COVID-19 and Nonprofits
While there has been a great deal of news coverage regarding the impact of COVID-19 on businesses, both small and large, there has been far less coverage regarding the impact of COVID-19 on nonprofits. One of the biggest issues facing nonprofits is the same thing that is facing most businesses around the world: can they survive the COVID-19 storm?
The question of survivability for nonprofits essentially means that they are going to have to figure out even more ways to sustain revenue and donations at a time when many donors might be facing their own financial challenges.
To complicate matters further, not all the relief programs (re the CARES Act) apply to nonprofit organizations.
Where we are now with the CARES Act
The CARES Act provides several opportunities for existing nonprofit and tax-exempt organizations to help reduce the stress that COVID-19 may cause on their finances, whether through loans, grants, or tax credits. There are some key areas that are relevant to nonprofits as well as regular businesses.
These include:
Paycheck Protection Program. Loans to 501(c)(3) and 501(c)(19) tax-exempt organizations with up to 500 employees. These low-interest Small Business Administration (SBA) loans, generally for two and a half months of payroll costs, maybe forgiven entirely if the borrower limits salary reductions to no more than 25% and maintains staffing levels for eight weeks after getting the loan.
Economic Injury Disaster Loans. An SBA disaster lending program for loans of up to $2 million with interest set at 2.75% for nonprofits (and grants of a quick $10,000). Payments of principal and interest may be deferred for up to four years.
Reimbursements for “Reimbursable Employers”. This benefit is for nonprofits that have elected to be “reimbursable employers” (you are probably not one of these, and if you are, you know who you are) for purposes of state unemployment insurance taxes.
Payroll Tax Credit. The employee retention payroll tax credit is a benefit for organizations that don’t get Paycheck Protection Program loans.
Industry Stabilization Fund. Loans to nonprofits with 500 to 10,000 employees (e.g., hospitals and universities) at 2% interest and no payments due for the first six months.
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