Editor’s note: For the most up-to-date information on the Employee Retention Tax Credit, please visit our ERTC Eligibility page.
For nonprofits, the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 unlocks new benefits and expands emergency aid provisions put into place through the relief bills enacted during 2020. RKL’s nonprofit team rounded up the key areas of impact for nonprofits continuing to navigate increased community need and potentially diminished charitable giving due to the ongoing pandemic.
Employee Retention Tax Credit (ERTC) Expanded and Extended
Introduced by the CARES Act, the ERTC is a refundable payroll tax credit for organizations that either had a full or partial suspension of operations OR experienced at least a 50 percent reduction in gross receipts as compared with the corresponding quarter in 2019. The credit available is 50 percent of the qualified wages up to a maximum of $10,000 (to include a healthcare allocation) for a credit of up to $5,000 per employee for 2020. If the nonprofit meets the full or partial suspension of operations test, the credit is available for qualified wages paid during the reduced operation timeframe. If the gross receipt reduction test is met, the credit is available for qualified wages for the entire quarter, available each quarter until revenue exceeds 80 percent when compared with the same quarter in 2019.
The Coronavirus Response and Relief Supplemental Appropriations Act enhances the ERTC in several key ways:
- Extends availability through June 30, 2021
- Increases credit from 50 percent to 70 percent of qualified wages (up to $10,000) for each quarter (January 2021 through June 30, 2021). The maximum credit now available is $7,000 per quarter – an increase from a total credit of $5,000 for 2020 to $14,000 for 2021.
- Makes tax-exempt public colleges, universities, hospitals and other 501(c)(1) organizations eligible for the credit (originally only available to 501(c)(3)s and 501(c)(19)s)
- Extends availability of the credit for those who received PPP funds – just not for the qualified wages allocated to the PPP loan
- Makes ERTC retroactively available to organizations that received a first round PPP loan
Get more details on the updated ERTC in our guide to payroll and leave provisions of the latest coronavirus relief act and consider our ERTC support package for step-by-step guidance to maximize benefit.
Extended Unemployment and Emergency Paid Leave Benefits
In March 2020, the Families First Coronavirus Response Act (FFCRA) expanded unemployment benefits to individuals who lost work due to COVID-19 and mandated employers with fewer than 500 employees to offer temporary paid sick and family leave. Later that month, the CARES Act expanded those enhanced unemployment benefits and adjusted tax credits to cover employer costs associated with providing the emergency leave.
Now, the Coronavirus Response and Relief Supplemental Appropriations Act continues emergency paid sick and family leave through March 31, 2021 on an optional basis for employers with fewer than 500 employees.
PPP Round Two: Expanded Eligibility for Nonprofits
The biggest provision of the Coronavirus Response and Relief Supplemental Appropriations Act is approximately $284 billion to fund a second round of the Paycheck Protection Program (PPP) launched in the CARES Act. Read a comprehensive overview of PPP round two.
Round two of PPP expands the eligibility to 501(c)(6) organizations. Previously, only 501(c)(3) and 501(c)(19) organizations were eligible to apply for PPP loans. Internal Revenue Code 501(c)(6) organizations are considered “business leagues,” which includes chambers of commerce, real estate boards, boards of trade and professional football leagues, so long as no part of the net earnings goes toward any private shareholder or individual. Professional sports leagues or organizations with the purpose of promoting or participating in a political campaign or other political activities are not eligible to apply for PPP loans.
501(c)(6) organizations are eligible for PPP round two loans if:
- The organization does not receive more than 15 percent of receipts from lobbying;
- The lobbying activities do not comprise more than 15 percent of activities;
- The cost of lobbying activities of the organization did not exceed $1 million during the most recent tax year that ended prior to February 15, 2020; and
- The organization has 300 or fewer employees.
Get tips to prepare for PPP round two applications and a refresher on acceptable payroll costs in our recent overview post.
Grants for Shuttered Venue Operators
The Coronavirus Response and Relief Supplemental Appropriations Act authorizes $15 billion for grants to eligible nonprofit and for-profit live venue operators or promoters, theatrical producers, live performing arts organization operators, museum operators, motion picture theatre operators or talent representatives who demonstrate a 25 percent reduction in revenues. The Act sets aside $2 billion for eligible entities that employ not more than 50 full-time employees, which rolls back into the broader grant pool if not used up with 60 days of program implementation.
The grant funding may be doled out in initial grants (up to $10 million dollars) followed by supplemental grants equal to 50 percent of first. Get more details on the grant program here.
Questions about eligibility or need assistance applying or calculating benefit? Reach out to your RKL advisor or use the form below to contact us.