The CARES Act: What is it and how does it work?
On March 27, 2020, the United States Congress passed, and President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This historic legislation creates an unprecedented and massive array of relief, benefit, and stimulus measures designed to help Americans, businesses, nonprofits, and state and local governments offset economic losses and hardships from the coronavirus crisis.
The CARES Act appears to have five parts which would provide forms of aid to most churches and nonprofit organizations. Of those five, only one will be most commonly used, the Paycheck Protection Program.
The five relevant parts of the CARES Act are:
- Paycheck Protection Program Loans/Grants
- Expanded Unemployment Benefits
- Deferral of Payment of Employer’s Share of Social Security Taxes
- Employee Retention Credit for Employers Subject to Closure or Substantial Revenue Loss
- Changes to Paid Leave and Emergency FMLA leave
The best resource we are aware of to explain the details of each of these programs is an outline written for the Evangelical Council of Financial Accountability (ECFA) by CPA Mike Batts. Batt’s accounting firm Batts Morrison, Wells & Lee specializes in serving non-profit organizations and is one of the leading firms in the country with this specialization. That ECFA of the CARES Act outline is here.
Another ECFA Outline with further updates is available here.
The next best source of information we are aware of is the Executive search firm website of Vaderblomen. They have a variety of unique checklists and forms to assist with the calculations necessary to make application for the aid available.
Vaderblomen also had a seminar on the Act which can be viewed here on Facebook.
And the Family Research Council (FRC) recently shared this guidance: Coronavirus Relief: What Churches and Nonprofits Need to Know About Accessing SBA Loans.
1) Paycheck Protection Program Loans/Grants
This is the largest and likely the most valuable part of the program that will be of interest to churches and nonprofits because it can pay for salaries and certain parts of overhead operating expenses for a church or organization.
Starting April 3, 2020, churches and nonprofits can apply. Starting April 10, 2020, independent contractors and self-employed individuals can apply. We encourage you to apply as quickly as you can because there is a funding cap.
These below are great explanations, outlines and forms on this specific program.
Overview of Paycheck Program by Treasury Dept.
Factsheet by the Treasury Department
The Department of the Treasury and Small Business Administration issue official guidance for the Paycheck Protection Program: Paycheck Protection Program – Interim Final Rule
SBA: Frequently Asked Questions Regarding Participation of Faith-Based Organizations in the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan Program (EIDL)
2) Expanded Unemployment Benefits
From the ECFA: “The CARES Act appears to provide a flat amount of $600 per week in addition to what an individual may qualify for under state unemployment systems. The payments will be paid by state unemployment agencies as Disaster Unemployment Benefits.
The Act provides unemployment benefits to unemployed workers from churches, religious organizations, and small nonprofits where employment would not normally be covered under state unemployment laws.
The Act provides federal funding to assist nonprofits that have elected the reimbursement method for participation in state unemployment coverage. The federal government will reimburse the state unemployment agencies 50% of reimbursed benefits paid to the government and nonprofit employers who elected to be a reimbursing employer. Section 2103.” See: How the COVID-19 Economic Stimulus Bill Affects Churches and Nonprofits
3) Deferral of Payment of Employer’s Share of Social Security Taxes
From the ECFA: “Deferral of payment of employer payroll taxes. Effective with the date of enactment of the CARES Act, employers may defer payment of employer payroll taxes attributable to wages paid during 2020 with 50% due December 31, 2021, and the remaining 50% deferred to December 31, 2022.
Note: This provision is not available to an employer who has had its debt forgiven in connection with the Payroll Protection Program.
For the purposes of this provision applicable to churches and other nonprofit organizations, payroll taxes is only the employer’s portion of Federal Insurance Contribution Act (FICA) — 6.2%, not the 1.45% Medicare Tax. Caution: This provision is not like a loan that can be renegotiated when it comes due. The IRS will expect to be paid the amount of employer’s FICA taxes on December 31, 2021 and December 31, 2022. Section 2302.” See: How the COVID-19 Economic Stimulus Bill Affects Churches and Nonprofits
4) Employee Retention Credit for Employers Subject to Closure or Substantial Revenue Loss
See: FAQs: Employee Retention Credit under the CARES Act
5) Changes to Paid Leave and Emergency FMLA leave
See: Treasury, IRS and Labor announce plan to implement Coronavirus-related paid leave and tax credits