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The CARES Act
U.S. Congress passed, and President Trump signed into law the CARES Act
(the Coronavirus Aid, Relief, and Economic Security Act) — a significant piece of legislation that seeks to provide approximately $2 trillion worth of economic assistance to consumers and businesses. As per the 800 pages legislations, following are available for Not for Profit Entity:
Emergency Small Business Loans (emergency SBA 7(a) loans): Provides funding for special emergency loans of up to $10 million for eligible nonprofits and small businesses, permitting them to cover costs of payroll, operations, and debt service, and provides that the loans be forgiven in whole or in part under certain circumstances.
General Eligibility Available to entities that existed on March 1, 2020, and had paid employees.
Nonprofit Eligibility It is available for charitable nonprofits with 500 or fewer employees (counting each individual – full-time or part-time and not FTEs).
Loan Use Loan funds could be used to make payroll and associated costs, including health insurance premiums, facilities costs, and debt service.
Loan Forgiveness Employers that maintain employment between March 1 and June 30 would be eligible to have their loans forgiven, essentially turning the loan into a grant.
Economic Injury Disaster Loans (EIDL) Eliminates creditworthiness requirements and appropriates an additional $10 billion to the EIDL program so that eligible nonprofits can get checks up to $10,000.
Paycheck Protection Program (PPP):
The U.S. Department of the Treasury and Small Business Administration (SBA) has taken the initiative to financially help businesses and organizations in the form of PPP loans so that they can keep their workforce employed during COVID pandemics instead of firing them. PPP loans can be for up to two months of your average monthly payroll costs from the last year plus an additional 25% of that amount. That amount is subject to a $10 million cap.
The PPP loan forgiveness program is to motivate the organizations to keep working with their existing employees and continue paying their regular wages. The PPP loan can be made forgivable by utilizing the loan amount according to the SBA terms and conditions.
- The Consolidated Appropriations Act 2021 authorizes the Second Draw of PPP loans for qualified employers who have previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses. Charitable nonprofits may qualify for a Second Draw loan of up to $2 million only if they satisfy the below-mentioned conditions:-
a) Have 300 or fewer employees
b) Have experienced a decline in the gross receipts of 25% in one of the four quarters in 2020 compared to the same quarter in 2019.
An expansion in the expenses which are eligible for forgiveness to include costs of personal protective equipment’s and modifications made to workplaces.
The ARP Act, signed by President Biden, expands the eligibility of PPP loans to various non-profit and tax-exempt organizations. Labor unions, benefit plans, agricultural organizations, and recreational clubs are now included in the list of eligible organizations for PPP loans.
Eligibility criteria for PPP loans:
- The organization must not receive more than 15% of its receipts from lobbying activities;
- The cost of organizations lobbying activities during the tax year before February 15, 2020, cannot exceed $1 million.
- The applicant organization cannot have more than 300 employees employed at a single physical location.
Tax and other benefits:
Charitable Giving Incentive: The Consolidated Appropriations Act extends through 2021, the incentives for those taxpayers who did not itemize their deductions of $300 made towards charitable donations. Couples can now deduct $600 in above-the-line deductions. Also, the limit on deductions has been increased in 2021 for individuals and corporations on deductible charitable contributions.
Self-Funded Nonprofits and Unemployment: Only reimburses self-funded nonprofits for half of the costs of benefits provided to their laid-off employees.
Employee Retention Payroll Tax Credit: ERTC is being made available to more nonprofit organizations by extending the eligibility requirements for ERPTC. Nonprofits with a 20% or more reduction in their gross receipts in any quarter of 2020 are eligible for a refundable tax credit of up to 70% covering wages of $10,000 per employee in a quarter. Nonprofits which have received the PPP loans are also eligible for the ERTC for wages not paid for by forgiven amounts of PPP loans. For tax-exempt organizations, the organization’s operations will be taken into account when considering the decline in revenues. Employers and organizations which are receiving emergency SBA 7(a) loans are not eligible for ERPTC.
Other Significant Provisions
Direct Payments: To adults of $1,200 or less and $500 per child ($3,400 for a family of four) to be sent out in weeks. The amount of the payments phases out based on earnings of between $75,000 and $99,000.
Expanded Unemployment Insurance: Increases payments by $600 per week for four months on top of what state unemployment programs pay. The bill of January 2021 provides an additional supplement of $300 per week and extends the benefits until March 14, 2021.
Amendments to the New Paid Leave Mandates: Lowers the amounts that employers must pay for paid sick and family leave under the Families First Coronavirus Response Act* (enacted March 19) to the amounts covered by the refundable payroll tax credit.
THE FEDERAL GOVERNMENT IS CURRENTLY FINALIZING THE DETAILS AND PROTOCOLS ABOUT HOW AND WHEN DIFFERENT PROGRAMS AND RELIEF WILL BE IMPLEMENTED. HARSHWAL & COMPANY IS CLOSELY MONITORING THESE UPDATING GUIDELINES AND WILL MAKE THE MOST UPDATED AND ACCURATE INFORMATION AVAILABLE TO OUR CLIENTS.