CARES Act aims to provide relief for not-for-profit organizations

The recent passage of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) will have a significant impact on your organization, your employees, and your constituents. Plante Moran has assembled a team of subject matter experts to dissect the various aspects of the bill and how it will impact the not-for-profit industry in particular.

Below is a summary of the key provisions of the Act that are most relevant to the not-for-profit sector with links to more detailed articles that we’ve already published on certain aspects of the bill.

Key provisions of the CARES Act

Keeping American workers paid and employed

• Paycheck Protection Program (PPP)
  • Allows the Small Business Administration (SBA) to make loans to certain small businesses, including 501(c)(3) nonprofit organizations and 501(c)(19) veteran’s organizations with 500 or fewer employees.
  • Provides immediate cash flow relief for payroll costs and mortgage, rent, and utility payments.
  • Incentivizes employers to maintain employees and salaries.
  • Please see a summary of this aspect of the CARES Act here: Paycheck Protection Program provides forgivable SBA loans.
• Emergency Economic Injury Disaster Loan (EIDL) grants
  • Provide private nonprofits eligibility for both EIDLs and grants.
  • Allow creditworthiness requirements for these loans to be removed.
  • Allow advanced EIDL payments to be received during the loan process, which can be used to cover paid sick leave to employees, maintain payroll, make rent or mortgage payments, and other limited uses.
  • Entities receiving funding under PPP (described above) are not eligible for EIDLs.

Assistance for American workers, families, and businesses

• Unemployment insurance provisions
  • Extend unemployment assistance programs to those affected by COVID-19 who may not traditionally be eligible for benefits.
  • Provide payments to states to reimburse nonprofits and certain other entities for half of the costs of their unemployment benefits.
  • Increase unemployment benefits for each individual by $600 per week for up to four months and provides an additional 13 weeks of benefits beyond existing state benefit limits.
  • Provide funding for states offering pro rata unemployment benefits to those employees who have their hours reduced.
• Rebates and other individual provisions
  • Provide recovery rebate checks of up to $1,200 per person. Additional rebates of $500 per child will be provided. Rebates will be phased out for taxpayers at higher income levels.
  • Offer additional incentives, such as the ability to access qualified retirement accounts, expanded deductibility of charitable contributions, and the ability of employers to provide student loan repayment as a nontaxable employee benefit, are also included in the Act.
  • Please see a summary of this aspect of the CARES Act here: CARES Act: Senate passes $2.2 trillion bill to support economy during the pandemic.
• Business provisions
  • Provide an employee retention payroll tax credit of up to $5,000 per employee and allows a deferral of the employer share of Social Security tax.
  • Modify net operating loss (NOL) carryback limitations and temporarily removes taxable income limitations to allow NOLs to fully offset income; this provision may be helpful in providing cash flow to not-for-profit organizations who file a Form 990-T in that NOLs may be used to amend prior year returns to obtain a refund of unrelated business income tax paid.
  • Please see a summary of this aspect of CARES here: CARES Act: Senate passes $2.2 trillion bill to support economy during the pandemic.

Supporting America’s health-care system in the fight against COVID-19

• Education provisions
  • Make changes to certain campus-based aid programs and student assistance programs, including waiving matching requirements for campus-based aid, allowing for transfer of unused work-study funds for use in supplemental grants, and allowing work-study payments to those unable to work due to closures.
  • Provide adjustments to subsidized loan limitations and Pell Grant requirements for those who have dropped out of school due to COVID-19.
  • Defer student loan payments through Sept. 30, 2020.
  • Adjust provisions of the National Service Corps programs, Workforce Innovation and Opportunity Act, TEACH grants, and the Teacher Loan Forgiveness Program.
• Labor provisions
  • Place caps on employer payments for:
    • Paid leave — not more than $200 per day and $10,000 in the aggregate for each employee.
    • Paid sick leave — not more than $511 per day and $5,110 in the aggregate for sick leave; not more than $200 per day and $2,000 in the aggregate to care for a quarantined individual or child.
  • Provide paid leave for certain rehired employees.
  • Provide for advanced funding of tax credits.
• Miscellaneous provisions
  • Temporarily waive nutrition requirements for Older Americans Act (OAA) meal programs.
  • Reauthorize the Healthy Start Program.
  • Make adjustments to certain Medicare and Medicaid provisions and to various human services programs, including extending the Temporary Assistance for Needy Families Program.

Economic stabilization and assistance to several distressed sectors of the U.S. economy

• Emergency Relief and Taxpayer Protections
  • Create a loan fund through the Federal Reserve that’s targeted at not-for-profit organizations and businesses with between 500 and 10,000 employees. The purpose of any loan from this fund must be to retain at least 90% of the recipient organization’s workforce.
  • Provide forbearance on certain foreclosures and evictions

In addition, the Act includes significant funding for the following departments and programs (among others) of interest to not-for-profit organizations:

• Department of Agriculture and the Food and Drug Administration to fund programs such as the Supplemental Nutrition Assistance Program (SNAP), the Child Nutrition Program, and the Emergency Food Assistance Program (TEFAP)
• National Science Foundation programs addressing COVID-19 research
• Legal Services Corporation (LSC)
• Emergency Food and Shelter Program
• National Endowment of the Arts and National Endowment for the Humanities in order to fund grants and provide support for cultural institutions
• Administration for Community Living
• Centers for Medicare and Medicaid Services
• Department of Education for an Education Stabilization Fund
• Department of Labor
• Child Care Development Block Grant
• Head Start programs
• Community Services Block Grant (CSBG)
• Low Income Home Energy Assistance Program (LIHEAP)
• Substance Abuse and Mental Health Services
• Corporation for Public Broadcasting for fiscal stabilization grants for public television and radio stations
• Community Development Block Grant
• Department of Housing and Urban Development programs to provide rental assistance protections

Have specific questions regarding the CARES Act? Give us a call.