As we continue to navigate unchartered waters, we know the impact this pandemic is having on the not-for-profit community. All of us in public accounting are passionate advocates for our clients. We genuinely want to help you create successful, thriving businesses and organizations. We celebrate achievements together, and work through setbacks together. Our relationships are personal. As a professional that works mainly in the not-for-profit industry, that is how I’ve always operated in this profession, so I’m taking this opportunity to send a message to all my not-for-profit friends. Given this, I shouldn’t be surprised that my role has abruptly shifted from “accountant/auditor” to “listener/counselor”. In two weeks, I have answered exactly one question about debits & credits, yet I’ve tried to console many clients who are facing extraordinary, gut-wrenching decisions. Fear and uncertainty are profuse right now; it’s a trying time for us all.
Earlier this week, just about the time I thought “I cannot do this, it’s too heartbreaking.” I caught a clip from the movie The Martian (spoiler alert):
“At some point, everything’s going to south on you. Everything’s going to so south and you’re going to say, ‘This is it. This is how I end.’ Now, you can either accept that, or you can get to work. That’s all it is. You just – begin. You do the math. You solve one problem. Then you solve the next one. And then the next. And if you solve enough problems you get to come home.”
Maybe we’re not stuck on another planet, but to be honest it feels just as surreal, doesn’t it?
I know I speak for all of us here at Anders when I pledge to you that – we are here for you and we will continue to be here for you! We solve business problems. And, we’ve got a big one on our hands right now. Let’s get to work.
COVID-19 Relief for Not-for-Profits
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) includes many provisions for not-for-profit organizations. Based on an initial analysis by the National Council of Nonprofits below are some of the most relevant updates for not-for-profits:
Paycheck Protection Program 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.
- Not-for-Profit Eligibility: General Eligibility for entities that existed on March 1, 2020 and had paid employees. Available for charitable not-for-profits with 500 or fewer employees, full time or part time and not FTEs. The final bill does not include a provision in earlier drafts that would have disqualified nonprofits that are eligible for payments under Title XIX of the Social Security Act (Medicaid).
- 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 February 15 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 not-for-profits and other applicants can get checks for $10,000 within three days.
Self-Funded Not-for-Profits and Unemployment
Only reimburses self-funded not-for-profits for half of the costs of benefits provided to their laid-off employees.
Charitable Giving Incentive
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 contributions for those who itemize, raising it from 60% of adjusted gross income to 100%. For corporations, the annual limit raises from 10% to 25%. Food donations from corporations would be available to 25%, up from the current 15%.
Employee Retention Payroll Tax Credit
Creates a refundable payroll tax credit of up to $5,000 for each employee on the payroll when certain conditions are met. The entity had to be an ongoing concern at the beginning of 2020 and had seen a decrease in revenue of at least 50% in the first quarter compared to the first quarter of 2019. The availability of the credit would continue each quarter until the organization’s revenue exceeds 80% of the same quarter in 2019. For tax-exempt organizations, the entity’s whole operations must be taken into account when determining the decline in revenues. Employers receiving emergency SBA 7(a) loans would not be eligible for these credits.
Industry Stabilization Fund
Creates a loan and loan guarantee program for industries like airlines to keep them solvent through the crisis. It sets aside $425 billion for “eligible business” which is defined as “a United States business that has not otherwise received economic relief in the form of loans or loan guarantees provided under” the legislation. It is expected, but unclear, whether charitable not-for-profits qualify under that definition for industry stabilization loans. Mid-sized businesses, including not-for-profits, that have between 500 and 10,000 employees are expressly eligible for loans under this provision. Although there is no loan forgiveness provision in this section, the mid-size business loans would be charged an interest rate of no higher than 2% and would not accrue interest or require repayments for the first six months. Not-for-profits accepting the mid-size business loans must retain at least 90% of their staff at full compensation.
Learn more about CARES Act provisions for individuals and provisions for businesses. Legislation around COVID-19 is continuously evolving at a rapid rate, and we will continue to update our COVID-19 Resource Center as legislation passes. Contact an Anders advisor to discuss how your not-for-profit could benefit from the CARES Act.
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