Understanding the Federal CARES Act

United Way of Lane County is committed to helping local nonprofits weather the COVID-19 crisis. Two new funding opportunities in the federal CARES Act signed into law on Friday, March 27, 2020 are an important piece of this complex puzzle. The first is an expanded Small Business Loan program that provides loans to cover payroll and other overhead expenses. The loans will be forgiven at the end of the year. The second is a new charitable deduction that will drive new giving and tap new donors.  

Paycheck Protection Program

First, the SBA 7(a) loan program called the Paycheck Protection Program allows 501(c)(3) charities to immediately take out loans equal to 2.5 times their average monthly payroll expenses. The loans come from traditional banks that have SBA authorization and the SBA provides a 100% guarantee. As long as your organization does not lay-off its staff or reduce salaries, and so long as the loan funds are used to cover payroll expenses, mortgage interest/rent and utilities by June 30, 2020, the loan will be fully forgiven at the end of the year.

Nonprofits that have a payroll should consider acting quickly to take advantage of this loan. There is a $349 billion pool of funds for these loans, but we will be racing against hundreds of thousands of for-profit small businesses and other nonprofits. These funds will be exhausted and we want our local partners to be at the front of the line.

Applications are available now and organizations should work with their lenders to get the forms submitted.

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Take these preliminary next steps:

  • If you need board approval, seek it now.

  • Reach out to a lender you know:

    Find out if they are an SBA lender and whether they will be processing the SBA 7(a) Paycheck Protection Program loans. These loans will be appealing to lenders because of the 100% guarantee.

  • Begin to prepare documentation you will need for the loan application:

    • Proof of your payroll expenses for the 12 months preceding the date of application for the loan.

    • Payroll expenses do not include any portion of an individual's salary over $100k/year or federal tax payments.

    • Payroll expenses include salary and many benefits like health insurance and retirement.

For more information: https://www.sba.gov/funding-programs/loans/paycheck-protection-program-ppp

$300 Universal Charitable Deduction

Second, the CARES Act creates a $300 "nonitemizer" deduction for 2020. Nonprofits may immediately incorporate this $300 deduction in your donor asks and promotional materials.

The deduction:

  • Is in full effect as of Friday, March 27, 2020 and will apply to donations made for all of 2020

  • Only for people who do not itemize their taxes

  • Donors who itemize their taxes are eligible for the existing charitable deduction

  • Only for cash donations (not in kind)

  • Can be used by the charity for any purpose (not limited to COVID-19 relief efforts)

For more information: https://www.congress.gov/bill/116th-congress/senate-bill/3548/text#id94861AD2E5904D0B9B649BE2CDE9AF0F

United Way of Lane County continues to monitor emerging community needs related to COVID-19 and identify ways to provide support our network of nonprofit partners.

To stay up-to-date sign up for United Way’s monthly eNewsletter. If you would like to contribute to our Community Response Fund or find additional resources visit our COVID-19 page.

COVID-19United Way of Lane County