebel team member or complete the form below and we’ll get back with you. We are all in this together.
Disclaimer of Liability
Our firm provides the information in this article for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this blog are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability and fitness for a particular purpose.