CARES Act: How to Apply for Nonprofit Relief Funds

Independent Sector

With nonprofit organizations scrambling to determine how the Coronavirus Aid, Relief and Economic Security (CARES) Act will apply to them, Independent Sector has teamed with Washington Council Ernst & Young, a DC-based lobbying firm with deep expertise in the nonprofit sector, and Sheppard Mullin, a national full-service law firm with a dedicated Nonprofit Team. This resource will help nonprofit organizations understand how the CARES Act will apply to them and how to proceed with filing for assistance.

This resource is categorized between assistance for individuals, small nonprofits (less than 500 employees) and large nonprofits (over 500 employees), and includes our latest information on eligibility criteria, timelines, and application information. Things are evolving and changing every day, so please check back regularly as we update this page.

5 Important Tips

Individuals

Self-employed individuals should also explore the “Small Nonprofits” section, as they are eligible for a number of those opportunities.

Eligibility Requirements

Each U.S. resident or citizen will receive up to $1,200 and an additional $500 for every child.

  • This amount will be reduced for higher-income taxpayers and begin phasing out after $75,000 in adjusted gross income for a single taxpayer, $112,500 for a head of household filer, and $150,000 for married couples who file a joint return
  • The amount is completely phased-out after $99,000 for single taxpayers, $146,500 for head of household filers with one child, and $198,000 for joint filers
  • Individuals must have a work-eligible SSN and must not be a dependent of another taxpayer
  • Individuals with little to no income and those on federal benefits, such as Social Security, SSI, and veterans’ disability payments, are still eligible

Application Information and Notes

The IRS has begun processing payments to taxpayers with direct deposit information on file. Those who would file a tax return in 2018 or 2019 can check the status of their payment or add direct deposit information through the IRS Get My Payment form while others can use the Non-Filers: Enter Payment Info Here form.

Despite initial concerns, the IRS has announced that individuals receiving Social Security retirement or disability benefits, Railroad Retirement Benefits, or Supplemental Security Income will receive their payments automatically. However, these beneficiaries may need to use the Non-Filers form in order to receive payment for any qualified children.

Eligibility Requirements

  • Pandemic unemployment assistance (PUA): Provides emergency unemployment assistance to workers left out of the regular state unemployment insurance or who have exhausted their state unemployment benefits.  A “Covered Individual” is eligible for up to 39 weeks (including any weeks for which the individual received regular unemployment benefits).
    • A “Covered Individual” is an individual who (i) is not otherwise eligible for regular or unemployment compensation; (ii) provides self-certification that the individual is unemployed, or partially unemployed, for various reasons related to COVID-19
    • Expands eligibility for unemployment to self-employed, part time workers who are unable to work due to COVID-19, and those with limited work history.
  • Emergency Increase to Unemployment Compensation (Pandemic Unemployment Compensation or PUC):  Individuals eligible for state unemployment benefits or PUA are eligible for an extra $600 per week for up to four months.
  • Pandemic Emergency Unemployment Compensation (PEUC): Provides 13 extra weeks of unemployment benefits after exhausting state unemployment benefits.  All but eight states offer 26 weeks of unemployment. To be eligible, workers must be actively engaged in looking for work, but states must provide flexibility in meeting this requirement when individuals are unable to look for work because of COVID-19.
  • Funds the cost of the first week of benefits if a state waives its standard one-week waiting period requirement.
  • Establishes a new short-term compensation plan where employers can reduce hours instead of layoffs, and employees can receive pro-rated unemployment benefits.
  • Funds 50% of the reimbursement of unemployment benefits for workers of non-profits that have elected the reimbursement method for unemployment insurance coverage, sometimes known as self-insurance.

Application Information and Notes

Expanded unemployment benefits are available through December 31, 2020.

Unemployment claims must be filed in the state where you worked. To find information on your state, visit CareerOneStop. Individual should gather his/her income and documentation regarding work situation. Individual will need to provide social security number, home address, telephone number, email address, banks name, address, account number and routing number for direct deposit, your employer’s name, address and phone number, first and last day worked, reason for leaving, and any pension or severance package information.

Individual should file on-line as soon as possible, but confirm that your state is ready to receive applications for Pandemic Unemployment Assistance if you are not otherwise eligible or for other extended benefits.

For general questions on unemployment insurance, visit the Department of Labor’s page.

The relief for non-profits with reimbursement arrangements applies for the period beginning March 13, 2020 through December 31, 2020.

Eligibility Requirements

Permits individuals to deduct up to $300 of cash contributions to most charities in 2020 for those who do not itemize their deductions.

Application Information and Notes

Available for the 2020 tax year.

Eligibility Requirements

Suspends the limitation on deductions for cash contributions to most charities for individuals who itemize. Increases the limitation on deductions for similar contributions by corporations from 10% to 25% of taxable income. Also increases the limitation on deductions from 15% to 25% for contributions of food inventory.

Application Information and Notes

Available for the 2020 tax year (and tax years ending in 2020 for corporations).

Eligibility Requirements

Excludes employer student loan repayments from taxable income of up to $5,250.

Public Service Loan Forgiveness (PSLF): The CARES Act includes several other provisions relating to student loans, including an interest free  suspension of payments due on certain federal loans until September 30, 2020.

The payment suspension will not affect PSLF for individuals who continue to be employed full time at a qualifying employer during the suspension, because for each month the loan is suspended or paid (either by the individual or by the employer on behalf of the individual), the  individual is treated as having made the payment for purposes of the PSLF.

If an individual makes a payment, it will reduce the principal of the loan. See more information from the Department of Education.

Application Information and Notes

Applies to any student loan payments made by an employer on behalf of an employee after March 27, 2020, and before January 2021.

No application required. 2020 IRS Form W-2 should exclude the payments from taxable income.

Nonprofits should review and amend any education assistance program documents to the extent they want to include this benefit.

Small Nonprofits (Fewer than 500 Employees)

Eligibility Requirements

Known as the Paycheck Protection Program (PPP), provides SBA 7(a) loans of up to $10 million to certain nonprofits

  • Applies to nonprofits under Section 501(c)(3) and tax-exempt veterans’ organizations under Section 501(c)(19)
  • Applies to these nonprofits that employ not more than the greater of (1) 500 employees or (2) if applicable, “the size standard in number of employees established by the Administration for the industry in which the” nonprofit organization operates
  • The loan is for expenses incurred between February 15, 2020 and June 30, 2020 for payroll costs, health benefits during sick or family leave, salaries or commissions, interest on mortgage, rent, utilities and prior debt
  • The size of the loan is the lesser of (1) a nonprofit’s average monthly “payroll costs” for the prior 12 months times 2.5 or (2) $10 million
  • Payroll costs include salary, wages, sick leave (unless allowed for paid leave tax credit), health benefits, pension benefits, and state taxes (Payments for salary and wages limited to $100,000). Independent contractors do not count as employees for this calculation.
  • Interest rate capped at 4%
  • Loans will be provided via existing SBA lenders and other lenders approved by the SBA
  • Nonprofits are eligible to have these loans forgiven, effectively turning the loans into grants. Forgiveness is available for the portion of the loan used for the following expenses during the covered period (8 weeks from origination)
    • Payroll costs (as defined above)
    • Interest on mortgage incurred before February 15, 2020
    • Rent obligation incurred before February 15, 2020 and
    • Utilities (electric, gas, water, transportation, phone, internet) for service that began before February 15, 2020
  • The amount forgiven will be reduced
    • Proportionally by any reduction in employees retained compared to the prior year, and
    • By the reduction in pay of any employee beyond 25% of their prior year compensation
  • To encourage employers to rehire any employees who have already been laid off due to COVID-19, borrowers that rehire workers previously laid off will not be penalized for having a reduced payroll at the beginning of the period

Application Information and Notes

Nonprofits may apply at any lending institution that is approved to participate in the program through the existing SBA 7(a) lending program and additional lenders approved by SBA and the Department of Treasury. Nonprofits do not need to visit any government institution to apply for the program, and should begin gathering suggested documents now.

Starting April 3, 2020, small businesses and nonprofits can apply. Starting April 10, 2020, independent contractors and self-employed individuals can apply. We encourage you to speak with your financial institution soon because there is a funding cap.

For information on finding SBA-approved lenders, visit SBA’s online Lender Match tool, your local Small Business Development Center, or local Women’s Business Center.

Eligibility Requirements

SBA EIDL loans are low-interest loans provided through the SBA disaster loan program to help businesses and homeowners recover from declared disasters. The CARES Act expands eligibility for access to EIDL loans and provides upfront grants.

  • Only “private nonprofits” are eligible for both EIDLs and the new EIDL grants
  • Establishes an emergency grant to allow an eligible nonprofit that has applied for an EIDL loan due to COVID-19 to request an advance on that loan, up to $10,000, which the SBA must distribute within 3 days
  • Applicants are not required to repay advance payments, even if denied for an EIDL loan, but advanced payments would be counted towards the loan forgiveness amount under a 7(a) PPP loan
  • Funds can be used for payroll costs, materials, rent, mortgage or other debt payments

Application Information and Notes

Application can be made during 2020.

To apply for an EIDL loan, visit the SBA’s COVID-19 Economic Injury Disaster Loan Application.

The law directs the SBA Administrator to issue initial guidance on procedures for application and minimum requirements by April 11, 2020.

To be considered for an expedited loan advance of up to $10,000, select the check box at the end of the EIDL application.

Eligibility Requirements

Provides a refundable payroll tax credit for 50% of wages paid by employers to employees during the COVID-19 crisis.

  • The credit is available to employers (1) who were fully or partially suspended, due to a COVID-19-related shut-down order, or (2) where gross receipts declined by more than 50% when compared to the same quarter in the prior year
  • The total wages attributed to an employee is capped at $10,000, including health benefits, resulting in a maximum credit of $5,000 per employee
  • Eligible wages include
    • For employers with greater than 100 full-time employees, wages paid to employees when they are not providing services due to COVID-19
    • For employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order
  • Applies only to wages paid after March 12, 2020 and before January 1, 2021

An employer that receives a loan under the SBA 7(a) PPP is not eligible for the credit

Application Information and Notes

On March 31, Treasury Department and the Internal Revenue Service launched the Employee Retention Credit and provided further details.Employers can be immediately reimbursed for the credit by reducing their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit.

Eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their quarterly employment tax returns or Form 941 beginning with the second quarter. If the employer’s employment tax deposits are not sufficient to cover the credit, the employer may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.

Eligibility Requirements

Allows employers to defer payment of the employer share of Social Security taxes, 6.2% on employee wages.

  • The provision applies to all employers, including nonprofits
  • There is no limit on the number of employees to take the deferral

Payroll taxes may not be deferred if a nonprofit has a loan forgiven under the Paycheck Protection Program, but any amounts deferred through the date the loan is forgiven continue to be deferred without penalty provided they are paid by the applicable deferred payment dates

Application Information and Notes

The deferred taxes are required to be paid over the following two years, with half of the amount paid by the end of 2021 and the other half by the end of 2022. The IRS has issued Frequently Asked Questions to guide organizations in this process.

Large Nonprofits (More than 500 Employees)

Eligibility Requirements

Provides a refundable payroll tax credit for 50% of wages paid by employers to employees during the COVID-19 crisis.

  • The credit is available to employers (1) who were fully or partially suspended, due to a COVID-19-related shut-down order, or (2) where gross receipts declined by more than 50% when compared to the same quarter in the prior year
  • The total wages attributed to an employee is capped at $10,000, including health benefits, resulting in a maximum credit of $5,000 per employee
  • Eligible wages include
    • For employers with greater than 100 full-time employees, wages paid to employees when they are not providing services due to COVID-19
    • For employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order
  • Applies only to wages paid after March 12, 2020 and before January 1, 2021

An employer that receives a loan under the SBA 7(a) PPP is not eligible for the credit

Application Information and Notes

On March 31, Treasury Department and the Internal Revenue Service launched the Employee Retention Credit and provided further details.Employers can be immediately reimbursed for the credit by reducing their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit.

Eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their quarterly employment tax returns or Form 941 beginning with the second quarter. If the employer’s employment tax deposits are not sufficient to cover the credit, the employer may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.

Eligibility Requirements

Allows employers to defer payment of the employer share of Social Security taxes, 6.2% on employee wages.

  • The provision applies to all employers, including nonprofits
  • There is no limit on the number of employees to take the deferral

Payroll taxes may not be deferred if a nonprofit has a loan forgiven under the Paycheck Protection Program, but any amounts deferred through the date the loan is forgiven continue to be deferred without penalty provided they are paid by the applicable deferred payment dates

Application Information and Notes

The deferred taxes are required to be paid over the following two years, with half of the amount paid by the end of 2021 and the other half by the end of 2022. The IRS has issued Frequently Asked Questions to guide organizations in this process.

Eligibility Requirements

Provides up to $454 billion (of the $500 billion total fund) in financial assistance to businesses, including nonprofits.

  • Treasury given authority to develop program to provide loans to nonprofit organizations with between 500 and 10,000 employees
  • Loans cannot be forgiven
  • Could be direct loans or guarantees of private loans
  • Loans made under the program would be at an interest rate no higher than 2%, with no payments due in the first six months
  • Borrower must make a good faith certification with respect to several items, including (but not limited to)
    • Economic conditions made loan necessary,
    • Loan proceeds will be used to retain 90% of workforce at full compensation until September 30, 2020
    • Entity will restore not less than 90% of workforce as of February 1, 2020 and restore all compensation and benefits to workers no later than 4 months after termination of the COVID-19 public health emergency, and
    • Entity is domiciled in the U.S. with significant operations and employees in the U.S.

Certain limits on executive compensation would apply

Application Information and Notes

The federal reserve has announced the purchase of up to $600 billion in loans through the Main Street Lending Program, but the term sheets it has released do not make mention of nonprofit organizations’ status.

Eligibility Requirements

SBA EIDL loans are low-interest loans provided through the SBA disaster loan program to help businesses and homeowners recover from declared disasters. The CARES Act expands eligibility for access to EIDL loans and provides upfront grants.

  • Only “private nonprofits” are eligible for both EIDLs and the new EIDL grants
  • Establishes an emergency grant to allow an eligible nonprofit that has applied for an EIDL loan due to COVID-19 to request an advance on that loan, up to $10,000, which the SBA must distribute within 3 days
  • Applicants are not required to repay advance payments, even if denied for an EIDL loan, but advanced payments would be counted towards the loan forgiveness amount under a 7(a) PPP loan
  • Funds can be used for payroll costs, materials, rent, mortgage or other debt payments

Application Information and Notes

Application can be made during 2020.

To apply for an EIDL loan, visit the SBA’s COVID-19 Economic Injury Disaster Loan Application.

The law directs the SBA Administrator to issue initial guidance on procedures for application and minimum requirements by April 11, 2020.

Top 11 Questions about Relief for Nonprofits under the CARES Act

Independent Sector’s members and partners have been asking many questions about the relief programs available under the federal CARES Act enacted on March 28, 2020.  In addition to our Summary of the CARES Act for Nonprofits and the information presented above about how to apply for relief, here are answers to questions we are frequently being asked – and important points that we are seeing that may not be getting enough attention. Updated 5.14.20

1. It is critical to apply quickly for loan funds, and to start with your current bank.

2. While you can accept only one loan, you can apply through multiple banks. Some banks are taking more time to screen applications and have had higher acceptance rates.

  • There is an incredibly high volume of applicants, including for-profits, and the banks providing the loans have been overwhelmed. While a number of lenders have recently been approved to make loans under the programs established by the CARES Act, most banks are currently accepting applications only from their existing customers, or are prioritizing their existing customers ahead of other applicants.
  • The initial $349 billion authorized for the Paycheck Protection Program was exhausted in less than 2 weeks, and Congress allocated another $310 billion which became available on April 27, 2020. Demand remains extremely high, so it is expected that the additional funding will be rapidly depleted.

Paycheck Protection Program (PPP) forgivable loans: Apply at any federally insured bank, credit union or other lender approved by the Small Business Administration (SBA).  The application form is available  along with information about approved PPP lenders at https://www.sba.gov/paycheckprotection/find

Economic Injury Disaster Loans (EIDL) & Grants:  Apply directly to the SBA.

Each relief program applies to a certain category of organizations, in addition to other eligibility criteria:

  • Paycheck Protection Program Forgivable Loans (SBA 7(a)): Section 501(c)(3) tax-exempt organizations, Section 501(c)(19) tax-exempt veterans’ organizations and Tribal small business concerns with not more than 500 employees.
  • Exchange Stabilization Fund: nonprofits with between 500 to 10,000 employees. No specific program has been announced, although in a recent statements the Federal Reserve indicated it was contemplating a special program for nonprofits.
  • Expanded Economic Injury Disaster Loans (EIDL) & Emergency Grants (SBA 7(b)): “private nonprofit organizations” with not more than 500 employees. This term has not been clearly defined. However, the SBA has recognized in the past that food kitchens, homeless shelters, museums, libraries, community centers, schools and colleges qualified.
  • Payroll Taxes Credit for Employee Retention: All employers, including nonprofits.
  • Payroll Tax Deferral:  All employers, including nonprofits.

Paycheck Protection Program & EIDL? An employer can apply for and receive both a Paycheck Protection Program and EIDL loan, but the funds obtained cannot be used for the same purpose.  Employers who previously obtained an EIDL loan may refinance their EIDL loan into a Paycheck Protection Program loan, which is eligible for forgiveness. Employers that apply for EIDL loans may also receive a $10,000 grant advance within 3 days of application, which may be kept regardless of whether your application is approved.

Paycheck Protection Program & Employee Retention Credit? An employer that receives a loan under the SBA 7(a) Paycheck Protection Program is not eligible for the employee retention credit against payroll taxes.

Paycheck Protection Program/Payroll Tax Deferral?  Employers who receive a loan under the Paycheck Protection Program are eligible to defer their share of Social Security taxes due for the period beginning on March 27, 2020, and ending on the date that the lender issues the employer its decision to forgive the loan.  An employer may not defer the deposit and payment of its share of the Social Security tax due on or after the date the employer receives a notice of such loan forgiveness. But any amounts deferred through the date the loan is forgiven continue to be deferred without penalty, provided that they are paid by the applicable deferred payment dates (i.e., December 31, 2021 for 50% of the deferred amount and December 31, 2022 for the remaining amount).

Applicable dates: The relief programs that are available to your organization depend on how many employees your organization had during the period from February 15, 2020 to June 30, 2020.

Affiliated entities: Employees of any affiliate or subsidiary of a nonprofit must be included in the number of employees when determining eligibility. An affiliate for this purpose is any entity that controls or has the power to control the other, or that is controlled by the same third party, regardless of “for profit” status (i.e., including for-profit subsidiaries and affiliates of nonprofit organizations).

Faith-Based Organizations: The SBA issued FAQs exempting many faith-based organizations from the affiliation rules used to count an organization’s number of employees.

Common misconception:  The Paycheck Protection Program application form requires reporting owners of 20% or more of the applicant, including their Social Security Numbers.  Nonprofits do not have owners and therefore would not fill out that section of the form.

Paycheck Protection Program loans require the applicant to certify that the current economic uncertainty makes the Paycheck Protection Program loan necessary to support the organization’s ongoing operations. There is no requirement to affirmatively show current or future economic hardship or injury.

EIDL loans require that an applicant show “substantial economic injury” as a result of COVID-19, which means the organization cannot meet its obligations and pay necessary and ordinary expenses.

Paycheck Protection Program loans are forgivable – meaning, they essentially can be converted into a grant.

How to apply for forgiveness: A request is made with the bank or lender from whom the Paycheck Protection Program loan was obtained.  Documentation must be submitted to verify the number of full-time employees and pay rates as well as payments on eligible mortgage, lease, and utility are required.

Qualifying for forgiveness: All that is required to be eligible for forgiveness is demonstrating that loan proceeds were used on qualifying expenses (i.e., payroll costs, mortgage/rent, utilities, etc.) incurred over the eight weeks following the receipt of the loan.

Amount forgiven: The amount forgiven can be reduced if the number of full-time employees is decreased over this period and/or you reduce employees’ wages/salaries 25% or more. The lender will make this determination. If the organization received an advance from an EIDL application but was not ultimately approved, the PPP forgiveness amount will be reduced by the EIDL advance amount.

Automatic review for loans > $2 million: In a recent public statements, the SBA stated that, following submission of a borrower’s forgiveness application, it will review all loans in excess of $2 million to ensure that the eligibility criteria were met. Further regulatory guidance on specific procedures is expected to be forthcoming.

Safe Harbor for loans < $2 million: On May 13, SBA published an FAQ indicating that “Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.”

Independent Sector has put together a list of suggested documents, although each financial institution may have its own particular requirements.

Applicants can expect to receive loan proceeds within 10 days of being approved for a Paycheck Protection Program loan. The length of time to receive approval largely depends on the specific institution through which you apply.  Once a completed application is submitted, applicants are typically approved anywhere between 3-10 business days..

Feedback from banks and others tasked with administering these programs is that difficulties in processing applications have occurred from time to time and may continue to occur. To ensure that an application has the best chances of being approved, it is imperative that the applicant submit a complete application with all supporting documentation to their lender.

Key Take-Away: The demand for loans is clearly greater than the amount of money allocated and SBA has confirmed the programs will be on a “first come, first served” basis, so if your organization is considering applying, you should do so now.

Student Loan Provisions: The CARES Act includes several provisions relating to student loans, including an interest-free suspension of payments due on certain federal loans until September 30, 2020.

PSLF: The payment suspension will generally not affect Public Service Loan Forgiveness (PSLF), for individuals who continue to be employed full time at a qualifying employer during the suspension. This is because for each month the loan is suspended or paid (either by the individual or by his or her employer), the individual will be treated as having made the payment for purposes of PSLF. If an individual makes a payment, it will reduce the principal of the loan.

Principal & Interest:  If an individual is able to make a payment, including a payment or reimbursement by his or her employer, the payment will further reduce the principal of the loan, since interest is not accruing during this time.

For more information, click here.

Check for other CARES Act relief: Additional relief and resources are available for certain nonprofits based on their type of operations, such as for healthcare organizations, universities, food banks, and arts and cultural organizations, as well as for organizations that have government contracts.

Check for other valuable sources of relief: State and local governments are providing additional aid in the forms of grants and loans, and many private foundations and other philanthropic organizations are funding COVID-19 relief funds, including funds focused on specific geographic areas.

  • A state-by-state list of community foundations and more grantmakers offering relief funds is available from the Council on Foundations.
  • For example, nonprofits in New York City may be eligible for the NYC COVID-19 Response & Impact Fund and NYC Employee Retention Grant Program.
  • Obtaining relief from these sources may be faster in some cases than obtaining loans under the CARES Act programs. However, there is no double dipping – organizations cannot have the same expenses reimbursed from multiple sources.

Stay tuned:  Things are changing at breakneck speed, as government agencies scramble to issue guidance (and sometimes, to change previously issued guidance).  Please continue to check back here for updates.

With special thanks to Tamar Rosenberg, Adam Barton and Claudia Hinsch of Sheppard Mullin’s Nonprofit Team for assistance with the FAQ’s.

The information here is a high level summary of complex law. It is provided for informational purposes only. It is not intended to be, and is not a substitute for, legal or financial advice. Organizations should consult their attorneys and advisors for specific guidance.

Things are changing quickly. Additional guidance and application materials are expected. This information represents our interpretation of where things currently stand at the time of drafting.

If you have any question, please email publicpolicy@independentsector.org.

Global Topics: Civil Society, Congress, COVID-19 Response, Public Policy
Policy Issues: Charitable Deduction, Charitable Giving, Federal Budget & Fiscal Policy, Nonprofit Operations, Tax & Fiscal Policy
Resource Types: Fact Sheet