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What loan and grant assistance is available for non-profits?

Paycheck Protection Program

Congress recently passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which provided $349 billion for the new Paycheck Protection Program (PPP).  On April 23, Congress allocated an additional $310 billion for PPP, which included set-asides of $30 billion for small- and mid-sized lenders and $30 billion for Community Development Financial Institutions, Minority Depository Institutions, and other community-based lenders to ensure eligible small businesses can access this critical funding and are not turned away by financial institutions. 

Under this program, non-profits with 500 or fewer employees may access loans to cover payroll costs and most rent, utilities, and interest on mortgage obligations.  If at least 75 percent of the loan is used for payroll costs over the eight-week period after the non-profit receives the loan, and the non-profit maintains its employment and compensation levels, the full loan can be forgiven.

These Small Business Administration (SBA) loans are capped at $10 million, are 100 percent federally guaranteed, and have no fees.  Any amount of the loan that is not forgiven will carry a two-year term and a one percent interest rate.

Non-profits interested in securing a PPP loan should contact their primary financial lender (and not the SBA portal).  The following non-profits with 500 or fewer employees are eligible for PPP loans:

  • 501(c)(3) non-profits; or
  • 501(c)(19) veterans organizations.

Non-profits can learn more about the program HERE.

Economic Injury Grants

The newly-enacted law created an advance of up to $10,000 for non-profits that apply for an SBA Economic Injury Disaster Loan (EIDL).  The legislation Congress passed on April 23 also provided additional funds to ensure SBA can continue to offer these grants and loans.  The advance does not need to be repaid, and it can be used to pay for certain expenses that could have been met, had the disaster not occurred, including paid sick leave to employees, maintaining payroll, meeting increased costs to obtain materials, making rent and mortgage payments, and repaying obligations that cannot be met due to revenue losses.  If a non-profit also obtains a PPP loan or refinances an EIDL into a PPP loan, any advance will be subtracted from the amount forgiven in the PPP loan.

The following non-profits with 500 or fewer employees are eligible for EIDLs:

  • 501(c)(3) non-profits;
  • 501(c)(19) veterans organizations;
  • Private non-profits with an effective ruling letter from the IRS, which grants tax exemption under sections 501(c), (d), or (e) of the Internal Revenue Code of 1954; or
  • Private non-profits that can provide satisfactory evidence from their state that they are a non-profit organized or doing business under state law.

Non-profits can learn more and apply HERE.

What tax relief is available for non-profits?

Employee Retention Tax Credit

Congress also recently created an Employee Retention Credit with the goal of incentivizing employers affected by COVID-19 to keep employees on their payroll.  The fully refundable tax credit is 50 percent of employees’ qualified wages paid in a calendar quarter by employers impacted by COVID-19.  The credit is provided for up to $10,000 in wages and compensation paid by the employer to each eligible employee.

For employers with 100 or fewer full-time employees in 2019, all wages paid can be claimed under the credit.  For employers with more than 100 employees, qualified wages are only those paid to employees who are not working.  This credit is available to companies whose operations have been fully or partially suspended as a result of government orders related to COVID-19 or who have experienced a greater than 50 percent reduction in quarterly receipts on a year-over-year basis.  Non-profits that take this tax credit are ineligible for the Paycheck Protection Program.

Non-profits can learn more about this tax credit HERE and HERE.

Deferment of Employer Payroll Taxes

Under the new law, non-profits may defer paying the employer share of the Social Security portion of Federal Insurance Contributions Act (FICA) payroll taxes through the end of 2020.  All 2020 deferred amounts would be due in two equal installments.  One installment would be due at the end of 2021 and the other at the end of 2022.  Employers utilizing the Paycheck Protection Program (PPP) may no longer use this deferral once a lender decides to forgive the PPP loan.

The IRS has more information on Deferral of Employer Payroll Taxes HERE.

Tax Credit for Sick Leave and Child Leave

The Families First Coronavirus Response Act created refundable tax credits for required paid sick leave and paid child care leave related to COVID-19.  Eligible employers may receive a refundable sick leave credit for providing up to 80 hours of sick leave (up to $511 per day) per employee.  The refundable child care leave credit cannot exceed $200 per day, or $10,000 in aggregate, for each employee taking such leave.  Employers that use these tax credits cannot include the relevant wages as payroll costs for purposes of receiving loan forgiveness for a PPP loan.

Non-profits can learn more about this credit HERE.

What other relief is available for non-profits?

Above-the-Line Deduction

The CARES Act allows individuals to take up to a $300 above-the-line deduction for charitable donations.  It also raises the existing limits on charitable deductions for corporations and individuals who itemize.

Emergency Unemployment Relief for Non-Profit Organizations

The CARES Act reduces by 50 percent the amount most non-profits, Indian Tribes, and governmental entities are required to reimburse states for benefits paid to their workers who claim unemployment insurance.

Are faith-based organizations eligible to receive PPP loans and EIDLs?

Yes.  The SBA has announced that faith-based organizations, including houses of worship, are eligible to receive these SBA loans regardless of whether they provide secular social services.

Faith-based organizations can learn more about their eligibility for SBA loans HERE.