CARES Act Summary
1. Payroll Protection Program - Churches and nonprofit organizations (private or public) that are tax-exempt under section 501(c)(3) of the Internal Revenue Code may apply to their local bank for a small business loan. The maximum amount of the loan is 2.5 times the average monthly expenses for payroll from the calendar year 2019, plus rent and utilities, with a cap of $10,000,000. The loan proceeds can be used to pay payroll, health and retirement benefits, rent or mortgage payments, utilities, and interest on pre-existing loans. If the borrower has less than 100 employees, the loan will be forgiven to the extent the borrower spends the loan proceeds on qualifying expenses for the eight weeks following receipt of the loan proceeds, with cash compensation capped at $100,000 for any individual employee. Employers with more than 100 employees may receive loan forgiveness only for payments to employees who did not render any services. No loan forgiveness for amounts paid for mandated sick pay or new FMLA paid leave. Any reduction from 2019 full-time equivalent employees (“FTEs”) will also reduce the amount of loan forgiveness. The law compares 2019 FTEs with FTEs from March 15, 2020 through June 30, 2020 or FTEs from January 1 through February 29, 2020. Please note that the Department of Labor, the Small Business Administration, and the Treasury Department are frequently issuing new guidance that may change any of the above.
2. Every adult taxpayer receives $1,200, and every child receives $500. These amounts are phaseout for taxpayers making more than $75,000. The payment is phased out entirely at $99,000 for single taxpayers and $198,000 for joint taxpayers. The phaseout is based on the 2019 tax return or 2018 tax return if the 2019 return has not been filed.
3. Every taxpayer will be allowed to take up to $300 as a charitable contribution without itemizing deductions.
4. The cap on charitable contribution deductions is 100% of Adjusted Gross Income for individuals. The corporate donation limit is increased to 25% from 10%.
5. Employers may delay the payment of employer portion of FICA payroll taxes until December 31, 2021, if they do not qualify for the loan forgiveness. The employer may pay 50% of payroll taxes on December 31, 2021, and the remaining 50% by December 31, 2022.
6. The emergency paid sick leave, and emergency paid FLSA leave are each capped at the limit of their respective credits. If an employee is laid off and rehired after March 1, 2020, the employee must work at least 30 days during the last 60 days since March 1.
7. Former church employees will be eligible for disaster unemployment compensation, though their former employers did not subscribe to state unemployment. Former employees should contact their local unemployment agency for more details.
8. Employer retention credit - The bill creates a refundable payroll tax credit of 50% of up to $5,000 for each employee on the payroll. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shutdown order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year. The credit is available each quarter until the nonprofit’s revenue exceeds 80 percent of the same quarter in 2019. Nonprofits receiving PPP loans or EIDL emergency SBA loans are not eligible for these credits. The credit is provided for wages paid or incurred from March 13, 2020, through December 31, 2020. If the employer secures a PPP loan, then they are not eligible for the credit.
9. Individuals may withdraw up to $100,000 from the retirement accounts without penalty, if the individual, their spouse, or their dependents are infected with the COVID-19 virus. Eligibility for the withdrawal also includes individuals quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19. The income taxes on the withdrawal are spread out over three years.
10. Economic Injury Disaster Loans (“EIDL”) and Grants – Private nonprofit organizations with less than 500 employees are eligible for a $10,000 conditional loan advance from the SBA if they have suffered economic losses due to a declared disaster area. The loan advance does not need to be repaid under most conditions. Private nonprofit organizations include religious organizations, Section 501
(c)(6) organizations and most tax-exempt organizations. Generally, if the nonprofit is located in a government-ordered shutdown or shelter in place, they qualify for the EIDL grants and loans. Nonprofit organizations are eligible for low-interest loans for up to $2 million under the same criteria as the grant.