Tax Credits and Deferrals
Employee Retention credit is available for 50 percent of qualifying wages paid to employees during the crisis, with a cap of $10,000 on qualifying wages, so employers may claim no more than $5,000 per employee. The refundable credit is available to institutions whose operations were fully or partially suspended due to a COVID-19-related shut-down order or whose gross receipts declined by more than 50 percent when compared to the same quarter in the prior year.
- IRS FAQ explains the credit and how its calculated
- Full set of IRS FAQs on various aspects of the credit
- Form 7200 and instructions which can be submitted to receive an advance payment
Payroll Tax Credits for Paid Leave are available to private institutions with fewer than 500 employees to offset the cost of providing expanded paid sick and family leave wages required by the Families First Coronavirus Response Act to their employee for leave related to COVID-19.
Deferral of FICA taxes. Institutions, public or private, may postpone payment of the employer’s share of FICA taxes that would be otherwise due on wages for the period beginning March 31 through December 31, 2020. The first half is due by December 31, 2021 and the remaining half is due by December 31, 2022. IRS Notice 2020-22 spells out penalty relief from payment of FICA and other employment taxes related to COVID-19-related provisions.
Main Street Loans for Small to Mid-Sized Nonprofits
The Federal Reserve Board has established two loan facilities under the Main Street Lending Program to offer low-interest loans to small and mid-sized nonprofit organizations that can demonstrate financial stability before the COVID-19 pandemic. Eligible nonprofits can obtain a new loan or expand an existing loan under the program. Eligible borrowers are organizations exempt from tax under section 501(c)(3) or 501(c)(19). The term sheet notes that "other forms of organization may be considered for inclusion" in the program at the discretion of the Federal Reserve. It is unclear whether public institutions will be considered eligible for Main Street loans. Borrowers must have at least 10 and not more than 15,000 employees, 60 days cash on hand, and an endowment that does not exceed $3 million, among other requirements.
- Nonprofit Organization New Loan Facility Term Sheet
- Nonprofit Organization Expanded Loan Facility Term Sheet
- Main Street Loans for Nonprofits FAQs
SBA Low-Interest Loans for Small Employers
Two loans are available through the Small Business Administration (SBA) for employers, including private institutions with 500 or fewer employers. Part-time and student employees must be included in the institution's employee count, with the exception of students working as part of the Federal Work-Study program or a substantially similar state program. Borrowers may apply for both of the loans, however the loans must each be used to cover different costs.
Payroll Protection Program loans of up to a maximum of $10 million to help cover the cost of payroll, health care benefits, rent, utilities, rent, or payments of interest on mortgage or other debt obligations. The following resources are available from SBA:
COVID-19 Emergency Injury Disaster Loans (EIDL) provide up to $2 million of working capital to help offset loss of revenues. The interest rate for nonprofit organizations is 2.75%.
Other Tax Relief
Relief for International Students. The IRS has extended tax relief for nonresident individuals including international students and scholars who are in the U.S. indefinitely as a result of COVID-19 travel disruptions. Visiting students and scholars will not run afoul of the substantial presence test and thus inadvertently be deemed permanent U.S. residents if they claim a COVID-19 medical condition exception which includes travel bans, government lockdowns, and canceled flights under the exception.The medical exception must be claimed on Form 8843, along with documentation. International students claiming treaty benefits will be presumed unable to leave the U.S. during the pandemic and will need to provide their withholding agent with Form 8233.
Tax Filing and Payment Extensions. The IRS has extended relief to more than individual and corporate taxpayers, announcing that extensions until July 15, 2020 will apply to all taxpayers, that have a filing or payment deadline falling on or after April 1, 2020 and before July 15, 2020. The Form 990-series returns or notices are included.
Suspension of Limitations on Net Operating Losses. The 80 percent limitation on net operating losses that was enacted as part of TCJA has been suspended for 2018, 2019, and 2020, allowing deductions for loss carryovers and carrybacks to fully offset taxable income for those years. Institutions wishing to maximize NOLs should amend previously filed Forms 990-T accordingly.
Expansion of Employer-Provided Tuition Benefits. An employer may now pay up to $5,250 annually toward an employee’s student loans, which would be excluded from the employee’s income. The $5,250 cap applies to both the new student loan repayment benefit as well as other educational assistance (e.g., tuition, fees, books) provided by the employer under current law. The provision applies to any student loan payments made on behalf of an employee after between March 29, 2020 and December 31, 2020.
IRS Coronavirus Resource Page. A collection of guidance and resources from the IRS is available on their resource page.