How the New CARES Act May Affect Your Gift Planning or your Nonprofit Organization
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, is the largest economic relief bill in U.S. history and will allocate $2.2 trillion in support to individuals and businesses affected by the pandemic and economic downturn. This act was passed by Congress and signed into law on March 27, 2020.
How the New CARES Act May Affect Your Gift Planning:
You may have questions on how the CARES Act affects your charitable giving. Below is an overview to get you started. If you have questions, you should reach out to your tax advisors or connect with one of the Catholic Foundation’s Preferred Advisors. Please contact us to help you with any gift planning opportunities.
New Charitable Deduction Available For Non-Itemizers (Section 2204)
Taxpayers who take the standard deduction rather than itemizing their deductions will nevertheless be able to claim a charitable deduction of up to $300 ($600 for a married couple) for cash donations made in 2020. This is an “above the line” adjustment to income that will reduce a donor’s adjusted gross income (AGI), and thereby reduce taxable income. A donation to a donor advised fund (DAF) does not qualify for this new deduction.
Higher Charitable Deduction Limits (Section 2205)
As part of the bill, individuals and corporations that itemize can deduct much greater amounts of their contributions. Individuals can elect to deduct donations up to 100% of their 2020 Adjusted Gross Income, or AGI, (up from 60% previously). Corporations may deduct up to 25% of taxable income, up from the previous limit of 10%. The new deduction is for gifts to a public charity. The higher deduction does not apply to donations directly to a Donor advised funds or 509(a)(3) organizations.
Required Minimum Distributions Waived in 2020 for Most Donors (Section 2203)
Required minimum distributions (RMD) that would have had to start in 2020 do not have to start until 2021, including distributions from 457 plans. This change may diminish the incentive for a donor to make a qualified charitable distribution (QCD) from their IRA in 2020. Even so, making a QCD this year will still allow itemizers and non-itemizers alike to direct up to $100,000 from their IRA to charities like the Catholic Foundation in a tax efficient manner.
For the act in its entirety please see the CARES Act. This information is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. State law may further impact your individual results.
How the CARES Act May Affect Nonprofit Organizations and Individuals:
For organizations applying for Paycheck Protection Program and Economic Injury Disaster Loans: These will likely be handled on a first come, first serve basis. If you are considering applying for these this week, contact your banking representatives as soon as possible.
Paycheck Protection Program:
To help retain employees, organizations with fewer than 500 employees may be eligible for the Paycheck Protection Program, which provides loans to cover qualified payroll, rent and utilities, and interest on mortgage and debt obligations. Organizations may qualify to have a portion of their loan forgiven if they meet certain requirements. Learn more through the U.S. Small Business Administration. Find an eligible lender.
Nonprofit organizations may apply for low-interest Emergency Economic Injury Disaster (EIDL) grants. Organizations seeking immediate relief can receive a $10,000 emergency advance within three days after applying for the grant, too. Learn more.
FREQUENTLY ASKED QUESTIONS REGARDING PARTICIPATION OF FAITH-BASED ORGANIZATIONS IN THE PAYCHECK PROTECTION PROGRAM & THE ECONOMIC INJURY DISASTER LOAN PROGRAM (from the U.S. Small Business Administration)
This information is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor and/or your board of directors.
Resource for Nonprofit Leaders & Boards on Crisis Decision Making
Resources from Plante Moran
Not-for-Profit Impact Article: Plante Moran’s NFP industry leaders have created an article that summarizes the various benefits of the Act.
Paycheck Protection Program provides forgivable SBA loans
Qualified disaster relief payments and leave-sharing can help employees affected by COVID-19
COVID-19 relief bill contains payroll tax credits for employers
COVID-19 Resource Center: Plante Moran’s main page for sharing articles and information on COVID-19