Important CARES Act updates for nonprofit organizations

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Enacted late last month, the CARES Act COVID-19 relief bill includes emergency support for individuals, businesses, public health organizations and nonprofits. The Paycheck Protection Program (PPP) created through the CARES Act included up to $349 billion in potentially forgivable loans to eligible small businesses and nonprofits to pay their employees during the COVID-19 crisis. Just this week, the Small Business Administration announced that PPP funding had been depleted as organizations across the country applied for loans.

  • If your organization has already submitted an application and received a loan number from the SBA, it’s likely that your loan is secured, and dollars will arrive within 2-7 days after signing loan documents with your bank. If you receive a PPP loan, be sure to follow the program’s rules and regulations and track relevant expenses so that you can qualify for maximum loan forgiveness. You must spend at least 75% on payroll costs with the remaining amount being spent on rent, utilities and interest on mortgage debt within 8 weeks of receiving your loan proceeds.
  • If you began the PPP loan application process but are unsure of your status, please reach out to your bank or log in to your bank’s application portal, if available.
  • If you have not completed a PPP loan application, you may still want to contact your banker to explore your options. It is possible that Congress will soon appropriate additional PPP funds to help those who couldn’t access funding in the first round. Organizations may want to act early to be in the pipeline if more funding becomes available.

Another CARES Act benefit: payroll tax deferral  

In addition to funding through the PPP, the CARES Act allows employers and self-employed individuals to delay payments of the employer share of Social Security payroll taxes (the 6.2% portion of Employer FICA and 50% of SECA tax under 1401(a)). The deferral applies to the deposit and payment requirements of the employer and the estimated taxes due (after date of enactment) and the balance due on an individual return by a self-employed person. Here are a few helpful tips:

  • The payroll tax deferral period begins on the enactment date of the CARES Act (March 27, 2020) and ends on January 1, 2021.
  • The deferred taxes must be remitted over a two-year period, with half due by December 31, 2021, and the remainder due on December 31, 2022. 
  • Professional employer organizations (PEO) are not liable for payment of the deferred tax. The liability will fall upon the ultimate employer who contracted with the PEO.
  • If you applied for and received a PPP loan, you are still eligible to defer the employer portion of social security through the date of forgiveness of the PPP loan, at which point the deferred balance will be payable 50% on December 31, 2021 and the remainder on December 31, 2022.

Additional resources  

  • The CARES Act includes several important provisions that encourage charitable giving during the COVID-19 crisis. Learn more on our blog here.
  • Find more details about CARES Act relief for nonprofits on our blog here.
  • Greater Cleveland Partnership has also created resources tailored to nonprofits for accessing COVID-19 economic relief, including PPP. For more information, click here.

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