Bills passed by Congress and signed into law in March include relief for public charities and private foundations with tax-exempt status under IRC Sec. 501(c)(3) whose budget and operations are impacted by the pandemic. This includes forgivable loan programs to avoid staff layoffs and pay rent or mortgages and utilities, as well as incentives to increase charitable giving. There are also provisions for assisting employees.
There are two opportunities for loans: the Paycheck Protection Program passed as part of the Coronavirus Aid Relief and Economic Security Act (CARES) and the Small Business Administration (SBA) Economic Injury Disaster Loans program that provides assistance when disasters are declared.
- Paycheck Protection Program (CARES Act)
501(c)(3) organizations with 500 or fewer employees that certify need due to current economic conditions can apply for loans through lending institutions that will be guaranteed by the SBA. The loan can be used for payroll, group health care costs, utilities and mortgage or rent payments. The maximum interest rate is 4% and no collateral is required. An organization that keeps its staff between March 1 and June 30 can make a separate application for the loan forgiveness.
- Economic Injury Disaster Loans (Disaster Declaration)
This program is administered directly by the SBA. 501(c)(3) organizations can apply for up to $2 million to offset temporary loss of revenue due to the disaster, in order to maintain payroll and pay for office space. The interest rate is 2.75% and loans may have a long-term repayment period. Although there is no loan forgiveness, organizations with 500 or fewer employees may get up to $10,000 as an advance on the loan, and this does not have to be repaid.
Charitable giving incentives in the CARES Act for 2020 include:
- Non-itemizer deduction up to $300 for individual contributions to public charities;
- Increasing caps on deductible donations for individuals and corporations; and
- Increase on deductibility cap for food inventory contributions from 15% to 25%.
Additional information is available from the law firm Faegre Drinker:
- Impact of the CARES Act Upon Nonprofit Organizations
- Opportunities for Small Business Through the Federal Stimulus Bill and Current SBA Loan Program (also applies to NPOs)
- Employee Assistance Programs to Address COVID-19 Challenges