Interim COVID-19 Funding Bill Signed into Law
On April 24, the President signed into law a package of bills to provide an additional $484 billion in new funding to combat the economic and health impact of COVID-19.
- $310 billion in new money for the Small Business Administration’s (SBA’s) Paycheck Protection Program (PPP), which provides emergency loans – some forgivable – to help sustain operations and payroll. Of this amount, $60 billion is earmarked for smaller lenders, including $30 billion for community development financial institutions (CDFIs) and other lenders with less than $10 billion in assets. This is designed to address widespread concerns about the practical accessibility of the PPP to many non-profits and small businesses. An additional $11 billion for SBA administration is also provided.
- $50 billion for the Economic Injury Disaster Loan (EIDL) program as well as $10 billion to the EIDL emergency grants program. [UPDATE 5/7/2020: The SBA’s website is now stating that SBA is accepting new Economic Injury Disaster Loan (EIDL) and EIDL Advance applications on a limited basis only to provide relief to U.S. agricultural businesses. If your organization previously applied for an EIDL loan or EIDL emergency advance, check with SBA on your application’s status.]
- $75 billion for hospitals.
- $25 billion for testing, split between the states and federal government.
So what’s next?
1) The U.S. Small Business Administration (SBA), which oversees the PPP, relaunched the program on April 27. As of May 7, funding for the program still appears to be available. Do what you can to be ready.
- If you have already submitted an application that has not been processed, or if have not received a final determination, contact your lender to determine the next steps. Most are saying that you should still be in line for consideration, but this is not 100% confirmed, so check to be sure.
- If you have NOT applied (or are told you need to resubmit):
- Understand your loan options and their ramifications. Take special note of the requirement to certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” U.S. Department of Treasury and SBA guidance regarding this requirement (see Q31 of this SBA FAQ) has changed several times in recent weeks, and advocacy is underway to ensure that non-profits are not needlessly discouraged from seeking legitimately and desperately needed PPP loans, even if they have cash in the bank.
- Act now to get your materials in order. Items may vary by lender and is always subject to change, but check this guide from FMA as a starting point.
- Check the additional resources below and on the Center’s COVID-19 resource page.
2) Advocacy is still needed. This new legislation is a vital and welcome next step to provide essential relief from the devastating effects of the COVID-19 crisis. But it is widely acknowledged that this is an interim measure and further action is needed. Indeed, discussions regarding the “CARES Act 2.0” are already underway in Congress. Non-profit advocates nationwide and in New Jersey continue to push for additional relief such as an expanded universal charitable giving deduction; unemployment relief for self-insured non-profits; and additional emergency funding for essential services. Additional aid to hard-hit states is also desperately needed. Stay tuned to the Center’s website, your email and our social media feeds for additional updates.
RESOURCES: (also see additional links at the bottom of this page)
- $484B More in Stimulus Funds Headed for Release: What’s Included, What’s Not, Nonprofit Quarterly, April 22, 2020
- The PPP: The Experience of It All and Advice for New Nonprofit Applicants, Nonprofit Quarterly, April 21, 2020
- FMA, PPP Toolkbox – https://fmaonline.net/ppptoolbox/
- April 9 web briefing (Office of U.S. Senator Cory Booker in partnership with the Center for Non-Profits), featuring in-depth presentations by the SBA and NJ Economic Development Authority Slides Recording
- State of NJ, COVID-19 Business Portal – cv.business.nj.gov – includes FAQs and links to the eligibility wizard
- National Council of Nonprofits, COVID-19 landing page
- National Council of Nonprofits, Loans Available to Nonprofits in the CARES Act
- NJ Non-Profit Community Letter to Congress regarding non-profit relief in the next CARES Act
Summary of the first CARES Act (enacted3/27/2020); adapted with permission from the North Carolina Center for Nonprofits.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), a bipartisan stimulus bill, was signed into law on March 27, 2020. It provides significant relief for non-profits struggling through the COVID-19 crisis and for many of their employees and clients. Several provisions are of particular importance to non-profits, including:
- The availability of forgivable small business loans to non-profits with 500 or fewer employees;
- Unemployment relief for workers and (partially) for many non-profits;
- A (limited) universal charitable deduction for 2020; and
- A variety of appropriations that will help many types of non-profits.
Small Business Loans – Some Forgivable – Available to Most Non-Profits
One important provision in the CARES Act would provide funding for a new small business loan program (emergency SBA 7(a) loans) that would provide many non-profits and small businesses up to $10 million to cover costs of payroll, operations, and debt service. These loans would be available to non-profits with 500 or fewer employees that existed on March 1, 2020 and had paid employees. Loan funds could be used to make payroll and associated costs, including health insurance premiums, facilities costs, and debt service. Notably, employers that maintain employment between March 1 and June 30 would be eligible to have their loans forgiven, essentially turning the loan into a grant.
In a major victory for charitable non-profits, the final bill does not include a provision in earlier drafts that would have disqualified non-profits that are eligible for Medicaid payments. [Note: because New Jersey has now been declared a federal disaster area due to the outbreak, non-profits are also eligible to apply for federal disaster loans under the federal Economic Injury Disaster Loan (EIDL) program. The EIDL loans, which could cover up to $2 million to pay fixed debts, payroll, accounts payable, and other bills that cannot be paid because of the disaster’s impact, carry a 2.75% interest rate for non-profits (lower than the 3.75% rate for small for-profit businesses), but are not forgivable, so the SBA 7(a) loan may be a better option. Also note that if you receive an EIDL loan, you will not be eligible for the SBA 7(a) loan. See below for a link to a preliminary comparison chart regarding some of the loan options.]
For larger non-profits (between 500 and 10,000 employees) that are not eligible for SBA 7(a) loans, the industry stabilization provisions in the CARES Act provide for (non-forgivable) loans at interest rates of 2% or lower with no interest or repayments required in the first six months. Large non-profits must retain at least 90% of their staff at their full compensation to qualify for these loans.
For organizations that don’t receive 7(a) loans, the CARES Act provides a refundable payroll tax credit of up to $5,000 for each employee on the payroll when certain conditions are met. The credits are available to organizations that were operating at the beginning of 2020 and saw a drop 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.
It’s important for non-profits to review all of the available programs to decide the best course of action. The National Council of Nonprofits has prepared a preliminary comparison chart of some of the loan programs under the CARES Act. Also note that the NJ Economic Development Authority (NJEDA) has announced the availability of assistance to New Jersey small businesses, including non-profits, affected by the COVID-19 emergency.
Three provisions in the CARES Act provide significant unemployment insurance (UI) relief to workers and to nonprofits, most notably:
- A new Pandemic Unemployment Assistance (PUA) program extends UI benefits to self-employed workers and others who are typically not eligible for UI benefits. Another notable group that would benefit from this provision are employees of houses of worship and affiliated religious organizations who might not otherwise qualify for unemployment insurance because these employers are typically exempt from New Jersey unemployment laws.
- The federal government would pay states for half of the cost of benefits that self-funded non-profits owe as reimbursement for their laid-off employees’ UI claims. While this will still leave significant costs for self-insured non-profits, it is an important first step. The Center is continuing to advocate for the state of New Jersey to hold harmless these non-profits for Coronavirus-related UI claims. For more details on self-insured non-profits, see this blog post.
- Unemployed workers would receive $600 per week for up to four months, in addition to state UI benefits. In New Jersey, the maximum weekly UI benefit is currently $713 per week, so New Jerseyans who are out of work could be eligible for up to $1313 per week in UI benefits.
After significant advocacy by the Center and other non-profits nationwide over the past several years, the CARES Act includes a temporary, above-the-line deduction for total charitable contributions (also known as a universal or non-itemizer charitable deduction), which is capped at $300. The incentive applies to contributions made in 2020 and would be claimed on tax forms next year. While the cap is lower than most charities would prefer and what advocates were requesting, it will nonetheless help encourage many more Americans to make charitable contributions this year at a time when non-profits are facing unpredecented financial challenges.
The bill also lifts the existing cap on annual contributions for those who itemize, raising it from 60% of adjusted gross income to 100% (meaning those taxpayers -usually of higher-income – could receive a full tax deduction if they donate all of their income to charity). For corporations, the charitable contribution deduction limitations are increased from 10% to 25% of their taxable income. Food donations from corporations would be available up to 25%, up from the current 15% cap.
To help preserve jobs and businesses, the CARES Act also provides direct appropriations for several programs that directly support non-profits. Some of these appropriations include:
- $130 billion for hospitals;
- $15.5 billion in additional funding for the Supplemental Nutrition Assistance Program (SNAP);
- $8.8 billion for child nutrition programs;
- $450 million for nonprofit food banks through The Emergency Food Assistance Program (TEFAP);
- $50 million for legal services;
- $400 million in election grants to states to help with vote by mail and expansion of early voting and online voter registration programs;
- $75 million for the National Endowment for the Arts and $75 million for the National Endowment for the Humanities, much of which will go to support the operations of nonprofit arts and cultural organizations;
- $3.5 billion for the Child Care Development Block Grant program;
- $750 million for Head Start;
- $1 billion for the Community Service Block Grant;
- $5 billion for the Community Development Block Grant;
- $4 billion in Emergency Solutions Grants to help families who are experiencing homelessness or are at risk of losing their homes; and
- $3 billion in rental assistance for low-income Americans.
A summary of New Jersey’s portion is provided by the Star-Ledger here.
This legislation is an important measure that will help to get vitally needed resources to many non-profits and small for-profit businesses affected by the emergency; however, given the massive extent of the crisis there is much more to be done. The Center and allies will continue to advocate for additional relief for charities and the people and communities that need them.
- Center for Non-Profits COVID-19 resource page. – information and the latest updates about COVID-19 and New Jersey non-profits
- National Council of Nonprofits Summary of the CARES Act
- National Council of Nonprofits – Loans Available for Nonprofits in the CARES Act
- Coronavirus Aid, Relief, and Economic Security (CARES) Act, H.R. 748 legislative text
- Section-by-Section Summary of the CARES Act
Non-profits should also familiarize themselves with the The Families First Coronavirus Response Act, signed into law on March 19, 2020. It includes funding for COVID-19 testing, food security, and unemployment extensions, and establishes a series of temporary paid leave mandates and employer extensions. See this summary from our friends at Pro Bono Partnership.
Information on this website does not constitute legal advice or a legal opinion. For answers to specific questions concerning your situation, you should consult a knowledgeable attorney who can advise you regarding your particular circumstances.
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