Editor’s note: President Trump signed the stimulus bill six days after Congress passed it. This article has been updated to reflect that the bill is now a law.
Congress passed a stimulus bill Monday night with key benefits for nonprofits, including an extension of the temporary charitable deduction available to people who don’t itemize their taxes and another round of forgivable Paycheck Protection Program loans.
However, the loans in the new $900 billion stimulus bill come with narrower eligibility criteria than in the stimulus bill enacted in the spring.
Aside from helping nonprofits directly, the measure also helps the people they serve — especially those behind a surge in requests for aid from food banks, housing charities, and other social-services groups. The bill provides $600 checks to individuals and $1,200 to couples, which will help the hundreds of thousands of Americans who have lost their jobs. And if last year’s experience is any indication, the stimulus checks to people who are faring better financially could be a boon for charity fundraisers.
Here are the major provisions directly affecting nonprofits, with information provided by the National Council of Nonprofits and other nonprofit advocates, as well as summaries issued by congressional negotiators.
Charitable Deductions
The previous stimulus legislation, known as the Cares Act, allowed deductions of up to $300 in charitable gifts in 2020 for people who don’t itemize their taxes. In the new measure, Congress extended that provision for tax year 2021, allowing single people to deduct up to $300 and couples to deduct up to $600 in charitable gifts even if they don’t itemize. The bill also specifies a penalty for overstating contributions.
The bill also extends for one year the previous stimulus law’s increased limits on deductible charitable contributions for individuals who itemize and for corporations.
For those individuals, the cap will remain at 100 percent of adjusted gross income instead of reverting to 60 percent.
For corporate charitable giving, the annual limit will stay at 25 percent of taxable income in 2021 instead of reverting to 10 percent. The cap on deductibility of food donations from corporations will stay at 25 percent of taxable income instead of reverting to 15 percent.
Paycheck Protection Program Loans
The bill provides $284 billion for Paycheck Protection Program loans. Under the stimulus legislation enacted in the spring, businesses and nonprofits with up to 500 employees (counting all full-time and part-time employees equally) were eligible for Paycheck Protection Program loans. Under the new legislation, that cap is reduced to 300 employees. Loans will be limited to $2 million per organization, down from $10 million under the previous stimulus law.
Paycheck Protection Program loans are generally forgivable if organizations can avoid layoffs and salary reductions. The new legislation expands the list of eligible loan expenses to include personal protective equipment, facilities modifications, and certain other worker-protection expenditures. The bill also simplifies the forgiveness application process for loans up to $150,000.
Negotiators included a provision for the second round of Paycheck Protection Program loans specifying that recipients must show they have had at least a 25 percent drop in revenue to qualify. Under that provision, many of the 180,000 nonprofits that received loans in the first go-round will no longer qualify, said Steve Taylor, senior vice president and counsel for public policy at United Way Worldwide. For context, according to SBA data, 1,872 nonprofits with more than 300 employees received $6.4 billion in Paycheck Protection Program loans in the first round of the program to support payroll expenses for at least 747,570 workers.
Nonprofit advocates point out that many charities that haven’t suffered significant revenue losses continue to cope with unusually high levels of demand for services.
The bill includes language to make clear that houses of worship and other faith-based organizations are eligible for PPP loans.
Cultural Institutions
The bill sets aside $15 billion in dedicated funding for live venues, independent movie theaters, and cultural institutions. The benefit is capped at $10 million per organization, and the entity must intend to reopen. The organizations also must show they have seen revenue decline by at least 25 percent compared with 2019.
Unemployment Insurance
The legislation extends until March 14, 2021, a reimbursement provision in the previous stimulus law for nonprofits that self-fund unemployment benefits. Under the provision, those nonprofits could get reimbursed for up to half the costs of benefits provided to their laid-off employees.
Other Provisions
The bill also includes several provisions that nonprofit advocates say will help the people they serve. It will provide $600 stimulus checks per person, including children, subject to certain income limits.
The measure will provide an additional $300 per week in unemployment benefits through March 14.
The bill will extend for a month a moratorium on evictions that was slated to expire at the end of 2020, and will provide $25 billion in assistance to renters.
The legislation also extends the previous legislation’s Employee Retention Tax Credit through July 1.
It will boost the refundable payroll tax credit by reducing the amount of required year-over-year decline in gross receipts from 50 percent to 20 percent, as well as increase the credit from 50 percent to 70 percent of workers’ “creditable wages” up to $14,000 per worker. This provision is a significant benefit to larger nonprofits that were largely left out of Covid relief, according to the National Council of Nonprofits.
