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CARES Act Guide for Nonprofits & Donors

The Coronavirus Aid, Relief and Economic Security (CARES) Act signed into law by the President on March 27 includes three distinct loan programs nonprofit organizations can access to get cash to meet operating costs, including retaining or rehiring staff, and to continue to fulfill their missions. It also encourages charitable giving to nonprofits in this crucial period by including three tax provisions for charitable donors during 2020.

Federal Disaster Relief Funding Available to Nonprofits

To qualify to access these revenue sources, nonprofit organizations must be operating and recognized by the IRS as a public, charitable 501(c)3 organization.

Paycheck Protection Program (PPP)

An emergency loan program based on the Small Business Administration’s (SBA) loan process but with important enhancements to assist nonprofits. Nonprofit and for-profit organizations with 500 or fewer employees can request funds to pay staff and operating costs for two months. By carefully following the rules, such as not laying off staff, the loans will be forgiven and essentially become a grant to your organization. Just as with SBA’s longstanding loan process, the PPP is administered through local lending institutions (about 1,800 nationally with more to be added soon). Already familiar with the SBA loan process, there should not be too much of a learning curve for them to get up to speed on PPP. The SBA has until April 11 to announce its guidance to participating institutions, so it will take a little while before organizations can apply for PPP loans. Congress appropriated $349 billion for this program. Learn more here. (Sec. 1102 of the bill)

Expanded Economic Injury Disaster Loan (EIDL) & Emergency Grants

Looser credit standards are used with EIDL resulting in a quick grant process that could direct $10,000 to nonprofits within three days to pay for salary and operating expenses. Not every nonprofit will qualify, but this could be a viable option. $10 billion was set aside for this opportunity. Learn more here. (Sec. 1110 of the bill)

Mid-Size Loan Program

This loan program still needs to be built out, but once in place, it would provide loans to nonprofits and other entities employing 500 to 10,000 people to help them retain at least 90 percent of their workforces. There is no website link yet. Look for information to be announced soon. (Sec. 4003 of the bill) To help you evaluate loan programs and determine which might work best for your organization, we’ve included on our website a helpful comparison chart, Loan Options for Nonprofits, created by the National Council of Nonprofits.

Tax Incentives for Donors to Promote Charitable Giving to Nonprofits

In addition to the loan programs, the CARES Act also includes incentives to promote charitable giving. The Community Foundation is sharing this information with fundholders and community donors to encourage giving. If you are in a position to give, now is the time to double down.

Above-the-Line Deduction for Cash Donations

This deduction allows people who do not itemize deductions (the majority of Americans) to take a one-time deduction for contributions of up to $300 made to nonprofit organizations. That’s a rather modest amount; however, it could spur some additional giving. As it’s written in the bill, this appears to be a deduction per individual, meaning that for people filing jointly, it would be a one-time deduction up to $600. However, there have been some different interpretations of this provision, so people should check with their CPA or another professional advisor for guidance. This incentive applies to gifts made in 2020 that would be reported on tax forms filed in 2021. This cannot be used for noncash gifts or donations to donor advised funds. There is an effort currently underway to possibly raise the $300 cap. (Sec. 2204 of the bill)

Expanded Deduction for Itemizers

For people who itemize their deductions, the CARES Act suspends the limitation on deductions for individuals allowing them to take deductions at 100% of their Adjusted Gross Income (AGI) for cash gifts only (previously the limit was 60 percent of AGI). Any cash gifts in excess of that limit can be carried forward for up to five years. Cash gifts to donor advised funds do not qualify for this expanded deduction. For corporations, the bill raises the annual limit from 10 percent to 25 percent, and the deduction limit for food donations from companies increased from 15 percent to 25 percent. These increased deductions are available for the 2020 tax year for individuals and tax years ending in 2020 for corporations. (Sec. 2205 of the bill)

Repeal of IRA Required Minimum Distributions

The CARES Act removed the requirement for people with IRAs to take the required minimum distribution (RMD) during 2020 only. However, people can still use the Qualified Charitable Deduction (QCD) to make a gift to a nonprofit organization. Gifts from IRAs can be a great way for donors to continue to support charities at this time. (Sec. 2203 of the bill) The Community Foundation is here to help you with information and resources regarding the CARES Act.