Update Jan. 3, 2021
In late December, the President signed a $900 billion COVID-19 relief package as part of an omnibus federal spending bill. Thanks to advocacy from the National Council of Nonprofits and many others, the legislation includes several forms of relief for charitable nonprofits, including:
Some other highlights and omissions of the COVID-19 relief negotiations include:
- Expanding nonprofit access to Paycheck Protection Program (PPP) loans. The bill creates a second round of PPP funding for nonprofits and businesses with fewer than 300 employees that had a 25% reduction in gross receipts in any quarter of 2020. It also expands the types of expenses that are allowable for PPP loans to include personal protective equipment, certain supplier costs, facilities modifications, and certain workplace protection expenses. It appropriates $284 billion in additional funding for new PPP loans. Nonprofits with more than 500 employees are still not eligible for PPP loans.
- Improving the Employee Retention Tax Credit (ERTC). The bill makes the ERTC available to more nonprofits by expanding it and changing eligibility requirements. Specifically, nonprofits that suffered a reduction in gross receipts of 20% or more in any quarter of 2020 are eligible for a 70% refundable tax credit covering wages of up to $10,000 per employee in each quarter (with a maximum of $14,000 per employee). For example, a nonprofit with 10 employees who each make $10,000 or more per quarter could qualify for a $70,000 refundable payroll tax credit (70% of $100,000). Nonprofits that received PPP loans can now qualify for the ERTC for wages not paid for by forgiven amounts of PPP loans.
- Strengthening incentives for charitable giving. The bill extends the temporary universal charitable deduction through 2021. For 2021, it also expands the cap on this non-itemizer charitable deduction for married couples filing jointly from $300 to $600. Individual taxpayers who use the standard deduction will still be able to deduct up to $300 for their charitable contributions next year. In addition, the bill extends two temporary increases in charitable giving incentives through 2021. Specifically, for 2021, it increases the limits on deductible charitable contributions for corporations to 25% of taxable income (up from 10%) and it removes the 60% of adjusted gross income cap on deductible charitable contributions for individuals who itemize their deductions.
- Increasing and extending federal unemployment insurance reimbursement for self-insured nonprofits. The bill extends federal funding to cover 50% of the COVID-related unemployment costs of self-insured nonprofits through March14, 2021.
- Extending unemployment benefits. The bill extends the Pandemic Unemployment Assistance program – which provides unemployment benefits to self-employed individuals and laid-off or furloughed workers at small and religious nonprofits that are exempt from unemployment requirements – through March 14, 2021. It also provides $300 per week in supplemental federal unemployment benefits for individuals who are out of work due to the pandemic, through March 14, 2021. This spring and summer, individuals had received $600 per week in supplemental benefits if they had been furloughed or laid off due to COVID-19. The bill also extends other CARES Act unemployment benefits through March 14, 2021. Without this legislative action, all of these unemployment benefits would have expired on December 30, 2020.
- Extending the Coronavirus Relief Fund (CRF) deadline. Under the CARES Act, all CRF expenditures were required to have been spent by December 31, 2020. Because of this deadline, the U.S. Treasury Department was requiring nonprofits and state agencies to submit final CRF reports by January 8, 2021. The new COVID-19 relief package extends the deadline for CRF expenditures through December 31, 2021, which should prevent nonprofits from having to return unspent funds to the federal government and make final grant reports in the next few weeks.
- Additional economic stimulus payments of $600 per person for individuals with adjusted gross income up to $75,000 and married couples with adjusted gross income up to $150,000.
- A one-month extension of the Centers for Disease Control and Prevention eviction moratorium through January 31, 2021.
- A $15 billion “Save Our Stages” grant program that will provide support to many nonprofit performing arts organizations and museums.
- Expansion of the PPP program to 501(c)(6) trade associations.
- Simplification of PPP loan forgiveness applications for borrowers – including nonprofits – with loans of $150,000 or less.
- Extension of the paid sick leave and paid family and medical leave requirements from the Families First Coronavirus Response Act – and the federal tax credit to cover employers’ cost of providing paid leave – through March 31, 2021. These paid leave provisions were set to expire on December 31, 2020.
- Allowance for individuals to carry over unused amount of health and dependent care flexible spending arrangement (FSA) benefits from 2020 into 2021.
- No new direct aid for state and local governments.
- No liability protections against COVID-related claims for businesses, nonprofits, or individuals.
The National Council of Nonprofits has prepared a summary of the main nonprofit provisions in the COVID-19 relief package.
IRS Decreases Standard Business Mileage Rate for 2021
The IRS has announced
that the standard business mileage rate will decrease to 56 cents per mile in 2021 (down from 57.5 cents per mile in 2020). Many nonprofits use this rate when reimbursing their employees for work-related driving.
The volunteer mileage rate – the amount that's tax-deductible when your nonprofit's volunteers drive on behalf of your organization – remains at 14 cents per mile and can only be changed by Congress.