Snapshot: CARES Act Benefits for Small Businesses and Tax-Exempt Organizations; Comprehensive Coronavirus Legislation Guide for the Charitable Sector
In This Week's Edition of Snapshot...
This week the Council published two analyses for the philanthropy field:
- CARES Act Benefits for Small Businesses and Tax-Exempt Organizations – an analysis for funders of the Paycheck Protection Program (PPP) and other provisions in the CARES Act, including the Economic Injury Disaster Loans, the employee retention credit and the delay of payroll tax remittance.
- Comprehensive Coronavirus Legislation Guide for the Charitable Sector – a primer for funders on the three federal legislative packages signed into law in response to the coronavirus pandemic.
House Speaker Nancy Pelosi has signaled that the next phase of relief funds should be an expansion of the $2 trillion coronavirus aid package the president signed into law last week. This could include more money to aid states, cities and small businesses, expand unemployment benefits and another round of direct cash payments for Americans. Senate Majority Leader Mitch McConnell has indicated his desire to slow down the discussion to see what transpires as a result of the just passed legislation. Interest groups, including the charitable sector, are drawing up their wish lists and desired fixes in the recently passed bills, while trying to figure out how to talk to Congressional members and committee staff not physically working on Capitol Hill.
With both House and Senate chambers recessed until April 20, the coronavirus outbreak has plunged the timing of the annual federal budget appropriations process into uncertainty. Hearings and markups have been canceled for the foreseeable future and the return of Congress to the Capitol is uncertain. Congressional appropriators say they're committed to finishing their work in a timely fashion however. House Democrats aim to clear all 12 spending bills by the end of June, while the Senate wants to finish markups for all or most of the fiscal 2021 measures by the July Fourth break. However, the likely demand for additional rounds of legislative assistance in response to the pandemic could delay or derail the calendar for finishing funding bills, even prompting the possibility of virtual markups.
Congressional Budget Office
The Congressional Budget Office updated its second quarter economic forecast on April 2nd with a prediction that the unemployment rate is expected to climb above 10 percent and gross domestic product will contract by at least 7 percent, reflecting the disruption caused by the coronavirus.
Department of Treasury
- With the Small Business Administration (SBA), Treasury is launching the Paycheck Protection Program (PPP) on April 3, 2020 that authorizes up to $349 billion from the CARES Act to be used for job retention and certain other expenses of small businesses, including tax exempt organizations. Self-employed individuals and independent contractors are eligible, if they also meet program size standards. The new loan program will provide critical capital to businesses without collateral requirements or SBA fees – all with a 100% guarantee from SBA. All loan payments will be deferred for six months. Most importantly, the SBA will forgive the portion of the loan proceeds that are used to cover the first eight weeks of payroll costs, rent, utilities, and mortgage interest under certain conditions. Funders can find information on how the PPP impacts tax exempt organizations on the Council’s COVID-19 Resource Hub. Loan applications will be funded on a first come, first serve basis until the funds run out.Time may be of the essence for nonprofits as thousands of for-profit small businesses and self-employed owners are likely to apply.
- On April 2, the SBA issued an Interim Final Rule related to implementation of the Paycheck Protection Program. The Interim Rule increases the interest rate previously stated from 0.5% to 1.0% for these new small business loans, with a maturity of 2 years. Additionally, the Rule confirmed that lenders can rely on borrower certifications to determine a borrower’s eligibility for the loans.
- The Treasury Department and IRS today began implementing the Employee Retention Credit included in the CARES Act. The IRS has already published guidelines for businesses that want to apply for the credit, which is applied against the employers' share of payroll taxes. The agency also issued a notice to shield employers from penalties they have incurred for failing to deposit employment taxes when tapping a tax credit Congress created to help them cover wages for sick leave and family leave.
- Treasury Secretary Steven Mnuchin also announced Wednesday that Social Security recipients would not have to file tax returns in order to receive coronavirus stimulus payments.
- The IRS expects to start sending an initial wave of economic stimulus payments of $1200 apiece the week of April 13. However, it could take as many as five months for people who have to be paid by check. To speed receipt, those without direct deposit information already on file will be able to get the information to the IRS either through an internet portal expected to be available late this month or in early May, or by filing a so-called simple tax return the IRS plans to release in the coming weeks.
The Office of Management and Budget has released these recent memoranda related to the coronavirus:
- M-20-19 Harnessing Technology to Support Mission Continuity (March 22, 2020)
- M-20-18 Managing Federal Contract Performance Issues Associated with the Novel Coronavirus (COVID-19) (March 20, 2020)
- M-20-17 Administrative Relief for Recipients and Applicants of Federal Financial Assistance Directly Impacted by the Novel Coronavirus (COVID-19) due to Loss of Operations (March 19, 2020)
- M-20-16 Federal Agency Operational Alignment to Slow the Spread of Coronavirus COVID-19 (March 17, 2020)
Federal Emergency Management Agency
FEMA has a dedicated webpage on ways to help with donations and volunteer assistance. For example, any organizations or donors having medical supplies or equipment to donate can complete a special form on FEMA’s website detailing the offer. Licensed healthcare professionals who want to volunteer can get information on eligibility, view credential levels by clinical competency and register with the Emergency System for Advance Registration of Volunteer Health Professionals in their state.
FEMA advises that any hospital or healthcare provider in need of medical supplies should contact their state or local public health and/or emergency management agency. Any needs that cannot be met by the local jurisdiction are then sent to the respective FEMA regional office coordinating requirements through the FEMA National Response Coordination Center. FEMA is working with the Department of Health and Human Services and other federal agencies to fulfill requests and ship supplies as quickly as possible.
The Small Business Administration has a webpage providing COVID-19 Small Business Guide and Loan Resources that provides guidance and applications for small businesses and tax exempt organizations.
USDA Rural Development has taken a number of immediate actions to help rural residents, businesses and communities affected by the COVID-19 outbreak.
The U.S. Interagency Council on Homelessness has announced a webpage with resources for homelessness services systems.
The Solar Energy Technologies Office (SETO) is soliciting innovative ideas for a photovoltaic or concentrating solar-thermal power project that can deliver significant results in one year. The SETO 2020 funding opportunity announcement has $5 million funding for 15-20 Small Innovative Projects in Solar (SIPS). Letters of intent for SIPS are due April 9 at 5:00 p.m. ET. This letter is required if you plan to submit a full application. Interested entities can submit a letter of intent through EERE Exchange.
White House Opportunity and Revitalization Council
The Opportunity Zone tax incentive is a private investment tool meant to bring private capital to underserved communities and came to life through the 2017 Tax Cut and Jobs Act. The OZ goal is to flow
private capital into low income Census tracts to spur economic development and investment opportunities. At the end of February 2019, the White House Opportunity and Revitalization Council had identified over 200 Federal programs where targeting, preference, or additional support could be granted to Opportunity Zones. The Councils mission is to target, streamline, and coordinate Federal resources to be used in these OZ communities that could leverage the private capital to stimulate economic opportunity in these communities.
The Treasury Department issued corrections for its OZ rules that polished some areas while further creating some uncertainty, such as how and when investors can apply the proposed and final rules. The corrections were posted on April 1 and rearrange various parts of the final regulations (T.D. 9889) governing the contentious capital gains tax breaks for investments in nearly 9,000 mostly low-income census tracts. The new changes also clear up an anti-abuse rule and explain how a test of an opportunity fund’s assets works for funds that own multiple businesses. But the revisions added confusion in at least one area: the effective date. Early this year, IRS and Treasury officials offered differing descriptions of when the final regulations, issued in December, went into effect for investors, as the rules are effective for tax years beginning after March 13. For those operating on a calendar year schedule, that means the rules aren’t effective until 2021.
Exclusive from our colleagues at the National Council of Nonprofits.
- Analysis of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (Pub. L. 116-136)
- Loans Available for Nonprofits in the CARES Act
State Revinue Estimates Dreadful
State officials are estimating major declines in state revenues due to the shutdowns caused by the coronavirus pandemic. Declines are ranging from $225 million in Hawaii to $15 billion in New York for the next fiscal year. Governors across the country are already warning of severe budget cuts and other cost cutting measures like spending limitations, purchasing bans, and hiring freezes. Lawmakers in Colorado are reconsidering new programs and possibly cutting existing ones after tax revenue expectations dropped by $1 billion over the next 15 months. Delayed tax filing deadlines and possible deferments also play a part in tax projections as states must wait longer to collect the revenues. The Senate Majority Leader in Pennsylvania said the delay will cause “significant disruption to the budget process.” All states with a personal income tax have extended their deadlines, most to July 15. Typically, when state governments run deficits they delay payments, cancel grants, and reduce spending on social support programs performed by nonprofits.