Coronavirus Resources for Nonprofit Organizations

Challenges Nonprofit Organizations are Facing Due to COVID-19

According to a recent survey by The Nonprofit Institute, as a result of COVID-19, San Diego nonprofits report a decline in donations and expect more layoffs. To download the report issued by The Nonprofit Institute, visit the University of San Diego’s webpage.

As a result of the COVID-19 pandemic, many San Diego nonprofits are experiencing increased demands for services, yet have been hindered or completely cut off from responding due to stay at home orders, revenue loss, and physical distancing.

In an effort to understand the impact of the COVID-19 pandemic on local nonprofits’ ability to meet their communities’ needs, The University of San Diego’s Nonprofit Institute has been surveying nonprofit leaders since March 2020. A total of 381 nonprofit leaders representing both small and large nonprofits from a variety of subsectors responded to the survey.

Key findings from the survey findings include:

  • Demand for nonprofit services is increasing while 71% of nonprofits are experiencing service disruption.

  • Three-quarters of all nonprofits report loss of fee-for-service revenue.

  • Over 60% of all nonprofits report a decline in individual donations.

  • There has been a significant and unprecedented reduction of the nonprofit workforce with 53% reporting staff furloughs, layoffs, reduced hours and/or reduced pay and more layoffs expected in the future.

  • Nonprofits are responding to new demands and challenges by shifting programs online, working remotely, and collaborating in new ways.

Beyond needing essential financial support, nonprofits need assistance with reevaluating fundraising strategies, financial scenario planning, and managing stress and anxiety of staff and clients.

IRS Guidance Regarding COVID-19 for Your Nonprofit Organization

The IRS released Notice 2020-23, providing filing deadline relief for virtually all tax forms due between April 1, 2020 and July 15, 2020 by providing an automatic extension of time to file until July 15, 2020. Some of the forms extended are listed explicitly in the Notice; others are incorporated by a reference to Rev. Proc. 2018-58.

Among the forms of particular interest to nonprofits are:

  • Forms 990, 990-EZ, and 990-N

  • Form 990-PF

  • Form 5227 (filed by charitable remainder trusts and charitable lead trusts)

  • Form 1041 (filed by charitable lead trusts)

  • Forms 5500 and 5500-EZ (filed by employee benefit plans)

To get answers to questions on the IRS filing and payment deadline, visit the IRS website. The IRS provides FAQs, updated on April 22, 2020. Additional COVID-19 resources are available on the IRS website, covering topics such as i) Employee Retention Credit Available for Many Businesses Financially Impacted by COVID-19, and ii) Coronavirus-Related Paid Leave for Workers and Tax Credits for Small- and Mid-Size Businesses.

For the latest information related to COVID-19, taxpayers can visit IRS.gov and follow the IRS on various social media platforms, including:

  • YouTube: The IRS has video channels that provide short, informative videos on various tax related topics in English, American Sign Language (ASL) and a variety of foreign languages. 

  • Twitter: IRS tweets include various tax-related announcements, news for tax professionals and hiring initiatives. 

  • Facebook: The IRS posts valuable tax information for tax professionals and those needing help to resolve issues with the IRS on Facebook.  

  • LinkedIn: The IRS posts important tax information, updates and announcements from the IRS on LinkedIn. 

  • Instagram: The IRS shares taxpayer-friendly information to help filers prepare for the tax season and navigate tax law changes on Instagram. It also provides the latest tax scam information.

Loan Programs for Nonprofit Organizations

Low-interest loans are available to help nonprofits that need a quick infusion of cash. These include SBA economic injury disaster loans (EIDL) and loans under the paycheck protection program (PPP). Any nonprofit with less than 500 employees can qualify for either or both loan programs. However, you can’t use funds from each loan for the same expenses.

SBA Economic Injury Disaster Loans (EIDL)

Congress has added millions in additional funds to the Small Business Administration’s Economic Injury Disaster Loans program. These loans of up to $2 million have a 2.75% interest rate when made to nonprofits. Payments can be deferred for up to four years. Applicants can also get an emergency grant of up to $10,000 while applying for such a loan. Apply online with the Small Business Administration.

Paycheck Protection Program (PPP)

Congress has authorized a brand-new loan program called the Paycheck Protection Program. Nonprofits can borrow up to 2.5 times 2019 average payroll costs for all employees earning up to $100,000. You can borrow up to $10 million. These are two-year loans with a 1% interest rate. However, the loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities. Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease. For more information, see the SBA Paycheck Protection Program page.

On May 15 the SBA released its much-anticipated Loan Forgiveness Application, with accompanying instructions and worksheet, for Paycheck Protection Program borrowers. The potential for loan forgiveness is arguably the most attractive feature of the program. However, the SBA and Treasury's evolving guidance on loan forgiveness requirements has been a source of concern for borrowers. Perhaps in response to these concerns, as well as those raised in the Inspector General's Flash Report, the SBA introduced through the Application certain measures and modified guidance with the stated aim of "reduc[ing] compliance burdens and simplify[ing] the [forgiveness] process for borrowers."

The House plans to return next week to vote on a bill making changes to a relief program for small businesses, as prospects of a bicameral aid package remain foggy. Lawmakers have already approved hundreds of billions of dollars in funding for forgivable, government-backed loans to small businesses under the Paycheck Protection Program, starting with the CARES Act (Public Law 116-136). But businesses have struggled with some of the requirements for the funds, and guidance has been confusing.

The bill (H.R.6886) coming to the floor would let businesses have more than eight weeks—the current limit—to put the funds toward payroll and would ease a requirement that at least 75% of the loans be used for payroll. Businesses would also get more than two years to pay back the loans and would be able to receive a payroll tax deferment.

Employee Retention Tax Credit for Nonprofits

All nonprofits, regardless of size, may be entitled to a new employee retention tax credit. This is designed to encourage employers not to lay off their employees during the pandemic. This a refundable credit--your nonprofit can collect the full amount even if it owes no taxes. The maximum amount for any employee is $5,000.

A nonprofit organization is eligible for this credit if it:

  • Fully or partially suspends operation during any calendar quarter in 2020 due to a government order limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19, or

  • Experiences a significant decline in gross receipts during the calendar quarter.

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. Note that your nonprofit cannot qualify for this credit if it receives a Small Business Interruption Loan under the Paycheck Protection Program. For more information on the employee retention credit, see the FAQs prepared by the IRS.

Charitable Deduction Tax Changes

As the economy suffers, so does nonprofit fundraising. The Coronavirus Aid Relief and Economic Security Act (CARES Act) enacted by Congress made two important changes in the tax law in an attempt to help nonprofits get donations.

Universal Charitable Deduction

First, the CARES Act allows taxpayers to deduct up to $300 in charitable contributions without itemizing. The contributions must be made in cash to 501(c)(3) public charities. Contributions to nonoperating private foundations, support organizations, and donor-advised funds don’t come within the new deduction. This change in the tax law is permanent—it applies to 2020 and all future years.

Nonprofits have long sought such a universal “above the line” charitable deduction that can be claimed by nonitemizers. As a result of recent tax changes, today only about 10% of all taxpayers itemize their personal deductions. Now, the other 90% can at least donate $300 each year and get a deduction. This $300 annual donation is much less than nonprofits sought, but it should encourage small donations.

2020 Increase in Charitable Donation Limit

For wealthier taxpayers who do itemize their personal deductions, the CARES Act increases the annual income limits on deducting charitable contributions. For 2020 only, taxpayers can deduct charitable contributions up to 100% of their adjusted gross income, increased from 60% of AGI. Corporate taxpayers may deduct up 25% of adjusted taxable income, increased from 10% (15% for food donations).

Sick Leave and Family Leave Tax Credits

The Family First Coronavirus Response Act signed into law on March 18, 2020 requires employers with less than 500 employees, including nonprofits, to provide their employees with paid sick leave and family leave. It also includes tax credits to help them pay for such leave. Nonprofits with fewer than 50 employees can apply for an exemption from the requirements.

Starting April 2, 2020 and continuing through December 31, 2020, covered employers must provide up to 10 days of paid sick leave to eligible employees who are impacted by the coronavirus pandemic. Covered employers are also required to provide eligible employees with up to 12 weeks of paid family and medical leave if an employee is unable to work or telework due to the need to care for the employee’s child under 18 years of age.

Nonprofits and other covered employers will receive a tax credit to provide 100% reimbursement for their costs. These tax credits not only cover the pay employers must provide their employees on leave, but the cost to maintain employee health insurance coverage during the leave period. Moreover, employers don’t have to wait until they file their 2020 taxes to get these credits. Instead, they can reduce the payroll taxes they must pay to the IRS right now to cover the cost. All payroll taxes may be reduced: income taxes withheld from employee pay, and both the employer and employee shares of Social Security and Medicare taxes.

If there are not sufficient payroll taxes to cover the cost of COVID-19 sick leave and/or emergency leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less.

Also, these sick leave and emergency leave payments don’t count as wages for Social Security and Medicare tax purposes. This means that employers who make such payments won’t have to increase their share of Social Security and Medicare payroll taxes. For more information, see the FAQs prepared by the IRS.

Save Organizations that Serve America Act

On March 27, 2020, U.S. Reps. Brian Fitzpatrick and Seth Moulton introduced the Save Organizations that Serve America Act (SOS America Act), H.R. 6408. The legislation, if passed, would provide $60 billion in emergency funding for nonprofits and create a universal charitable deduction. The representatives will also advocate for nonprofits of any size to qualify for newly created Small Business Administration loans. The legislation has the support of leading American nonprofits from across the country, who added their voices to call for the legislation’s swift passage.

COVID-19 Resources in California

The following is a list of information and resources in California regarding the coronavirus which may be helpful to you or your business or nonprofit.

Resources for Helping Businesses:

Resources for Helping Californians:

  • For information on how the Office of Governor Gavin Newsom is protecting Californians from COVID-19, visit: covid19.ca.gov/

  • For the most up to date information on COVID-19 from the California Department of Public Health, visit: cdph.ca.gov/covid19

For the most up to date information on COVID-19 from the Center for Disease Control and Prevention, visit: cdc.gov/coronavirus/2019-ncov/

Have Questions About Your Nonprofit Facing Challenges Due to COVID-19? We can help!

If you are a tax-exempt organization and have questions, our experienced attorneys can help. Please contact Nonprofit Attorney Jonathan Grissom via the contact button below.

Jonathan Grissom, Attorney