Coronavirus Relief for Nonprofits & Their Employees
The information in this article is current as of April 7, 2020. Bookmark this page for updates!
On March 14, the House passed the Families First Coronavirus Response Act. And on March 18, the package passed in the Senate and the president signed the relief package into law.
On March 27 the President Trump signed into law the $2 trillion coronavirus stimulus bill, called the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
Here is a breakdown along the two primary types of Federal Aid pertaining to our customers: Nonprofit Corporations and Nonprofit Employees and Contractors
Relief Category 1: Federal aid for Nonprofits
Running a nonprofit is a challenge all by itself without the coronavirus pandemic.
Businesses and nonprofits alike are reeling from consumer spending reductions, disruptions to the supply chain, and productivity losses stemming from (among other things) workplace shutdowns.
Forbes reports, nearly 75% of businesses are dealing with supply chain disruptions due to coronavirus.
Many small businesses and nonprofits have no room to handle drops in revenue or for extending paid sick leave to employees.
Though it can’t solve all the myriad related problems, the government is responding to what businesses - including small nonprofits, are going through.
In an effort to immediately relief economic strain due to the coronavirus pandemic, the government has proposed four measures aimed at providing businesses with some financial relief:
- Low-interest loans
- Employer tax credits
- Government cash payment
- Tax deferments
The employer tax credit was signed into law on March 18.
The CARES Act has several major provisions; primarily, the Act will send $1,200 checks to qualified individuals, create a $367 billion loan program for small businesses, and establish a $500M lending fund for cities, states, and industries.
There are four types of relief for Nonprofit Corporations and Small Businesses:
1. Low-interest loans
President Trump announced that the government would be providing millions in more funds for federal disaster loans, backed by the SBA.
The first category of Small Business Administration (SBA) loans are known as Economic Injury Disaster (EIDL) Loans.
According to the SBA, you can apply for an Economic Injury Disaster Loan to help generally pay bills you cannot afford due to the coronavirus, without significant restriction.
The Economic Injury Disaster Loan program (including the easy-to-obtain $10,000 grant we're referring to as the "Easy EIDL" grant profiled here) provides relief for qualifying businesses in the form of:
- Low interest rates: 3.75% for businesses and 2.75% for nonprofit organization, with long-term repayment plans: Up to a maximum of 30 years
- Keep in mind that businesses with credit elsewhere are not eligible for these low-interest rate loans.
- In most cases this loan will actually resemble a grant, and will NOT need to be repaid.
The Paycheck Protection Program (PPP)
Another initiative under the CARES Act is the Paycheck Protection Program (PPP). The PPP provides small businesses (companies with less than 500 employees) with enough funds to pay up to eight weeks of payroll costs, including benefits. PPP low-interest loans are 100% forgiven if employers use them to cover eligible expenses. However, employers must keep employees on payroll to qualify for full loan forgiveness.
The PPP is significantly more complicated to file than that of the "Easy EIDL".
Applications for the PPP loans start on:
- April 3, 2020 for small businesses and sole proprietorships
- April 10, 2020 for independent contractors and self-employed individuals
You can apply for a loan using the Paycheck Protection Program Application Form on the SBA website.
2. Employer tax credits
On March 18, 2020, a bill proposing federally-mandated paid sick leave and paid leave benefits passed in the Senate and was signed into law.
With the relief package, employers with eligible employees are required to provide paid sick leave to impacted and eligible employees for 10 days, in addition to any paid sick leave they already offer employees. And, employers are required to provide paid leave to qualifying employees for 10 weeks. Employers can’t change their sick leave policies or discriminate or retaliate against employees who use it. Both types of paid time off are explained later.
To offset these paid time off costs and help alleviate some of the burden from employers, the new legislation provides a business tax credit, equal to 100% of the benefits doled out during this time. Business tax credits directly lower a business’s tax liability, dollar-for-dollar.
Self-employed individuals can also claim this tax credit if giving themselves paid sick leave.
Keep in mind that employers who must provide paid sick and paid leave benefits do not have to pay the employer Social Security tax on those wages.
Employers without sufficient payroll taxes to cover the paid sick and paid family leave can ask the IRS for an accelerated payment. The IRS will announce more details of this process next week.
Another tax credit available for employers was established under the CARES Act: the Employee Retention Credit. Employers can claim this credit only if they do not receive a PPP loan.
This fully refundable tax credit is equal to 50% of qualified wages paid to employees.
Although you can claim both the Employee Retention Credit and the tax credits associated with paid leave, you can’t claim them on the same wages.
3. Government cash payment
Another relief measure is a stimulus check. With the CARES Act, checks will provide direct assistance to most U.S. adults, including business owners and workers alike.
The act provides cash payments of up to $1,200 per person (up to $2,400 for couples). Payments increase by $500 per child. Individuals who earned above $75,000 in adjusted gross income (AGI) on their 2018 income tax returns will receive a lesser amount.
Individuals without a federal tax liability will receive $600 under this proposal.
4. Tax deferments
Another form of financial relief for businesses comes in the form of tax deferments. This includes a federal income tax deferment for employers as well as a possible Social Security payroll tax deferment.
Sole proprietors, single-member LLCs, and corporations ending their year on December 31 have a business tax return deadline of April 15.
The deferment extends the April 15 deadline for businesses negatively impacted by the coronavirus—without penalties—for 90 days. The new deadline for filing federal tax returns and paying taxes is now July 15,5.
Based on the CARES Act, corporations also have an estimated tax payment postponement until October 15.
States have also implemented tax filing and payment guidelines. You can view a state-by-state tax filing guidance for coronavirus pandemic here.
You would not owe penalties on your taxes if you took advantage of the federal income tax deferment.
Some cities and states are putting similar tax extensions into motion locally.
In addition to the federal income tax deferment, business owners are also able to defer the Social Security tax due to the CARES Act. Qualified companies are able to delay remitting their share of Social Security tax to the IRS. The employer portion of Medicare tax is due to the IRS as usual. Employers would still need to withhold and remit the employees’ entire portion of payroll taxes.
Employers can delay remitting the employer portion of Social Security tax until January 1, 2021 (50% owed by the end of 2021 and the other half due by the end of 2022).
Relief Category 2: Federal aid for employees
With the virus spreading and businesses panicking, more employees are working from home or not working at all. The fear of community spread of the coronavirus has led to the shuttering of nearly all major public events and institutions across the nation. To relieve employees during this pandemic, the government is working on passing new laws to help aid employees impacted by the virus.
Some legislation in the works includes:
- Paid family leave
- Paid sick leave
- Government cash payment
- Unemployment benefits
- Food aid
- Income tax deferment
A number of the federal aid proposals, including paid leave, unemployment benefits, and food aid, passed in the House—with the president’s support—just before 1 a.m. on March 14, 2020. Now, this legislation heads to the Senate. On March 18, the president signed a coronavirus relief package that includes paid sick and family leave into law.
1. Paid leave benefits
One of the proposals aimed at helping employees who are impacted by coronavirus is paid leave. On March 14, a bill including paid leave benefits passed in the House. And on March 18, a revised package passed in the Senate and was signed into law by the president.
The federal paid family and medical leave bill provides up to 10 weeks of paid leave at a rate of two-thirds their regular wages (limited to $200 per day). This benefit applies to employees who have to stay home with a child whose school or childcare facility is closed due to the coronavirus, as well as workers with family members affected by the coronavirus. Quarantined workers, or those who were caring for affected family members, are not eligible. Instead, they are eligible for paid sick leave (explained below). This temporary, federal paid family and medical leave benefit is available through December 31, 2020.
The Families First Coronavirus Response Act provision on paid leave benefits applies to all employers with fewer than 500 employees. Some small businesses with fewer than 50 employees may be exempt from providing workers with the paid leave. Businesses with more than 500 employees are also excluded from the mandatory paid leave.
Employees who have been employed by an employer for at least 30 calendar days are eligible. Employers with 25 or more employees must allow job restoration for employees who use the leave.
Employers are responsible for providing impacted employees with the percentage of their regular wages. Again, employers will receive a tax credit for providing this benefit.
Self-employed individuals are also entitled to receive the same paid leave benefits as employees. Self-employed individuals can claim a tax credit for their paid leave.
2. Paid sick leave
Twelve states currently have paid sick leave laws in place. But, what about paid sick leave laws related to coronavirus?
With coronavirus rising in the U.S., the government put an emergency, federally-mandated sick leave benefit for private businesses into action. The bill passed in the House on March 14, passed in the Senate on March 18, and was signed into law by the president.
The law requires all employers to allow their qualifying employees 10 days of paid sick leave (up to $511 per day or $200 per day, depending on the reason). Employees who qualify for their regular wages (up to $511 per day) while taking paid sick leave are those who are being tested for, treated for, or diagnosed with the coronavirus. Employees are also eligible if they have been told by a doctor or government official to stay home due to exposure or symptoms. And, employees qualify for two-thirds of their wages (up to $200 per day) if they must take paid sick leave to care for an individual who meets the COVID-19 care criteria.
Depending on the size of the business, part-time employees are entitled to the number of hours of paid sick time equal to the average number of hours they work over a two-week period.
Again, employers will receive a tax credit for providing this benefit.
Self-employed individuals are also entitled to receive the same paid sick leave benefits as employees. Self-employed individuals can claim a tax credit for their paid sick leave.
3. Government cash payment
The CARES Act, which includes legislation about a government-issued cash payment to individuals, passed in the Senate on March 25. On March 27, the proposal of the $2 trillion coronavirus aid package passed in the House and was signed into law. The package will provide cash payments of up to $1,200 per person.
These $1,200 government-issued cash payments take the place of a previously touted idea of a payroll tax cut.
4. Unemployment benefits
Unemployment benefits help workers who are unemployed at no fault of their own. Workers who receive unemployment benefits get a percentage of the wages they would have earned if they were still employed.
On Thursday, March 12, 2020, the U.S. Department of Labor gave states flexibility to amend their laws to provide unemployment benefits to individuals affected by the events related to the coronavirus, and on March 18, 2020, Donald Trump signed those provisions into law.
Workers laid off due to the outbreak are already eligible for unemployment benefits. However, the legislation would provide $B for additional caseloads and administrative costs to encourage furloughed workers to acquire unemployment benefits.
The CARES Act also boosts unemployment insurance benefits for workers by expanding eligibility and offering eligible workers an additional $600 per week for four months in addition to what the state program pays.
A number of states are providing employers with a special mass-layoff number to use for coronavirus-related layoffs. This not only speeds up the process of employees receiving benefits, but it may also prevent employer SUTA tax accounts from increasing.