COVID-19 Guide for Not-for-Profit Organizations

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As the COVID-19 pandemic continues to disrupt our day-to-day, we are presented with unprecedented challenges that force the not-for-profit industry to quickly adapt to this new reality. In this time of crisis, charities are forced to further prioritize their resources in order to fulfil their mission in the most efficient way possible. As it remains uncertain as to how long the effect of this pandemic will last, we wanted to provide organizations with a brief summary of the benefits that are currently available to help not-for-profits work through this difficult time. 

Paycheck Protection Program

The most advantageous, and as a result, most popular tool currently available is the Paycheck Protection Program. Intended as an eight-week equity infusion, these forgivable loans are available to 501(c)(3) and 501(c)(19) tax exempt organizations with up to 500 employees. Under this program, eligible recipients may qualify for a loan up to $10 million determined by 2.5 times average monthly payroll/benefits payments for a one-year period before the loan is made. Loan payments are deferred six months. 

If you maintain your workforce, the SBA will forgive the portion of the loan proceeds that are used to cover the first eight weeks of payroll and certain other expenses following loan origination. Any proceeds that are not forgiven will hold a one percent interest rate to be paid back over a two-year period. These loans can be applied by contacting any FDIC insured lender. Click here for more information.

Economic Injury Disaster Loans

In response to the pandemic, many not-for-profits will be eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000. The Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million that can provide relief to businesses that are currently experiencing a temporary loss of revenue. This loan will undergo a more traditional underwriting process and is not forgivable, so there must be communication with your current lender should you choose this path. If necessary, you can apply for the loan here.

Employee Retention Payroll Tax Credit

The CARES Act offers a payroll tax credit for all tax exempt 501(c) organizational types. In order to qualify, operations must be fully or partially suspended due to a governmental order that limited commerce, travel or group meetings due to COVID-19—or have a 50 percent decrease in gross receipts for the same calendar quarter in the prior year. This credit is refundable, meaning you will get a refund for any additional amounts claimed on your quarterly payroll tax return in excess of actual amounts due.  The credit amount is for 50 percent of “qualified wages” for the first $10,000 of compensation for each employee. If you have less than 100 employees, “qualified wages” include all wages paid whether the employer is open for business or subject to a shutdown order. If you have more than 100 employees, those are wages paid to an employee even though the employee is unable to work due to a full or partial suspension of operations as a result of a governmental “stay at home” or other order.

Charitable Contributions

For the 2020 tax year, the deduction percentage limitation for charitable contributions of cash has been removed for individual taxpayers (your donors). This simply means that any qualified contribution is allowed to the extent that the aggregate of such contributions does not exceed the taxpayers adjusted gross income. This provision is applicable only for cash contributions. 

In addition to removing the restrictions on what a donor can deduct as an itemized deduction, donors are now eligible to an “above-the-line” deduction of up to $300 for qualified charitable contributions. This may only be achieved if the donor elects not to itemize deductions. Although it is not a significant amount, it is still a great tool and conversation piece that you can share with both current and potential donors.

Working Remotely in 2020

Today it is easier than ever to work remotely and still have total access to co-workers, clients and dates. Now is a crucial time to explore the possibility of migrating to an Office 365 format in order to have access to the communication, collaboration and file-sharing capabilities that it provides. 

Microsoft Teams is also a fast-growing application that provides the ability for remote workers to have real time communication with their colleagues through instant messaging, PC to PC calls and other video options. This pandemic is quickly changing how people are working, and in order to stay in front of this scenario, it is becoming increasingly important for organizations to remain flexible.

As we continue to be separated from each other, it is important for organization leaders to recognize the uncertainty and anxiety that many people are experiencing. It has become increasingly important to reach out to volunteers and staff, stay engaged and remain connected as everything runs its course.

We are eager to helping you navigate through this new climate. For a more in-depth review of many of these topics, visit our COVID-19 Resource page or contact our trusted professionals.

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.

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