Much has been written about how the CARES Act and Families First Coronavirus Response Act (FFCRA) will help businesses. Nonprofit organizations are included in those relief efforts. We've shared some high level insights into how nonprofits can benefit.
Applies to the employer’s 6.2% portion of the Social Security tax due from 3/28/20 to 12/31/20
-50% payable by December 31, 2021
-Remaining 50% payable by December 31, 2022
Note: deferred payroll tax payments not permitted if the organization has received debt forgiveness on an SBA loan (PPP loan)
EMPLOYEE RETENTION CREDIT
Applies when an organization has been partially or fully shutdown or with a 50% decrease in gross receipts in a quarter compared to prior year.
-For the gross receipts factor, applies until the organization returns to 80% of prior year
Must apply to all aspects of nonprofit organization
Introduces a 50% refundable tax credit for 50% of the wages (including employer’s health plan expenses) paid by the employer up to $10,000 per employee (max $5,000 per employee)
- If an employer has > 100 employees, it applies to the employees not providing services
- If an employer has < 100 employees, applies to all employees paid during the eligible period
Organization not eligible if receive a PPP loan
Provides for advance payment of the credit
PAYCHECK PROTECTION PROGRAM
NOTE: Some of this information may change as regulations are finalized and implemented. We will update as new details become available.
Applies to 501(c)(3) organizations, not to 501(c)(6) organizations
-No apparent exclusion of faith-based organizations (including churches)
For organizations with < 500 employees
-1 person = 1 employee for purposes of the 500 test
Loan
-Amount = lesser of 2.5 months of average payroll (including health benefits) or $10,000,000
-Made by local and national SBA lenders, all FDIC-insured institutions
-Relaxed requirements
-Convert to grants equal to the amount spent on payroll, rent, interest on mortgage, and utilities for the 8 weeks after loan origination if the organization maintains staff levels from March 1 through June 30
Forgiveness
-Amount of loan forgiven is reduced proportionally if the employer reduces the number of Full Time Equivalents (FTEs) or if wages are reduced by > 25%
-If the organization has already reduced the workforce, the organization can call back the employees and restore wages within a 30-day window and maintain levels through June 30 to qualify.
Provides up to $2M of working capital loan
-Based on credit scores
-No tax returns necessary
-Can obtain up to $200,000 without a personal guarantee
-No collateral for loans < $25,000
Interest rate is 2.75% for nonprofits
Payments are deferred up to 1 year
Organization can obtain $10,000 emergency grant within 3 days, no repayment required
-Can obtain and take the $10,000 emergency grant without accepting the EIDL loan
Interacts with PPP loan – if EIDL rolled into a PPP loan, the $10,000 will be deducted from the forgivable loan amount
Organizations < 500 employees are required to provide 10 days of sick leave to:
-Employees who have been diagnosed with COVID-19
-Employees who are caring for a family member with COVID-19
-Employees who are caring for a child during a school closure
Pay
-Pay is at employee’s regular rate up to max of $511/day when the employee has been diagnosed with COVID-19
-Max pay is 2/3 of employee’s rate up to max of $200 per day if caring for a family member
-Payment up to the maximum is reimbursed by the federal government in full
-Leave is in addition to other leave programs provided by the employer
-Businesses with < 50 employees may be exempt from providing leave to care for a child whose school or daycare is closed if providing leave threatens the viability of the business
-Not available if an employee can work from home
Organizations with < 500 employees must provide up to 10 weeks of paid leave if an employee needs to care for a child due to school or daycare closure
Pay
-Max pay is 2/3 of employee’s rate up to max of $200 per day, not to exceed $10,000 in the aggregate
-Leave is in addition to other leave programs provided by the employer
-Payment up to the maximum is reimbursed by the federal government in full
-Businesses with < 50 employees may be exempt if providing leave threatens the viability of the business
-Not available if an employee can work from home
Paid Sick Leave and FMLA Exception: If you can prove one of the following items would occur, you can exempt yourself from FFCRA Paid Sick Leave and FMLA items just mentioned:
The provision of paid sick leave or expanded family and medical leave would result in the small business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity;
The absence of the employee or employees requesting paid sick leave or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities; or
There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee or employees requesting paid sick leave or expanded family and medical leave, and these labor or services are needed for the small business to operate at a minimal capacity.
SEPARATE BENEFITS FOR INDIVIDUALS INCLUDED IN THE CARES ACT
Cash gifts - $300 above the line deduction for charitable deductions, may not be to donor advised fund or supporting organization
100% Charitable Deduction Limit – For 2020, cash gifts to charity (excluding donor advised funds and supporting organizations) are deductible to 100% of AGI. Gift may be for any purpose.
$100,000 IRA Rollover – Owners may withdraw up to $100,000 and recontribute that amount to the IRA within three years for certain circumstances that involve coronavirus. The IRA owner, spouse or a dependent must be diagnosed with COVID-19, the business of the IRA owner must have been closed or damaged due to COVID-19, the IRA owner must have been laid off due to COVID-19, or the IRA owner must be unable to work as well as provide required child care due to COVID-19. Eliminates the pre-age 59 ½ penalty tax on the $100,000 IRA withdrawals and subsequent re-contribution. If not re-contributed within three years, the distribution becomes subject to tax.
Required Minimum Distribution (RMD) Waiver – RMD is waived for IRA and other qualified retirement plan owners for 2020.
Student Loans – Individuals with federally insured loans may benefit from a provision that delays payments for a six-month period. Student loans are not forgiven, but there is no interest or penalty assessed during the six-month period.
Unemployment Benefits - $600 additional amount added to per week amount received by individuals under state unemployment rules. Result could be unemployment payments of over $1,000 per week for a four-month period resulting from combination of federal and state unemployment payments. The state benefits may extend for an additional ten weeks.
Margene Zink, CPA, CGMA
