The federal government has enacted various pieces of legislation providing relief to employers, including nonprofits, suffering financially due to the COVID-19 pandemic. While much of public attention has focused on government lending programs, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) includes two other notable provisions that could aid struggling organizations.
1. Retention tax credits
The CARES Act created a new refundable credit against payroll tax. Nonprofits can qualify if their:
- Operations were fully or partially suspended due to a COVID-19–related governmental shutdown order, or
- Gross receipts fell more than 50% compared to the same quarter in the previous year.
Employers with more than 100 employees may qualify to claim the credit for wages paid to employees who’ve been furloughed or had their hours reduced. Organizations with 100 or fewer employees can qualify regardless of whether they’ve furloughed employees or reduced their hours. The credit equals 50% of up to $10,000 in compensation paid to an eligible employee from March 13, 2020, through December 31, 2020.
2. Payroll tax and unemployment benefit support
The CARES Act allows employers to defer payment of their employer share (6.2% of wages) of the Social Security payroll tax. You have the next two years to pay your share, with the first half due by December 31, 2021, and the remainder due by December 31, 2022.
Certain nonprofits qualify for reimbursement of 50% of the costs they incur from March 13, 2020, through December 31, 2020, to pay unemployment benefits. This relief is available to organizations that reimburse their states for unemployment benefits paid to former employees, rather than paying unemployment taxes.
Proceed with caution
Note that additional rules apply to these breaks. For example, participation in the Small Business Administration’s Payroll Protection Program could affect your eligibility. We can help you make the most of the COVID-19 relief that’s already been provided and any additional relief that comes down the road.