On Friday, March 27, President Trump signed into legislation the Coronavirus Aid, Relief and Economic Security Act (CARES) Act. The $2.2 trillion legislation represents the largest stimulus package in U.S. history—dwarfing the $800 billion package signed during the 2008 financial crisis—and provides a variety of economic relief measures to mitigate the impact of the coronavirus pandemic on American society.
Not-for-profits should be aware of certain parts of the CARES Act as it pertains to the impact of COVID-19 on their employees and business operations.
The federal CARES Act guidelines list five options for not-for-profits in search of relief. Not-for-profits should assess the five options that could meet their needs:
- Paycheck Protection Program – (SBA 7a Loan) – 501c3s with less than 500 employees are eligible for this loan program, which will provide up to 2.5 times the average monthly payroll costs (with a specific formula to be followed) up to $10 million. These loans will ultimately be forgiven for some organizations and require a good faith certification that the funds will be used to prevent reduction of the organization’s workforce. Read CBM’s short write-up about the Paycheck Protection program and a link to the application by clicking here.
- Employer Payroll Taxes – Payment for 50% of 2020 employer payroll taxes can be deferred until December 31, 2021 and the final 50% can be deferred until December 31, 2022. This only applies to the employer’s portion of the 6.2% Social Security tax.
- Employee Payroll Tax Credit – Not-for-profits eligible for this credit will have seen a drop in revenue of at least 50% in the first quarter of 2020 compared with the first quarter of 2019. For not-for-profits with under 100 employees, the credit will be $5,000 per employee. For not-for-profits with more than 100 employees, the only employees for which credit is allowed are those who cannot work due to COVID-19.
- Economic Injury Disaster Loan (EIDL) (SBA 7b Loan) – Not-for-profits with under 500 employees are eligible for this loan in an amount up to $10,000.
- Economic Stabilization Fund – These loans are available for not-for-profits with more than 500 employees.
The CARES Act provides some additional areas of relief for not-for-profit organizations including:
- The payment date for unrelated business income tax for 2020 has been extended from April 15, 2020 to July 15, 2020.
- Maryland Relief Program – Eligibility for relief from this program will be determined on a case-by-case basis in the State of Maryland and is for not-for-profit organizations employing less than 50 staff and with under $5 million in revenue. The program provides for financial relief of an amount not greater than three months of operating expenses if the organization can show the negative impact of COVID-19 on its business.
- DC MicroGrant – This $10,000 grant can be awarded to not-for-profits with at least 50% of its workforce based in, or at least 50% of its revenue generated in, the District of Columbia.
- Expanded Unemployment Benefits for employees – Read our blog post for more details about expanded unemployment benefits as part of the CARES Act.
As a reminder, CBM is hosting an open call for not-for-profits where we plan to discuss all the above items. Please register at….
CBM will continue to provide breaking news to clients and friends of the firm as the very fluid COVID-19 situation develops, and we encourage not-for-profit organizations to keep an eye out for future alerts dedicated to the impact of the CARES Act.
We hope you all stay safe during this unprecedented time.
CBM, P.C. is a professional services firm delivering tax, accounting and business advisory expertise throughout the Mid-Atlantic region from offices in Bethesda, MD and Washington, DC.
