Financial Help for Nonprofits During Covid-19

Congress has passed three different pieces of legislation to help address the wide-ranging impact of Coronavirus. Several components of those new laws can help nonprofits survive and hopefully retain employees during this time of great challenges.

While we at Safe Routes Partnership are not legal or financial experts, we do follow Congressional action closely. We thought it would be helpful to round up what we see as the most important options for nonprofits in the Safe Routes space looking for ways to stay solvent and keep their staff. Below we’ve listed several federal programs and opportunities worth looking into, along with links for more information.

Paycheck Protection Program:  Paying for two months of payroll (a loan that becomes a grant!)

Passed last week as part of the CARES Act, the Paycheck Protection Program builds on the Small Business Administration’s emergency 7(a) loans to make them more widely available. Key things to know:

  • The loan can pay for 8 weeks of employee salary, benefits (health insurance and retirement contribution) and payroll costs plus mortgage, rent, and utility costs. It excludes payroll costs for employees making more than $100,000.   
  • If you retain your staff through June 30, 2020 – any loan proceeds used to pay those 8 weeks of payroll and mortgage/rent will be completely forgiven. If you lay off staff, the amount forgiven will be reduced proportionately.
  • 501(c)3 nonprofits and small businesses with less than 500 employees are eligible, along with 501(c)19 veterans organizations. Other types of nonprofits including 501(c)4 and 501(c)6 are not eligible.
  • Most of the prior loan requirements, such as having to personally guarantee the loan or provide collateral, have been waived.
  • The maximum loan size is 2.5 times your average monthly payroll, up to $10 million.
  • If there are remaining funds on your loan, it has a term of 2 years and an interest rate of 1%. (The interest rate changed from 0.5% on 4/3/20). There are no fees to take out the loan, and any repayment is deferred for six months.
  • In other words – if you are a small nonprofit looking for a way to retain your staff, the federal government will effectively pay for your payroll for two months to avoid you having to lay off your staff.

For more information:

  • The Small Business Administration has information and a sample application on their website
  • You apply through a local lender, so contact your existing bank to see if they are participating. Applications open on Friday, April 3 and the money ($350 billion) is expected to go quickly. So please contact your banker ASAP!

Sick and Family Leave Paid by the Government

Passed as part of the Families First Coronavirus Response Act, this provision requires employers with fewer than 500 employees to provide employees affected by Coronavirus with paid sick leave and paid family/medical leave – at the government’s expense. (Note: on 4/3/20 Department of Labor has added exemptions for employers that have less than 50 employees to opt out if the leave would pose a risk to the business' existence; businesses must document the reason for the exemption.)

Employees must be provided with:

  • Up to 80 hours of paid sick leave at their regular rate (to a max of $510/day) if they are unable to work due to being quarantined or experiencing COVID-19 symptoms.  OR
  • Up to 80 hours of paid sick leave at two-thirds their rate of pay (to a max of $200/day) to care for a child whose school/child care is closed due to COVID-19 or to care for an individual sick with COVID-19.
  • In addition, up to an additional 10 weeks of paid family and medical leave at two-thirds their rate of pay (to a max of $200/day) if they cannot work due to being quarantined or sick, or are caring a child whose school/child care is closed or a sick individual (all must be related to COVID-19).

Employers paying for the leave noted above can claim a refundable payroll tax credit—meaning that 100% of these costs can be deducted from your payroll taxes, or you can request a refund from the federal government if the amount exceeds your regular payroll taxes. If you use a payroll provider, they should be helping you with tracking this new leave and requesting the tax credits. 

You must make your employees aware of these new provisions by sharing a Department of Labor poster with them. More information is also available on the Department of Labor’s website.

Other Payroll Assistance Options

If you do not qualify for the Paycheck Protection Program, there are some other programs worth looking into:

  • The Small Business Administration has an expanded Emergency Injury Disaster Loan (EIDL) to include nonprofits of all kinds and has loosened requirements for how to qualify for a loan. You can apply for an emergency advance of $10,000 that will be made available within 3 days of applying to meet payroll, with up to $2 million available for loans. The remainder of the loan (other than the advance) has a 2.75% interest rate for nonprofits. You apply with the Small Business Administration.  Note that you cannot get both an EIDL loan and a Paycheck Protection Program loan.
  • If you do not get a Paycheck Protection Program loan, you may be eligible for an Employee Retention Credit which is a refundable payroll tax credit for 50% of the wages and health insurance paid for an employee for a quarter (up to a $5,000 per employee credit). Your organization must have been suspended due to a COVID-19 shut-down order or your gross receipts must have declind by more than 50% when compared to the same quarter last year. More information is available from the Internal Revenue Service FAQ, including how to use the credit to reduce your payroll taxes, or how to request an advance of the credit.   

Expanded Charitable Deductions

For 2020, individuals can deduct up to $300 for cash donations made to charities this year – meaning that people who don’t itemize their deductions can benefit from this tax break (called an “above the line” deduction). For those who itemize, the limit on cash donations that is deductible was increased from 60% of adjusted gross income to 100%. Limits for corporate contributions to charitable organizations was also increased from 10% of their taxable income to 25%. With these changes, more of your supporters will be able to have a tax benefit from donating to your organization.

Expanded Unemployment

Despite these resources, if you are unable to retain your staff, make sure they know about the expanded unemployment options. Changes include:

  • States are incentivized to allow people to immediately enroll in unemployment without waiting a week.
  • People who lost their job or who cannot work/telework due to COVID-19, or who have had their hours cut back due to COVID-19 are eligible for 39 weeks of employment benefits, which is 13 weeks beyond normal unemployment. The normal unemployment benefits will be boosted by $600 per week until July 31, 2020.

More information, including an Unemployment Benefits Finder that will help you navigate unemployment in your state, is available on the Department of Labor’s Career One Stop Center.

Other Resources for Nonprofits

  • In addition to these federal programs, please also look to your state or county/local government to see if they have passed any rescue or assistance packages.  Many states and localities have new financial assistance for businesses, nonprofits, and individuals that may also be of help.
  • The Council of Nonprofits has been holding a number of webinars and producing materials specific to COVID-19 and the impact on nonprofits.

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