Nonprofit Strategies for Maximizing COVID-19 Relief

Maximizing the amount of relief your nonprofit organization receives during the COVID-19 pandemic depends largely on understanding your options, eligibility and obligations under each program. The major areas of relief that nonprofits should be considering as we enter 2021 include:

Paycheck Protection Program (PPP) – PPP loans are back, and nonprofits may be eligible to apply for their first or second forgivable loan through March 31, 2021. Under the CARES Act, only 501(c)(3) organizations were eligible, but the program has now been expanded to allow 501(c)(6) organizations to apply for a first draw loan if they meet the original eligibility requirements and do not surpass certain limitations on lobbying activities. To qualify for a second PPP loan, borrowers must have 300 or fewer employees, spend the entirety of the first PPP loan, and show a 25% or more decline in 2020 gross receipts compared to 2019 (quarterly or annually). 501(c)(6) and other first-time PPP borrowers can apply for a first draw loan if they have 500 or fewer employees, as stipulated under the CARES Act.

Economic Injury Disaster Loans (EIDL) – The SBA announced that the EIDL program will reopen in January and be extended through 2021. Eligible private nonprofits can apply for these 30-year loans at the low interest rate of 2.75%. This relief was made even more valuable for PPP borrowers under the new law, which stipulated that EIDLs will no longer reduce PPP forgiveness.

Other loan and grant opportunities – While the federal relief programs have received most of the spotlight, nonprofits should remember that many states, municipalities and foundations continue to offer financial support to help meet the increased needs of their local communities.

Employee Retention Credit (ERC) – More welcome news for PPP borrowers and other employers came in the form of the expanded ERC. Under the CARES Act, the ERC provided a payroll tax credit of 50% of up to $10,000 of qualified wages per employee for the 2020 covered period. Originally, the credit was not available to PPP borrowers. Now, not only can eligible PPP borrowers retroactively get the 50% credit for 2020 qualified wages (not paid with forgiven PPP funds), but all eligible employers can receive an increased credit of 70% of qualified wages per quarter for the first two quarters of 2021. This is an immediate credit and significant source of cash flow for nonprofits that qualify. Eligibility requirements for the 2020 credit include a full or partial shutdown of operations due to the COVID-19 pandemic or a 50% or greater drop in gross receipts in a 2020 calendar quarter (compared to 2019). The new law reduced the latter requirement to 20% or more.

Keep the Relief You Receive – Equally important to securing the relief is keeping it. Government-funded organizations should carefully track how they spend forgiven PPP loan funds and ensure the same expenses are not reimbursable by other government funding, which would trigger a double-dipping event. In addition, nonprofit organizations that received HHS Provider Relief Fund payments totaling more than $10,000 must comply with strict HHS quarterly reporting requirements that are due beginning on February 15, 2021. Recipients of more than $750,000 of federal funding are also subject to single audit requirements.

David M. Rottkamp David M. Rottkamp, CPA, is an Audit Partner and Nonprofit Practice Leader, at Grassi. David has over 36 years of experience providing audit and advisory services to the not-for-profit and health care industries. David focuses on organizations serving individuals with special needs, religious organizations, educational institutions, membership associations, social service providers, healthcare providers, foundations, and the arts and culture world. David’s technical knowledge allows... Read full bio