April 7, 2020

BREAKING COVID-19 UPDATE: EQUINE NON-PROFIT & CHARITABLE RESOURCE

COVID 19 FBCover5

 

The Maryland Horse Council has pulled together new and additional resources for our state equine community, business, and particularly our non-profits.

We have provided several business-related resources during the last week. While this article addresses those resources, we have added some non-profit specific information relative to the relief programs. We have so many 501c3 organizations in Maryland helping horses that we wanted you to learn about these resources as they apply to your organization and tax structure.

See below for a breakdown of these programs. Each is bolded to highlight to relief programs available to you.

1.SBA- Paycheck Protection Program (“PPP”)

501c3 organizations are eligible for the Paycheck Protection Program. www.sba.gov/funding-prorgrams/loans/paycheck-protection-program. You must reach out to your bank to start the process. The program extends until June 30th, but you should start this as soon as possible with your bank. It is a first come first serve process. It is not need based and will be funded on an as requested basis. The loan amount cannot exceed $10 million, and it is generally 2.5 times your payroll costs. Eligible salaries will be capped at $100,000 (as paid from February 15th to June 30, 2020). You should include higher salaries, but you will not receive more than $100,000 for each of those salaries.

The PPP is not accepting applications from sole proprietors or independent contractors until April 10th.

The interest rate is currently 1% and will not exceed 4%. It is now a two-year term. There is no prepayment penalty and a there is a six-month deferral before the start of payments. There are no collateral or personal guarantees. The loan may be used for rent, utility, and other mortgage and debt obligations.

There is potential loan forgiveness. Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels.  Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease. You apply for 2.5 times payroll costs and what is forgiven ultimately is payroll costs, interest and utilities for eight weeks. You are subject to a possible reduction if you don’t retain the same number of employees as you had prior to the program. Other factors would be reduced pay by more than 25%. If you rehire or increase pay before June 30th, you may be able to avoid this reduction in the amount of forgiveness. SBA provided additional guidance that not more than 25% of the forgiveness can be related to non-payroll costs. 75% must go to payroll.

Application Process:

  1. Simple two-page loan application.
  2. Personal financial statements, IRS form, and schedule of liabilities have not yet been requested. It is possible after initial application.
  3. Calculation of average monthly payroll cost.
  4. Independent contractors do not count in your payroll cost figure. Encourage your contractors to do their own application.

There is a new PPP form as of April 2nd where you can select that you are a non-profit. You can use your board president or signatories to sign the new form.

TIP: Check with your banker for their recommendation.

2.Economic Injury Disaster Loan Program

This is a direct application to SBA www.covidrelief.sva.gov/#/. The SBA EIDL Information Link is www.sba.gov/pagr/diaster-loan-applications.

Qualifications & Loan Details

  1. Private nonprofits are eligible. This includes most organizations except religion organizations.
  2. $2 million maximum loan amount.
  3. Term up to 30 years. Waives personal guarantee up to $200,000.
  4. 75% interest rate for non-profits

The SBA is projecting 21 to 31 days to review applications. There are no forgiveness features. It is designed to be a longer-term financing option.

Every applicant can potentially also receive a $10,000 economic injury grant. It is requested during the EIDL loan application process. It may be used for payroll, supply chain disruptions, business obligations, rents, and mortgage purposes. This is a grant and will not need to be repaid.

Thus far we have heard that if you are using the loan and grant money for different purposes you can apply for both. However, if you receive an EIDL grant you most reduce your PPP forgiveness amount, if you have also applied for the PPP.

If you want a grant only, you have to start the loan application process but you don’t necessarily have to accept the loan funds

3.FFCRA – Family First Coronavirus Response Fund

Provides paid leave for employees quarantined, experiencing symptoms and seeking a medical diagnosis. Employees can receive up to 80 hours at a regular rate. If they are caring for an individual quarantined or for a person under the age of 18 whose school or child care provider is closed, they may receive up to 80%.

Employees may receive up to an additional 10 weeks at 2/3 the regular rate if they are unable to work due to the need for leave to care for a child whose school or child care provider is closed. There is an employee longevity requirement here. The employee must have been employed for at least 30 days prior to March 1st. If the employee had been terminated and rehired there are additional provisions.

Part-time employees are entitled to paid leave under this program at their average number of work hours in a two-week period. Paid leave does not have to be taken consecutively. For example: Tuesday and Thursday, etc.; it does not have to sequential.

This program is available for organizations with fewer than 500 employees and does includes non-profits. Organizations with fewer than 50 employees may qualify for exemption from the requirement to provide paid leave due to school closing or child care unavailability if leave request would jeopardize the viability of the organization as an ongoing concern. [Is this accurate? I pasted it in from a prior version of the document, now that I think I understand better what you were getting at.]

Employers receive 100% Reimbursement for required paid leave. Payments are not subject to Employer Social Security tax and employers can claim credit for Medicare tax. Prorated health insurance costs are also eligible for that credit. Reimbursements to employers are made in the form of dollar-for-dollar offset against Form 941 deposits by submitting streamlined advance Form 7200 to the IRA.

www.dol.gov/agencies/whd/pandemic

www.irs.gov/newsroom/covid-19-related-tax-credits-for-required-paid-leave-provided-by-small-and-midsize-businesses-faqs

There are required posters that must be displayed in your workplace as of April 1st. They must also be made available electronically.

  1. https://www.dol.gov/sites/dolgov/files/WHD/posters/FFCRA_Poster_WH1422_Non-Federal.pdf

4. Additional CARES Act Programs

Employee Retention Credits (“ERC”)

Refundable payroll tax credits are available for 50% of qualified wages paid by eligible employers to certain employees. If you are receiving PPP funds, you are not eligible for this credit.

ERC provides incentives to keep employees on payroll even if forced to close or suspend business.

Businesses are eligible for ERC if business was carried on in 2020 and if operations were fully or partially suspended as a result of a COVID-19 government order, or the organization remained open but experienced a greater than 50% reduction in quarterly receipts as compared to the same quarter in 2019. Eligibility is determined by the whole organization’s revenues, so it cannot be based solely on specific events or programs.

ERC applies to wages paid after March 12, 2020 and before January 1, 2021. The credit for 50% of qualified wages is claimed against the employer’s 6.2% share of social security payroll taxes for each calendar quarter for which the employer is eligible and qualified wages are paid. If the credit exceeds the organization’s liability, employers can retain federal employment taxes including withheld taxes or request an advance of credit from the IRS.

Qualified Wages: For employers who have an average number of full-time employees in 2019 of 100 or fewer, all employee wages are eligible. Qualified wages include “qualified health plan expenses” to the extent the amounts are excluded from gross income of the employees (so not taxable to employees). Qualified wages are capped at $10,000 for each employee for all quarters. This is a cumulative cap and it is applied at 50%, so a maximum of $5,000 credit per employee. This is not available if you have taken the Work Opportunity Credit with respect to the employee, for wages considered for the employer credit for paid family medical leave (IRC Section 45S), or for wages considered for purposed of the payroll credits for required paid leave under FFCRA.

IRS FAQs:

www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act

Delay of Payment of Employer Payroll Taxes

Allows employers to defer paying the employer’s 6.2% share of social security taxes due from date of enactment of the Act through the end of 2020. Any amounts deferred will be payable 50% by December 21, 2021 and 50% by December 31, 2022. This applies to any remaining amounts due after applying the previously discussed credits. Organizations that received a PPP loan with forgiveness are NOT eligible for this deferral.

Unemployment Resources

Expanded benefits related to COVID-19. If your employees were previously exempt from unemployment, they are now eligible. For organizations that had elected the self-insure method, you will be responsible to cover half of those benefits now and the other half will be covered by federal funds. If you paid in as you normally do, you will not have your experience ratings increase during this period of time of high unemployment.

Short-Term Compensation (STC) Program

If you have employees for whom you have reduced their hours or pay, you can apply as an employer for supplementary funds from unemployment to make their pay whole.

Tax Income Provisions

“The legislation includes a permanent change to tax deductions for charitable donations: If you claim the standard deduction (meaning you don’t itemize your taxes), you can now deduct up to $300 for qualifying charitable donations “above the line,” which means they lower your total taxable income by the amount you’re deducting.

If you do itemize your taxes, the usual limit on deducting charitable cash donations is 60% of your adjusted gross income. This legislation waives that limit for 2020 (although limits on donations of non-cash assets, like stock, still apply). And the limit for corporations is being increased from 10% to 25%.”

Required minimum distributions have been suspended this year. Contributions to Donor Advised Funds are not eligible for the $300 deduction. Also, donations in excess of 60% of adjusted gross income cannot be to Donor Advised Funds. Donations to SPELL OUT QCDs are still available though. A QCDs is a charitable qualified  distribution that allows you to “rollover” up to $100,000 of you required minimum distribution after age 70.5 without incurring ordinary income taxes it must be made directly to the charity from the financial institution.

Tax Deadline for Non-Profits

990 filing still due May 15th