Given the current COVID-19 pandemic, recent legislation has been passed to assist individuals and employers with the impact. One piece of legislation, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), has the following provisions which may be of benefit to tax-exempt organizations:
- As noted in our March Tax-Exempt Alert, the CARES Act is providing certain loans through the Payroll Protection Program (“PPP”) which is being administered by the Small Business Administration (“SBA”). Here is some additional information regarding the PPP.
- Recipients of a loan received through the PPP may be eligible for forgiveness of all or part of the loan received.
- The loan can be used to retain employees as well as pay other permitted expenses as identified through the PPP.
- Uncertainties remain regarding the PPP. Organizations with specific questions on the PPP may want to consult their potential lender for questions about applying for a loan under the PPP or an attorney for advice.
- Anyone who does decide to apply for a loan under the PPP should consider the following guidance issued by the SBA on where to apply for such a loan:
- “You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program.” (https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp)
- Organizations believing such a loan through the PPP is needed should consider applying in the near future as there are limited funds available for this program.
- An organization may only apply for one loan under the PPP. You should consult with an attorney to see if multiple affiliated entities or subsidiaries can have each entity or subsidy apply for such a loan.
- The CARES Act also provides tax benefits to individuals and corporations which can, in turn, benefit tax-exempt organizations which receive charitable donations. Some of these tax benefits are as follows.
- The Tax Cut and Jobs Act (passed in 2017) greatly limited the taxpayers who may itemize deductions, potentially causing donations to charities to not be tax deductible. Under the CARES Act, individuals who donate cash to a charity are eligible for up to a $300, above the line tax deduction on their 2020 tax return. This deduction can be taken even by individuals who do not itemize deductions. This “nonitemizer deduction” expires at the end of 2020.
- Donors, for the 2020 tax year, may take a charitable tax deduction of up to 100% of their Adjusted Gross Income. This provision is significant as it eliminates the cap on charitable tax deductions based upon a donor’s Adjusted Gross Income.
- The CARES Act even provides benefit to corporate donors. Corporations can now donate 25% of their income for 2020, up from 10%.
Tax-exempt organizations which solicit donations can indirectly benefit from these tax benefits provided to donors.
- The CARES Act also provides other benefits to employers. One such benefit relates to employee retention which allows employers to take a tax credit of up to 50% of wages paid from March 12, 2020 through December 31, 2020. Other benefits allow employers to have delays in tax payments. These benefits are some of the examples of the CARES Act, and the benefits vary and can differ from one organization to another when criteria provided for under the CARES Act is met. A certified public accountant or tax attorney can advise you on specific benefits available to you and your organization, including ones which may be available to you in addition to the ones listed.
Please do not hesitate to contact us if you have any questions on this matter.
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Note: This provides general information regarding matters of interest to tax-exempt organizations. Such information is neither legal advice nor legal opinion concerning particular situations. If legal advice or opinion is required, legal counsel should be consulted.
We would be pleased to address any questions you may have regarding the foregoing or any other tax-exempt issues. For further information, please contact Mike Dutkovich (412-765-0535), [email protected]; Susan Ott (412-745-9900), [email protected]; or Jack Owen (412-765-1020), [email protected].
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