Relief Available and Our Recommendations
These are trying times and we are in uncharted territory as businesses and nonprofits. We’re thinking of all of the invaluable nonprofits that do so much good in our communities and the challenges they now face with COVID-19 disruptions. We’re here to help.
We wanted to make sure that you have up-to-date information about the CARES Act, specifically what it means for your organization, and our recommendations on how to navigate your next steps. Relief is available to help you get cash to retain or rehire staff, cover operating costs, and ultimately continue to advance your missions. Please note that this is not all-encompassing, but rather excerpts of the act. More information can be found at
Individual Recovery Rebates
The CARES Act provides a $1,200 refundable tax credit for individuals and $2,400 for joint taxpayers. Additionally, taxpayers with children will receive a flat $500 for each child. This is based on the 2018 return unless the 2019 return has been filed. Amounts are reduced for higher income taxpayers and begin phasing out after a single taxpayer has $75,000 in adjusted gross income and $150,000 for joint filers.
Our recommendation: Encourage your donors to share a portion of their rebate with the community if they are currently employed and able to give.
Charitable Contributions Incentives
The CARES Act creates a new above-the-line deduction, which is applicable for all taxpayers (even those that do not itemize) for charitable contributions of up to $300. This incentive is effective for contributions made in 2020 which would be claimed on Form 1040 next year.
The act also lifts the limitations on charitable contributions by individuals who itemize, from 60% of adjusted gross income to 100% and for corporations by increasing the limitation from 10% to 25% of taxable income. Donations to donor-advised-funds would not qualify for the increased deduction.
Our recommendation: Inform your donors to speak with their accountants and let them know that even if they don’t itemize deductions, their donations may make a difference to you and to their 2020 taxes.
Employer Payroll Taxes
Employers are eligible for a 50 percent refundable payroll tax credit on wages paid up to $10,000 during the crisis. The credit would be available to employers whose businesses were disrupted due to virus shutdowns and those that had a decrease in gross receipts of 50 percent or more when compared to the same quarter last year. The credit can be claimed for employees who are
retained but not currently working due to the crisis for firms with more than 100 employees, and for all employee wages for firms with 100 or fewer employees. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020. You can also delay payment of employer social security taxes for the year.
We recommend taking advantage of both the credit, if your organization qualifies, and the delay in paying the employer social security taxes.
The credit will be taken on the new Form 7200. Guidance was issued March 31, 2020 providing instructions on how to receive the benefits of the credit immediately by employers reducing their employment tax deposits without penalty and allowing for advance payment of the credit. Employers who paid qualified wages under CARES or Families First during a particular quarter may reduce the amount of their federal employment tax deposits for that quarter by the amount of qualified wages paid for that quarter, so long as that amount does not exceed the anticipated credits under the CARES payroll tax credit, and the Families First Qualified Leave credit for the quarter.
Employers are also allowed to defer paying the employer portion of the social security taxes through the end of 2020. Half of the deferred amount will be due at the end of 2021 and the other half will be due at the end of 2022.
Paycheck Protection Program (PPP)
The PPP provides 8 weeks of cash-flow assistance through 100 percent federally guaranteed loans to small employers who maintain their payroll during this emergency. If the employer maintains payroll, the portion of the loans used for covered payroll costs, interest on mortgage obligations, rent, and utilities would be forgiven. This is available for 501(c)(3) nonprofit organizations with 500 or fewer employees. Nonprofits can borrow 2.5 times of monthly payroll expenses, up to $10 million, and use funds to cover qualified payroll costs, rent and utilities and interest on mortgage and debt obligations.
Economic Disaster Loan Program (EIDL) & Emergency Grants
Qualifying Small Businesses under the SBA criteria has been expanded to include private non-profit businesses in operation before January 31, 2020. Loans are available for fixed debts, payroll, payables, and other bills. A low interest rate of 2.75% is offered for nonprofits over 30 years with principal payments deferred for 12 months from the disbursement date. Nonprofits may receive up to $10,000 as an advance, within 3 days of application, if the SBA certifies that the entity is eligible. This provision enables nonprofits to quickly access financial assistance while their loan is being processed. If the loan application is denied, the $10,000 advance is not required to be repaid. All “private nonprofit organizations” are eligible for the EIDL grants including 501 (c) trade associations, advocacy organizations, unions and social clubs. Remember, these organizations are excluded to participate in the Paycheck Protection Program.
Other Recommendations for Nonprofits
- Communicate to your donors, across all channels, on how they can support you right now.
- Understand your cash flow and cash needs for the next 3, 6, 9 and 12 months.
- Have a virtual meeting with your Board of Directors and any subcommittees to discuss your plan of action and next steps.
- Develop a Business Continuity and Recovery Plan.
- Get creative with fundraising through virtual events and outreach.
Most importantly, we encourage our nonprofit clients to keep fundraising! The number one reason people don’t give is because they’re not asked.
- Transform in-person events into virtual experiences
- Create a special COVID-19 fundraising appeal campaign
- Pivot and adjust your programs
of crisis fundraising advice, articles, opinions, webinars, videos and resources from Bloomerang.
Thank you for all you do in our communities
and please let us know how we can help you through these difficult, unprecedented times.