Qualified Sick and Family Paid Leave Under the Families First Coronavirus Response Act (FFCRA) – Nonprofit organizations are subject to FFCRA if they have fewer than 500 employees. There is a hardship exception for businesses with fewer than 50 employees if the payments made under FFCRA would jeopardize the viability of the business as a going concern. Nonprofit organizations are also eligible for the payroll tax credits allowed in FFCRA to help offset the employee costs. The IRS has created a new Form 7200, which provides the payroll tax credits immediately rather than at the end of the quarter.
Employee Retention Credit under the CARES Act – Nonprofit organizations that qualify are eligible to receive the tax credits. To qualify for the credits, a nonprofit organization’s operations must be fully or partially suspended because of a government order limiting commerce, travel, or group meetings due to COVID-19 during the calendar quarter. The credit against employment taxes equals 50% of qualified wages (up to $10,000 of wages) for each employee. Organizations that receive a loan through the Paycheck Protection Program are not eligible to receive this credit.
Charitable Deduction Changes – To encourage charitable giving for 2020, taxpayers can take a $300 charitable deduction even if they do not itemize their deductions. For 2020, adjusted gross income (AGI) limitations allow individuals to make charitable contributions up to 100% of their AGI. Corporations can deduct charitable contributions up to 25% (up from 10%) of their taxable income during 2020.
Net Operating Losses (NOLs) – Nonprofit organizations that have recently reported losses on Form 990-T may benefit with the changes made to NOLs. For tax years beginning before 2021, the 80% income limitation for NOL deductions is temporarily repealed. For losses arising in tax years 2018, 2019 and 2020, a five-year carryback is allowed. This may present an opportunity to get a refund by carrying back an NOL to a tax year in which taxable income was reported on Form 990-T.
Employer Social Security Tax Deferral – Nonprofits are eligible to defer the 6.2% employer portion of social security taxes that would otherwise be due from March 27, 2020 through December 31, 2020. The first 50% of the deferred amount must be paid before December 31, 2021, and the second 50% of the deferred amount must be paid before December 31, 2022. Nonprofits that receive a loan under the Paycheck Protection Program are not eligible for this deferral.
Paycheck Protection Program (PPP) – Currently, 501(c)(3) and 501(c)(19) organizations, including religious organizations, with fewer than 500 employees are eligible for this SBA program. These loans have been extended to all FDIC insured banks and credit unions and not just SBA approved lenders. Under certain circumstances these loans may be 100% forgivable. Congress is looking to appropriate more funds for these loans.
Economic Injury Disaster Loan (EIDL) Program – The CARES Act was written with the intention that all private nonprofit 501(c), 501(d) and 501(e) organizations can participate in this program. Houses of worship are allowed to participate. This program includes a $10,000 emergency advance that should be provided within 3 days. The $10,000 advance will be treated as a grant and forgiven even if the borrower is denied an EIDL loan. These loans will bear an interest rate of 2.75% for nonprofits, compared to 3.75% for other entities. For eligible organizations, these loans can be refinanced into a PPP loan and forgiven as long as the funds are used in accordance with the PPP requirements. You can apply for a loan under both the EIDL and the PPP.
Mid-Size Loan Program – Largely undefined loan program to be created by the Treasury Department to fill the gap between the PPP for smaller employers and the industry stabilization loans to big business. Nonprofit organizations will be eligible for this program.
State Loan Programs – The Utah Governor’s Office of Economic Development has appropriated $11m of state funds to provide gap funding to Utah’s small business and nonprofit entities. While the first round of funding excluded nonprofit organization, the second round of applications will include 501(c)(3) nonprofit organizations. The second round applications are open from April 13 at 8:00 am to April 16 at noon. These loans will bear 0% interest for up to a 60 month period and payments are deferred for 12 months.
For more assistance with nonprofit financial services, contact Kyle Robbins for audit information and Richard Scoresby for tax information.
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