CARES Act: How it will impact nonprofits and charitable giving

On Friday, the U.S. government passed the The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which will provide much needed assistance to families and businesses across America.

Below is a summary of items in the CARES Act that could provide value for your nonprofit:

Charitable Giving Incentive
The CARES Act establishes a new, above-the-line deduction (universal or non-itemized deduction that applies to all taxpayers) for total charitable contributions of up to $300. The incentive applies to contributions made in 2020 and would be claimed on tax forms next year. Section 2204.

The bill also lifts the existing cap on annual contributions for those who itemize, raising it from 60 percent of adjusted gross income to 100 percent. For corporations, the bill raises the annual limit from 10 percent to 25 percent. Food donations from corporations would be available to 25 percent, up from the current 15 percent cap. Section 2205. 

Emergency Small Business Loans (emergency SBA 7(a) loans)
Provides funding for special emergency loans of up to $10 million for eligible nonprofits and small businesses, permitting them to cover costs of payroll, operations, and debt service, and provides that the loans be forgiven in whole or in part under certain circumstances. Title I, Section 1102.

Nonprofit Eligibility
Available for charitable nonprofits with 500 or fewer employees (counting each individual – full time or part time and not FTEs). The final bill does not include a provision in earlier drafts that would have disqualified nonprofits that are eligible for payments under Title XIX of the Social Security Act (Medicaid).

Self-Funded Nonprofits and Unemployment
Reimburses self-funded nonprofits for half of the costs of benefits provided to their laid-off employees. This is explained in a recent blog article. Section 2103.

Direct Payments
Adults will receive checks of $1,200 or less and $500 per child ($3,400 for a family of four) to be sent out in weeks. The amount of the payments phases out based on earnings of between $75,000 and $99,000 ($150,000 / $198,000 for couples).

The CARES Act provides a number of options to help struggling nonprofits get a better footing during this crisis. A few actions you should take:

  • Inform your donors: Let your donors know about the changes to the charitable giving deduction. It is possible this will free up some donors to provide additional support.
  • Apply for a small business loan: If your nonprofit is eligible to apply for a small business loan, do so. Even a small loan could help keep important staff working as you weather the current crisis.
  • Keep asking for support: Times are tough for everyone right now. But your needs are still there. And growing, as many nonprofits need operational support at this time. The direct payments will help boost the economy and provide an opportunity for donors to assist their favorite nonprofits. Stay top of mind and continue to share your needs with your supporters. They will assist in whatever way they can.

If you have questions about the CARES Act or need help with other strategies to stay on track during the current crisis, please contact me.

For more information about stewardship, fundraising and development during the coronavirus crisis, visit our COVID-19 toolkit.