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Effect of Federal Legislation on Nonprofit Organizations

By Madeline Fuller

April 17, 2020

In an effort to guide employers and employees through the COVID-19 pandemic, the Federal Government has passed various pieces of legislation. This post will focus specifically on how the CARES Act and FFCRA affect various nonprofit organizations.

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) – enacted March 27, 2020

Paycheck Protection Program (“PPP”) Loans. For more details on this program, see HERE.

Who’s eligible?

  • Section 501(c)(3) organizations, including faith-based organizations (with 500 or fewer employees).
  • Churches and other houses of worship who have not obtained tax-exempt status by the IRS, but meet the requirements of Section 501(c)(3). These entities are not required to seek formal tax-exempt recognition from the IRS in order to be eligible.
  • Section 501(c)(19) veteran’s organizations (with 500 or fewer employees).

Emergency Economic Injury Disaster Loans (“EIDL”) and Grants. EIDLs are available to “private nonprofit organizations” which is a broader set of nonprofits than those eligible under the PPP. Unlike the PPP, there is no limitation on the size of the nonprofit. For more details on this program, see HERE.

Who’s eligible?

  • Entities exempt under Section 501(c), including trade associations, civic leagues, social clubs, advocacy organizations, and faith-based organizations.
  • Churches and other houses of worship who have not obtained tax-exempt status by the IRS, but meet the requirements of Section 501(c)(3). These entities are not required to seek formal tax-exempt recognition from the IRS in order to be eligible.
  • Section 501(d) entities, associations with a common treasury.
  • Section 501(e) entities, cooperative hospital service organizations.

NOTE: Faith-based organizations are still eligible for both PPPs and EIDLs even if they provide secular social services. Faith-based organizations are subject to the same rules regarding the use of funds as other potential borrowers, they are not limited to expenditures for secular purposes.

Additional Assistance Available to All Nonprofit Employers

Employee Retention Tax Credit. For more information, see HERE. A nonprofit employer that receives a loan under the PPP is not eligible to claim this credit.

Expanded Unemployment Benefit Assistance. For more information, see HERE.  The primary benefit of this assistance is a reimbursement to most nonprofit entities of 50 percent of the unemployment pay obligations that they otherwise would owe to the State of Ohio.

Delay of Payment of Employer Payroll Taxes. Option for nonprofit employers to defer paying the employer portion of FICA tax through the end of December 2020 with deferred amounts due in two equal installments at the ends of 2021 and 2022. This benefit is not available to employers who have had PPP loans forgiven.

Families First Coronavirus Response Act (FFCRA) – in effect April 1, 2020

Emergency Paid Sick Leave Act and Emergency Family and Medical Leave Expansion Act. Provides two significant benefits for employees and a corresponding tax credit for private nonprofit employers with fewer than 500 employees. For more information, see HERE.

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