While we may be grounded, we’re lucky to have digital resources at our fingertips. Since last week, a lot of information became available detailing how the Coronavirus Aid, Relief and Economic Security (CARES) Act impacts nonprofits and higher ed. I’ve kept myself informed with several webinars and articles, and put together a synopsis of what I’ve learned so far. Hope it saves you a step, and allows you to drill down to more details if you go to the original sources.
As of Friday, March 27, Congress passed “Phase 3” of the stimulus package in response to the COVID-19 virus pandemic. This summary is a synthesis of several resources (links below) that outlines the key impacts on nonprofit organizations –specifically 501(c)(3)s, with specific details on the impact to higher education at the end.
- Employer Payroll Tax Deferral – Allows employers, including nonprofits and colleges and universities, to delay their 2020 FICA payroll tax payment until January 1, 2021. Half must be paid by 12/31/21 and the balance by 12/31/22.
- Employee Retention Payroll Tax Credit – A refundable tax credit, up to $5,000 for each employee when certain conditions are met. For tax-exempt organizations [501(c)], the eligible entity’s whole operations must be taken into account, as opposed to the 50% decline in gross revenue threshold for eligible for-profits.
- Paycheck Protection Program Loans – Loans up to $10 million for eligible 501(c)(3) nonprofits and small business with 500 or fewer employees (counting each individual, not full-time equivalent [FTE]s), no personal guarantees or collateral required, amount to be the lesser of $10 million or 2.5x the average monthly payroll costs (including benefits) from the 12 months prior to the date of the application. [NOTE: Employers that maintain employment for the eight weeks after the loan starts may have their loan forgiven. Also, if the loan program is utilized, the Payroll Tax Deferral and Payroll Tax Credit cannot also be used. If the loan is not utilized, both can be taken. Also note that loans for mid-sized entities with employees between 500-10,000 may have loan options that are still be developed.]
- Economic Injury Disaster Loans (EIDL) – Emergency grants for eligible nonprofits and others with 500 or fewer employees with an advance up to $10,000 to be received within three days.
- Charitable Giving Incentives – Up to $300 in donations to public charities by individual tax payers is deductible for tax year 2020 when taking the standard deduction, and Adjusted Gross Income caps are lifted to 100% for those taxpayers who itemize. There are advocacy groups in Washington attempting to increase the $300 if there is a fourth phase to the stimulus packages. Corporate donations raises the annual limit from 10% to 25% of taxable income, including food donations.
- Unemployment Insurance – The one week waiting period for individuals is waived; payments are extended 13 weeks; $600/week more than the state benefit, non-traditional employees may be covered.
- Student Loans – Forbearance for federal student loans allowed until 9/30/20 retroactive to March 13,2020, automatic 0% interest rate through 9/30/20, and automatic cease of any wage garnishment and/or debt collections for most student borrowers.
Specific Considerations for Higher Education Institutions
Education Stabilization Fund – Approximately $30 billion of the fiscal stimulus from the CARES Act is earmarked for Education, inclusive of K-12 and higher education, with an estimated $14 billion of that for higher ed. An estimated 10% of that $14 billion is earmarked for historically Black and Minority-Serving Institutions, as well as institutions with the greatest unmet needs, with priority given to those institutions that do not receive at least $500,000. The balance is allocated as follows:
- Must use at least 50% for emergency financial aid for students which will be calculated on a formula comprised of 75% FTE Pell Grant enrollment and 25% non-Pell Grant enrollment, inclusive (it is believed) of International students. It has yet to be determined whether any refunds for room and board will be included in this category.
- The other 50% can be used for operational expenses, yet to be fully defined, but the consensus seems to be that endowment, religious, and athletic activities will not be included. A requirement of receiving any aid is to maintain employees.
- Approximately $3 billion will be made available to governors based on the state’s population of people ages 5-24, to be used at the governors discretion. When applying for these funds, states must include assurances of their financial support for higher education for Fiscal Year 2020, Fiscal Year 2021, and the three preceding fiscal years, and cannot count funds given for capital projects, research and development, or tuition and fees paid by students.
University Research – In addition to the $30 billion from the Education Stabilization Fund, the CARES Act provides $945 million to the National Institutes of Health, $75 million to the National Science Foundation, $99.5 million to the Dept of Energy Office of Sciences, and $60 million to NASA for COVID-19 research. Additional advocacy is continuing as it relates to funding for university research at the national level.
Resources for all of the CARES Act provisions can be found at the following links:
These are interesting times. Through it all, keep looking for those silver linings. What advantages do you have now that you didn’t have before – maybe more time to work on those strategic initiatives, or read an article from beginning to end, or take that walk every day. Take care!
Information provided by SEI Investments Management Corporation, a registered investment adviser and wholly owned subsidiary of SEI Investments Company. Investing involves risk including possible loss of principal.
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