Many non-profits across the country are being severely impacted due to today’s COVID-19 pandemic, leaving management teams and boards of directors questioning where to seek financial assistance and relief to help maintain their organization’s operations as well as continue serving their communities. There are some ways to gain financial relief thanks to recently passed legislation such as the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief and Economic Security Act (CARES Act).

Unfortunately, the Small Business Administration recently announced that funding has been exhausted for its Paycheck Protection Program (PPP) and Economic Injury Disaster Loan Program (EIDL), so if your non-profit organization did not take advantage of these loan opportunities, it’s now too late (unless Congress replenishes the program as has been reported). However, there are some alternatives to consider.

Doeren Mayhew’s dedicated Government and Non-Profit Group highlights these three opportunities to help ease your current financial burden:

  1. Tax credit opportunities. Non-profit organizations are encouraged to work with their tax advisor to explore whether they are eligible for the following refundable tax credit opportunities:

a. Sick and Family Leave Credit: Introduced by the FFCRA, non-profit organizations are entitled to fully refundable tax credits of up to $10,000 in total, based on qualifying expenses. As outlined by the FFCRA, these expenses include costs associated with providing employees paid sick leave due to them being quarantined, caring for someone with COVID-19 or unable to work because of a need to care for a child whose school or place of care is closed or unavailable.

b. Employee Retention Credit (ERC): Non-profit organizations are eligible for this credit if they have either fully or partially suspended operations due to COVID-19 or they experienced a 50% decline in gross receipts during a calendar quarter compared to the same quarter in 2019. The ERC is a fully refundable tax credit that is equal to 50% of qualified wages that eligible employers pay their employees and applies to qualified wages paid after March 12, 2020, and before Jan. 1, 2021. The maximum amount of qualified wages taken into account for each employee is $10,000 in total, so that the maximum credit for an eligible employer for qualified wages paid to any employee is $5,000. Please note, non-profit organizations cannot apply this credit if they receive a PPP loan, regardless of whether it is forgiven or not.

  1. Employer Payroll Tax Deferral. The CARES Act allows employers, including non-profit organizations, to defer and deposit the payment of the employer’s portion of social security taxes that would otherwise be due between March 27, 2020, and Dec. 31, 2020. The law permits employers to instead deposit half of these deferred payments by Dec. 31, 2020, and the other half by Dec. 31, 2021. Non-profit organizations that are PPP loan recipients are eligible to defer the deposit and payment of their share of social security tax, however, once the organization receives a decision from its lender that the loan is forgiven, they are no longer eligible to defer such taxes after that date.
  1. Charitable Giving Incentive. The CARES Act also provides a charitable giving incentive that includes a new above-the-line deduction (universal or non-itemizer deduction that applies to all taxpayers) for total charitable contributions of up to $300. The incentive applies to contributions made in 2020 and would be claimed on tax forms next year. The bill also lifts the existing cap on annual individual contributions for those who itemize, raising it from 60% of adjusted gross income to 100%. For corporations, the bill raises the annual limit from 10% to 25%. Food donations from corporations would be available to 25%, up from the current 15% cap. In light of these revised deductions, consider soliciting donations from current or potential donors by educating them on the tax benefit.

The Federal Reserve also recently announced the Main Street Lending Program, which provides loans of up to $25 million at a low interest rate. However, the organization has been silent on whether non-profits could participate. As a result, the National Council of Nonprofits as well as other advocates are pressing the Treasury Department to create a similar loan program dedicated specifically to non-profit organizations. We are closely monitoring the outcome.

Doeren Mayhew understands the challenges non-profit organizations are currently facing with today’s COVID-19 pandemic and stand ready to help them navigate this uncharted territory. To learn more about which options work best for your organization, contact us today.