Congress has enacted several key pieces of legislation over the last year to help businesses continue operations during the COVID pandemic. As we move deeper in 2021 it is important to know that several types of assistance for non-profit organizations still exist. While not every organization qualifies based on size or adverse economic impact, it is worth looking to see where you fit in.
Payroll Protection Plan 1st Draw Loan
During the initial rollout of the PPP program, the interpretations of the rules and regulations were changing on a regular basis. Some organizations believed they did not qualify or would be unable to demonstrate the economic need and decided to pass on this funding source.
If your organization did not apply during 2020 or returned funding out of an abundance of caution, you may still be eligible for PPP funding if you have 500 or fewer employees (average headcount per pay period for 2020.) Applications are accepted until March 31, 2021. Funds can be used to cover an expanded list of costs:
- Mortgage interest
- Employee protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
- Property damage costs related to property damage and vandalism or looting due to public disturbances in 2020 that were not covered by insurance or other compensation.
- Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.
- Payments for any business software or cloud computing service that facilitates business operations; product or service delivery; the processing or payment of payroll expenses; human resources; sales and billing functions; or accounting or tracking of supplies, inventory, records, and expenses.
Payroll Protection Plan 2nd Draw Loan
If your organization received a PPP loan in 2020, you may be eligible for an additional 2nd Draw loan. These loans are targeted to a group of employers with fewer employees than the initial round and that have suffered measurable economic loss. Covered expenses are the same as above. To be eligible you must:
- Have no more than 300 employees (average headcount per pay period for 2020.)
- Have received an initial PPP loan in 2020.
- Have used or will use the full amount of the first PPP loan (including any amended loan amount) by the expected disbursement date of the second loan.
- Show that your gross receipts in any calendar quarter of 2020 were 25% less than the corresponding quarter in 2019.
- Show that current economic uncertainty makes the loan necessary to support the ongoing operations of your organization.
The loan amount is based on 2.5 times the average monthly payroll costs (including employer share of insurance premiums and retirement) in either 2019 or 2020 with a loan cap of $2,000,000. Eligible costs must be incurred over a period of between 8 and 24 weeks. Applications are accepted until March 31, 2021 and the loan is potentially 100% forgivable.
Employee Retention Tax Credit
During the initial phase of COVID relief, entities could not participate in both the PPP loan program and apply for the Employee Retention Tax Credit. Recent legislation lifted this prohibition and organizations with no more than 500 employees should now take a hard look at the ERTC program. For 2021 an organization can receive as much as $14,000 per employee and for 2020 as much as $5,000 per employee. These funds are granted by reducing payroll tax deposits or by claiming an advance refund with IRS form 7200. Note: wages that were or are to be reimbursed by PPP funds are not eligible wages for this program.
For 2021, organizations must show a 20% reduction in gross receipts in the first quarter of 2021 as compared to 2019 to qualify for the program. If you meet that benchmark, a refundable tax credit can be requested of up to 70 percent of the first $10,000 in qualified wages of an eligible employee, or up to $7,000 per employee, for the first quarter. The same test can be applied in the second quarter of 2021, allowing for the potential of an additional $7,000 per employee in this quarter.
The rules for 2020 are less favorable. The organization needs to show a 50% reduction in gross receipts for any of the last three quarters of 2020 compared to 2019. If this benchmark is met, the organization can claim a credit of up to 50% of the first $10,000 in eligible wages per employee. You have up to three years to claim these credits, but we encourage you to investigate this program as soon as possible.