Everything Nonprofit Leaders Need to Know about the CARES Act of 2020 During the COVID-19 Crisis

Photography by Anthony Feliciotti

Written by Caitlin Worm, Managing Director of Blackbird Philanthropy Advisors

As nonprofit leaders, you’re facing unprecedented times in managing your workforce while also trying to maintain the level of quality in community services you’ve provided before the COVID19 crisis.

Last Friday, the $2 trillion federal stimulus package "CARES Act" passed that could offer direct relief for your organization.

I am writing to provide a summary for you of strategic options to consider as you wade through the health and economic crisis.

Under the CARES Act, unemployment benefits are confirmed upon application AND benefits are upped an additional $600/week (bringing total benefit to $800-$900/wk).

If you think it’s inevitable that you may eventually have to lay off workers soon, it might make more sense to lay off your staff immediately to unlock this program's benefits. Do the math, see if this makes sense for your team members and your operations. This program is here to help you get through this.

The CARES Act also provides up to $10,000 advance for payroll expenditures (this is called an Emergency Economic Injury Disaster Loan, approved within three days of application). If you then plan to “rehire” May 1, you could use this loan to help get you through the month of May. Then by June, it’s likely (fingers crossed) the quarantine will be over and you can fully re-open to meet client needs. This is really more like a grant, it does not need to be repaid.

This route might be able to get you through at least one month of payroll and then some payroll relief for the month of May. Something to talk to your financial advisors about, every organization is unique and requires a unique strategy.


ADDITIONAL CARES ACT BENEFITS FOR NONPROFITS 

• HALF OFF UNEMPLOYMENT INSURANCE: The CARES Act will reimburse you up to 50% for unemployment insurance costs through the end of 2020.

 

• FUNDRAISING INCENTIVE: Lifted the limit from 60% gross adjusted income to 100% for those who itemized donations. This very plainly means, an individual earning $100,000/year can deduct up to $100,000 in 2020. For businesses, the limitations were upped from 10% to 25% of taxable income. (Donor-advised fund gifts are excluded.)

 

• OPERATIONS LOANS AVAILABLE: Nonprofits (up to 500 employees) can borrow 2.5x monthly payroll expenses up to $10 million to cover payroll expenses, rent and utilities, and interest on mortgage and debt obligations. These “Paycheck Protection” loans must be repaid, but annual fees, collateral requirements, and prepayment penalties are waived and the interest rates are capped at 4%. Additionally, this program offers up to 8-weeks of loan forgiveness options, so long as you maintain your payroll. 

 

• FREELANCERS/CONTRACTORS COVERED: The CARES Act also provides benefits for contractual workers and freelancers, so please reach out to them as well to let them know they’re able to apply for a month of unemployment benefits for the first time ever in history.

 

• EMPLOYEE RETENTION CREDITS: If you prove revenue was down 50% or more March 31 through 2020, you may qualify for a $5,000 payroll credit per employee for keeping staff on. This may be a good option for nonprofits that choose to maintain all existing operations and who do not apply for operations loans.

If you haven’t done so already, reach out to your legal and financial counsel as soon as you can to determine what the best options are for your organization. In Indiana, we recommend Kruggel Lawton CPAs (Margene Zink mzink[@]klcpas.com) for accounting information and South Bank Legal for legal matters. Elsewhere, let me know if you’re looking and I will get you a good referral.

I am not a lawyer or a CPA. I am offering ancillary support as a nonprofit administration consultant who wants to see your important organization get through this whole and on your feet.

Feel free to reach out using our contact form if you have specific questions or need assistance during this tough period.

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