The FAMCare Blog

We are suddenly sailing in uncharted waters. A deadly viral pandemic has infected the entire world. So many people are in distress. They need so much help. Nonprofits, as they always do, are responding. But in these troubled times, the nonprofits themselves will need help.

Overwhelmed by your client’s need, it’s possible to neglect your own vulnerability.

The Cares Act

Given this country’s current political dysfunction, it is a miracle (truly a miracle) that Congress responded so quickly to the economic implications of this exploding health crisis. Three weeks into the rolling deadly infection, Congress passed the $2 trillion Cares Act to put a safety net under the entire economy. No one could need it more than the nonprofit community.

Seek Help Immediately

Keeping your organization intact is perhaps the first imperative for nonprofits. Thankfully, the Federal Government recognized this danger for nonprofits and quickly passed the Cares Act.

“Reaching out to the bank right now is really important," said David Thompson, vice president for public policy for the Council of Nonprofits. "Because the program is administered through the banks, they are going to hear details before we are, so you may get a heads-up faster. Larger organizations that are already well organized are going to be the ones poised and ready to apply. Many of the small organizations might not have the resources or the capacity to navigate the system, and we are really worried that could exacerbate some of the inequities of the sector."

A Summary for Nonprofits

The Cares Act is divided into four distinct programs, all of which nonprofits qualify for and should take advantage of immediately.

1. PAYCHECK PROTECTION PROGRAM

• Nonprofits with 500 or fewer employees can apply for forgivable loans of up to $10 million, or up to 2.5 times average monthly payroll costs, whichever is less.
• The loans can be used for payroll costs, benefits, interest on mortgages, rent, utilities, and debt incurred from February 15 to June 30.
• The loans are forgivable, but the amount forgiven will be cut if a nonprofit fails to bring the staff size up to pre-pandemic levels or reduces the pay of any employee more than 25 percent.
• The loans may not be used to pay salaries in excess of $100,000.
• The program is retroactive so employers can rehire their recently laid off employees through June 30 and remain eligible. 
• The portions of the loans that are not forgiven are payable in two years at a rate of 0.5 percent.
• The loans will be processed by most FDIC-insured banks and credit unions. 
• Lenders are required to consider only a few factors in evaluating loan applications, such as the necessity of a loan to survive the economic disruption caused by the coronavirus pandemic. Previous credit-seeking is not a factor, and no collateral is required.

2. ECONOMIC INJURY DISASTER LOANS

• Nonprofits, including some faith-based organizations, are eligible for loans of up to $2 million. The interest rate for nonprofits is 2.75 percent, with terms of up to 30 years. Initial payments can be deferred for up to one year.

3. EMPLOYEE RETENTION CREDIT

• Provides a refundable payroll tax credit for 50 percent of wages paid during the crisis. 
• Nonprofits of any size whose operations were fully or partially suspended by the coronavirus, or that saw gross receipts decline by more than 50 percent compared with the same quarter in the previous year, are eligible.

4. PAYROLL TAX DEFERRAL

• Nonprofits of any size may defer payment of the 6.2 percent share of the employer’s Social Security taxes.
• The deferred taxes must be repaid over the following two years.
• Payroll taxes cannot be deferred if a nonprofit has a loan forgiven under the Paycheck Protection Program.

Do not hesitate. Act now. If you are a smaller organization, do not get caught at the back of the line mired in “red tape”. Your need is just as valid and, perhaps, more imperative than any other. Save yourself, so you can continue to save others.