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Due to the unprecedented times we live in, many nonprofit organizations worldwide are facing financial difficulties from restricted visitors, canceled tours and spring events, and the loss of donations due to uncertain markets and lost jobs. In response, the United States government has created a number of programs to help nonprofit organizations who are struggling to pay the bills.
The CARES ACT Paycheck Protection Program (PPP Loan)
This program was launched as of April 3, 2020 in order to help United States-based 501(c)(3) organizations with 500 or fewer employees keep their staff employed during this time. It can also be utilized by self-employed individuals, sole proprietors, and independent contractors. The program has a funding pool of $349 billion, and once this runs out, the program is currently set to conclude. This means that if you think you should apply for this program, you should do so quickly. For more official information on this loan, check out this link.
Most compellingly, this loan can be forgiven if your organization verifies that you used it for qualified expenses between February 15, 2020 and June 30, 2020.
This program offers the lesser of either loans up to $10 million, or 2.5 times the average monthly organizational payroll from 2019. You cannot calculate payroll compensation above $100,000 annually.
In order to stay within the loan’s terms, you must certify that you will use the loan to keep workers employed, maintain payroll, offer paid leave, or use the loan to make mortgage, lease, or utilities payments. You can also use it to pay off mortgage interest and other debt interest, as long as the debt existed before February 15, 2020. All lenders may provide these loans, regardless of whether you have loans out in other institutions, without any collateral required. And fees, principal, and interest can be deferred for at least six months, but not more than one year.
For organizations who have already laid off some employees after February 15, 2020, the loan can still be considered for partial or full forgiveness if they are rehired with a restored salary before June 30, 2020.
Organizations can apply at their bank or lender (as long as they’re SBA-certified), which will have more details on the process as it currently stands. You should have a conversation with your organization’s leadership to ensure that this is the right move for your sanctuary before applying, as there are terms to follow and paperwork to be compiled. The official application for this program can be found here.
Deferral of Payment of Employer’s Social Security Taxes
As of this resource’s publishing date, if your organization does not take advantage of the Paycheck Protection Program (above), you may defer your share of Social Security taxes for the period of time between March 27, 2020, and December 31, 2020. You will instead owe 50% of these taxes by December 31, 2021, and the other 50% by December 31, 2022.
Employee Retention Tax Credit
As of this resource’s publishing date, if your 501(c)(3) organization does not take advantage of the Paycheck Protection Program (above), you will generally be entitled to a tax credit equal to 50% of of “qualified wages” for each employee receiving payroll. This credit can be taken immediately against the employer’s portion of Social Security taxes that are due, and potentially other federal employment tax obligations as specified by the IRS. If the employer cannot claim the entire credit against applicable taxes due, excess credit will be treated as an overpayment and will be refunded by the IRS.
According to this program, these are “qualified wages”:
- For employers with 100 or fewer full-time employees, all wages are qualified.
- For employers with more than 100 full time employees, wages paid to employee not performing services due to COVID-19 changes (for instance, a suspension of operations) are qualified.
- The maximum total wages considered are capped at $10,000 (meaning the max credit is $5000 per employee)
- The credit calculation includes an employer’s “properly allocable” qualified health plan expenses with respect to the employee
- Wages considered under paid
- Sick and family leave (which receive a separate credit) are excluded from “qualified wages”.
This credit can not be doubled up with a work opportunity credit, nor an employer credit for paid family and medical leave (added in the 2017 tax reform legislation).
Economic Injury Disaster Loan and Grant Program (EIDL)
The CARES Act also expands the Small Business Association’s Economic Injury Disaster Loan program, which “Private nonprofit organizations” that have been operating on January 31, 2020 may apply for. “Private nonprofit organization” is not defined currently within the parameters of the EIDL program.
Within this program, an organization may apply for up to a $2 million loan, which can only be used for expenses that could’ve been met had the COVID-19 outbreak not happened, such as employee payroll and other specific expenses. The loans have up to a 30 year term and the nonprofit interest rate is 2.75%, the principal and interest of which can be deferred for up to 4 years. These loans don’t require personal guarantees if asking for less than $200,000, nor is there a requirement that applicants must demonstrate that they cannot obtain credit elsewhere or that they have the means to repay the loan.
Although the EIDLs are not eligible for loan forgiveness, up to $10,000 of the loan may be applied for as a grant, as long as the applicant legally affirms that its use is within the parameters of the grant program. Grants can be used for any allowable purpose, including sick leave due to COVID-19 related issues, maintaining payroll during downtimes, increased costs due to supply chain interruptions, rent and mortgage payments, and repaying other obligations that can’t be met at this time.
State, Local, Or Regional Community Foundation Grants & Emergency Relief
Organizations should do research in their area to see if any foundations specifically geared to serve the community in which they reside are offering financial aid or relief which they may qualify for. These will be highly regional (or even local), and will likely require a bit of research, but could prove to be invaluable during this time.
We will continue to update this resource as economic measures are developed and updated.