There is a ton of information coming at everyone from many different directions about new laws and resources that have recently surfaced due to the COVID-19 pandemic and its economic effects. My goal in this blog is to summarize the information that is relevant to nonprofit organizations and connect you to more detailed information for each area. Not-for-profits and small businesses alike are struggling and fortunately the government and others have reacted in big ways. With that comes complexities. Nonprofits specifically have been hit with tight cash flows due to cancelled events, halted programming, and a drop-off in donations and other revenues without an offsetting decrease in expenses in most cases.
At this point in time (as things are changing quickly), the following items could be of help to nonprofits:
- Payroll and HR related changes – recently enacted laws have provisions for funding paid sick leave and job-protected leaves for employees needing to stay home due to the pandemic, employer payroll tax credits, and changes for unemployment benefits. Please see our blog What COVID-19 Legislation Means for Nonprofits and Their Staffers which goes more in-depth on the subject.
- New SBA loans – these loans are offered at an interest rate of 2.75% for nonprofits. Collateral is needed for applications in excess of $25,000 and certain nonprofits, including religious organizations, are not eligible. Please see our blogs SBA Offering Loans to Small Businesses Hit Hard by COVID-19 and COVID-19 SBA Loans Available.
- New loans (partially or fully forgivable) enacted through the CARES Act – these loans under the Paycheck Protection Program are potentially forgivable up to a certain point. They are meant to cover payroll & general operating expenses enticing organizations to keep their staffing levels intact rather than doing lay-offs. The loan amount is a function of average monthly payroll costs. Another option is an emergency grant under the Economic Injury Disaster Loans program, which is meant for applicants to get checks for $10,000 within 3 days. Please see our blog COVID-19 SBA Loans Available.
- New tax laws related to charitable donations – the CARES Act that was passed on March 27 has a provision planned to benefit charitable organizations. Donors will be allowed a $300 deduction for cash donations made to a charitable organization, even when they don’t itemized deductions. The tax law passed in 2017 significantly increased the standard deduction for taxpayers, which resulted in many more families taking the standard deduction versus itemizing, which in turn, made charitable donations less impactful to their tax returns. This new provision starting in 2020 (with no foreseeable end date) will help individuals receive a tax benefit for donating to charities. The CARES Act also loosens the limitation where previously a taxpayer was limited to deduct charitable contributions up to 60% of their adjusted gross income. The limitation has changed to 100%, for qualified contributions. See our blog on The New CARES Act For Individuals.
- New funding and grants offered by foundations – some of the local and national foundations have stepped up by offering emergency assistance grants related to the financial effects of the COVID-19 pandemic. MN Council of Nonprofits (MCN) has great resources surrounding this, including a recording of a webinar “Grantmaking in Response to Coronavirus” and a Special Edition Grants Directory for MN & National funding opportunities responding to the impact of COVID-19 and Disaster Relief. MCN is also hosting a series of calls with Governor Walz specific to nonprofits (signup on their website to listen in) and has other resources and updates on their website as well. Details on their resources can be found on the MN Council of Nonprofits’ website.
Some benefits may not be available, depending on the other assistance received. Please feel free to reach out with any questions or if we can help you in any way. Anna Lovegren, CPA, can be contacted at email@example.com