Congress approved a stimulus bill on December 21, 2020 that, if signed by the President, will provide additional coronavirus relief to nonprofits. The bill not only includes an extension of the temporary above-the-line charitable deduction, but also offers another round of forgivable Paycheck Protection Program (PPP) loans to nonprofits. Additionally, it includes several provisions that will benefit nonprofit employers.
Charitable Deduction Extension
Through the previously enacted CARES Act, individuals that don’t itemize deductions on their tax returns are eligible to take a deduction of up to $300 for charitable gifts given in 2020. The new stimulus bill will allow individuals to do the same for the 2021 tax year.
The bill also extends the increased limits on deductible charitable contributions for individuals who itemize and for corporations. This means that for the 2021 tax year, the cap on charitable deductions for individuals will remain at 100% of their adjusted gross income. For C corporations, the annual limit for deductions on charitable giving will remain at 25% of taxable income for 2021.
The intent is that these charitable deduction extensions will continue to incentivize individuals and corporations to contribute to nonprofits during these financially difficult times.
Paycheck Protection Program Loans
The new bill will also provide for $284 billion in additional PPP loans. Nonprofits may apply for a second PPP loan even if they have already received one. There are different eligibility requirements for a second draw loan, however, making it more difficult for nonprofits to qualify.
Under the CARES Act, nonprofits with up to 500 employees are eligible to apply for a PPP loan. A second PPP loan is only available to nonprofits with 300 or fewer employees. Also, nonprofits must be able to show that they have had at least a 25% drop in revenue. With these new requirements, several nonprofits that qualified for an initial PPP loan will not qualify for a second loan.
Additionally, the maximum loan amount available to nonprofits applying for a second loan is $2 million, as opposed to the initial limit of $10 million. The PPP loans will still be forgivable to nonprofits if they can avoid layoffs and salary reductions. Plus, the list of eligible loan expenses for all PPP Loans will be expanded to include personal protective equipment (PPE). The bill also provides for the release of a simplified loan forgiveness application for PPP loans of $150,000 or less.
Cultural Institution Carve Out
The bill specifically sets aside $15 billion in funds for live venues, independent movie theaters, and cultural institutions. Nonprofits included in this carve out are:
- Organizations that organize, promote, produce, manage, or host live concerts, comedy shows, theatrical productions or other events by performing artists;
- Organizations that own or operate at least one place of public accommodation for the purpose of motion picture exhibition; and
Loans that fall into this category are available in amounts up to $10 million per organization. To be eligible, the organization must intend to reopen and show that they have seen their revenue decline by at least 25% when compared with 2019.
Additional Coronavirus Relief for Employers
Nonprofit employers also get additional coronavirus relief from the new bill. The reimbursement provision in the CARES Act for nonprofits that self-fund unemployment benefits is extended to March 14, 2021. Under this provision, nonprofit employers may be reimbursed for up to half the costs of benefits provided to their laid-off employees.
Additionally, the bill extends the Employee Retention Tax Credit through July 1, 2021. The payroll tax credit is now easier to qualify for and the amount of the credit that is available to employers has increased. This is especially beneficial to larger nonprofits that don’t qualify for other types of relief.