Loan Programs
Small Business Loan Program Expansion – “Paycheck Protection Program”: Provides 100% guarantee for bank loans made to qualifying business/organizations during the period of February 15, 2020 to June 30, 2020. To qualify, nonprofits must not have more than 500 total full-time and part-time employees. Nonprofit organizations with more than 500 employees are not eligible for this program. Detailed guidance from the firm on this program can be found here.
Emergency Economic Injury Grants – “Disaster Loans”: Nonprofits with fewer than 500 employees who apply for an economic injury disaster loan with the SBA may receive up to $10,000 as an advance against the loan within 3 days of application if SBA certifies that the entity is eligible. This is to enable nonprofits to quickly access financial assistance while their loan application is being processed. Eligibility is based solely on applicant’s credit score. Funds can be used for payroll costs, materials, rent, mortgage or other debt payments. Nonprofits can submit an application during calendar year 2020. Detailed guidance from the firm on this program can be found here.
Treasury Industry Stabilization Loan Program: Provides up to $454 billion in financial assistance to businesses and nonprofits. The legislation grants the Department of the Treasury the authority to develop a program to provide loans to organizations with between 500 and 10,000 employees through December 31, 2020. Detailed guidance from the firm on this program can be found here.
Which Non-profits Are Eligible for These Programs?
- Under the law the term ‘nonprofit organization’ means an organization that is described in section 501(c)(3)of the Internal Revenue Code of 1986 and that is exempt from taxation under section 501(a) of such Code.
- Nonprofits that receive Medicaid reimbursement are also eligible.
- In addition to 501(c)(3) nonprofit organizations, all veterans organization, or Tribal business concern described in section 31(b)(2)(C) are eligible to receive loans if the organization, or Tribal business concern employs not more than the greater of—
- “(I) 500 employees; or
- “(II) if applicable, the size standard in number of employees established by the Administration for the industry in which the business concern, nonprofit organization, veterans organization, or Tribal business concern operates.
Labor Provisions
Emergency Unemployment Relief for Governmental Entities and Nonprofit Organizations – This provision permits the Secretary of Labor to issue guidance allowing states to interpret their state unemployment compensation laws to provide maximum flexibility in reimbursing employers. It also provides a mechanism by which the Federal Treasury pays states to reimburse self-funded nonprofits, government agencies, and Indian tribes for half of the costs they incur to pay for all unemployment benefits from March 13, 2020 through December 31, 2020. As a general matter, Nonprofit Organizations fall into three categories for purposes of Unemployment Insurance:
- Charitable nonprofits that pay state unemployment taxes (SUTA) like other businesses. These organizations pay quarterly taxes based on their “experience rating,” a formula based on the recent history of unemployment claims by their former employees.
- Charitable nonprofits have the option of electing of self-insuring rather than paying SUTA. Nonprofits that elect to take this option are required to reimburse their state unemployment insurance trust funds for the amount of benefits their terminated or laid off employees claim. As stated, self-funded non-profits are the only category of non-profits affected by this provision of the CARES Act.
- Some nonprofits are exempt from unemployment laws. These include houses of worship, religious organizations that are affiliated with houses of worship, and religious schools. Nonprofits with fewer than four employees who work during 20 weeks of the year are also exempt. Employees of SUTA exempt charitable organizations are not eligible to receive unemployment insurance benefits if they lose their jobs.
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