Nonprofit Covid Relief Bill – Consolidated Appropriations Act 2021

Nonprofit Covid Relief Bill – Consolidated Appropriations Act 2021 is INSIDE CHARITY’s overview of the Consolidated Appropriations Act of 2021 passed by both the U.S. House & Senate and signed into law by the White House on Monday, December 28, 2020. The original CARES Act legislation (spring of 2020) helped many nonprofits with its Paycheck Protection Program. Thousands of charitable organizations nationwide were able to secure forgivable loans from the Small Business Administration to ensure their ability to pay their staff members during the shutdowns. This new bill spans 5,593-page and allocates more than $2.3 trillion for nonprofit organizations and businesses struggling to make ends meet as cases of COVID-19 surge across the country. Thankfully, Congressional and Administration negotiators reached an agreement on the latest round of COVID-19 relief that is key to supporting nonprofits and our communities across the country. Here’s a complete list of what’s important to 501(c)(3) organizations:

Nonprofit Covid Relief Bill – Consolidated Appropriations Act 2021

New Funding Allocation:
$284 billion to SBA for Paycheck Protection Program (PPP), $20 billion for EIDL grants, $15 billion in dedicated funding for shuttered performance venues.

PPP Second Draw:
New PPP Loans are available to charities that employ 300 or fewer employees, and demonstrate at least a 25% reduction in gross revenues between same quarters in 2020 and 2019; nonprofit “gross receipts” defined under Section 6033 of Internal Revenue Code. Maximum loan amount: $2 million.

PPP Loan Forgiveness:
Expands forgivable expenses to include personal protective equipment, covered supplier costs, facilities modifications, covered worker protection expenditures. Simplifies the forgiveness application process for smaller loans up to $150,000 by allowing nonprofits to attest on a one-page form that they complied with the terms of the CARES Act PPP provisions.

Economic Injury Disaster Loan (EIDL):
Targets a new round of EIDL advances for charities located in low-income communities, have suffered economic loss of greater than 30%, and employ 300 of fewer employees. Extends emergency EIDL Grants through 12/31/2021. Repeals EIDL Advance Reduction that occurred when borrowers sought PPP loan forgiveness.

Charitable Giving Incentives:
Reestablishes the $300 above-the-line deduction for 2021 and permits a $600 deduction for couples filing jointly in 2021; imposes a penalty for overstating contributions. The bill also extends for one year the increased limits on deductible charitable contributions for individuals who itemize and for corporations.

Save Our Stages:
Provides grants of up to $10 million for performance venues, independent movie theaters, and cultural institutions.

State Issued Coronavirus Relief Fund:
Extends deadline for states to spend Coronavirus Relief Fund (CRF) monies through 12/31/2021.

501(c)(6) PPP Eligibility:
Expands to include qualified 501(c)(6) orgs including business leagues, chambers of commerce, real estate boards, boards of trade and professional football leagues, which are not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder.

Unemployment Insurance & Self-Insured Employers:
Extends until 3/14/2021 the 50% federal coverage of the costs of self-insured “reimbursable” employers.

Employee Retention Tax Credit (ERTC):
Extends the Employee Retention Tax Credit through 7/1/2021. It also improves the refundable payroll tax credit by reducing the amount of required year-over-year decline in gross receipts from 50% to 20%, while increasing the credit from 50% to 70% of workers’ “creditable wages” of up to $10,000 for each of two quarters, for a maximum per worker benefit of $14,000. Expands full benefit to all employees of nonprofits with 500 or fewer employees; larger charities can apply the credit only to workers who are paid but are not working. Provides that organizations who receive Paycheck Protection Program (PPP) loans may still qualify for the ERTC with respect to wages that are not paid for with forgiven PPP proceeds.

Paid Sick Leave:
Extends the refundable payroll tax credits for paid sick and family leave that were established in the Families First Coronavirus Response Act, through March 31, 2021. Extends through 2025 the 12.5% tax credit for paid family and medical leave originally enacted in the 2017 tax law.

Expense Deductibility:
While this doesn’t directly impact tax-exempt organizations, it’s worth mentioning because of the impact to businesses overall. The IRS has recently ruled that businesses that received a PPP loan could not deduct for tax purposes the payroll and overhead costs paid from the loan proceeds. The net result of that ruling essentially made the loans taxable income. That is not what Congress intended, and there has been a large outcry for this to be fixed via legislation. This new bill clarifies that omission but retroactively allowing business expense deduction from the original proceeds, collectively saving participating businesses approximately $170 billion in taxes this year.

Payments to Individuals:
This element, too, doesn’t directly target charities, but it is a huge component of the bill. The legislation provides for direct, monetary relief of $600 per person for those making $75,000 or less, similar to the checks that went out to everyone earlier this year. The relief is lowered by $5 for every $100 in income above $75,000, phasing out completely at $87,000. For married couples, phaseout is complete at $174,000. Children qualify for the $600, as well, subject to similar phaseouts.

Conclusion:

It will be several weeks before the SBA or your financial lender clarifies the PPP Second Draw process. Hang in there. We’ll keep you posted!

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