In paying attention to the news, you’ve heard every possible description for 2020. It’s been called unprecedented, chaotic, surreal, and even relentless. All of these descriptors indicate the challenges that individuals and organizations have faced throughout the COVID-19 pandemic.
Many nonprofits ran into issues as the economic downturn and social distancing regulations made fundraising even more challenging. Despite these challenges, your nonprofit’s donors stepped up and helped you get through these difficult times. But they weren’t the only ones. The government stepped in too, enacting legislation designed to help nonprofits and individuals alike handle the challenges presented by the pandemic.
In this guide, we’ll provide a brief overview and history of the various pieces of legislation that were passed as a direct result of the COVID-19 pandemic and how that legislation relates to nonprofit organizations. These three legislative pieces include:
- The CARES Act
- The Consolidated Appropriations Act
- The American Rescue Plan Act
The chaos of the pandemic made it challenging to really take in the details of each of these Acts. That’s why it’s a perfect time to reflect on them now, to see what passed and how they will continue to impact your organization.
After an overview of these Acts, we’ll dive into predictions about the world moving forward and trends that nonprofits can expect moving forward past the pandemic.
CARES Act
The CARES Act was the first piece of federal legislation passed in response to the COVID-19 pandemic. It was adopted into law on March 27th, 2020.
According to Jitasa’s guide to the CARES Act, this legislation contained two principal components that impact nonprofits:
- The Paycheck Protection Program (PPP): This program was designed to help nonprofits make payroll and continue successfully employing their staff members even as they hit hard economic times and the pandemic-related recession. This first iteration of the PPP provided loans for up to 250% of monthly payroll costs for registered nonprofits of fewer than 500 employees. The funds could be used for wages, commission, leave time, retirement benefits, and other staffing-related expenses. These loans also had forgiveness built-in as long as organizations applied to show that the funds were spent on the intended expenses.
- Economic Injury and Disaster Loans (EIDL): Economic Injury and Disaster Loans (EIDLs) were available before the COVID-19 pandemic for small businesses and organizations considered to be in an official disaster area. The EIDL loans were given at a maximum of $2 million depending on the magnitude of economic injury caused by COVID-19. On top of these loans, some nonprofits were able to receive EIDL grants of up to $10,000 to hold them over until the loan was paid out in full. The EIDL loans were generally not forgiven like the PPP loans were, however, the grant associated with it could count towards the PPP and end up forgiven.
While this legislation also contained the first economic stimulus check for individuals, additional unemployment benefits, and the first iteration of the employee retention tax credit (which we’ll cover more later), these items did not have as great an impact as the two listed above.
At this point in time, other organizations started releasing COVID-19 resources, information, and assistance. For instance, Double the Donation’s list of coronavirus resources includes blog articles from Classy, free access to Areva’s peer-to-peer platform for 90 days, webinars from SalsaLabs, and more.
While nonprofits were feeling the chaos of the unknown in the early stage of the pandemic, this is also when the help started pouring in. Organizations and the government alike stepped up to provide resources that would help nonprofits like yours stay afloat during challenging times.
Consolidated Appropriation Act
Towards the end of 2020, it became clear that the COVID-19 pandemic wasn’t going to subside after a few weeks as was originally believed. Therefore, the federal government passed another piece of legislation, the Consolidated Appropriation Act on December 27th, 2020.
This act came at a time when most had taken up remote working, the first stimulus check had been fully distributed, and vaccines weren’t yet on the table. Therefore, it was time (or some may argue— past time) to receive some additional help.
This act came with a number of new and updated policies for nonprofits, including:
- Additional PPP loans. The second round of the PPP was issued as a part of the Consolidated Appropriations Act. Eligible organizations were ones that did not employ over 300 people, had used (or would soon use) the full amount of the first PPP loan, and demonstrate at least a 25% reduction in gross receipts for any of the first three quarters in 2020. The amount of this loan was again up to 250% of average monthly payroll costs, with a maximum of $2 million.
- Enactment of Shuttered Venue Operators Grants (SVOG). These grants were designed to help organizations that operate in shuttered venues such as theaters, museums, zoos, and other organizations. These venues were mostly nonoperational during the pandemic and were eligible to receive additional grant monies if they demonstrated a 25% decline in gross receipts in a quarter of 2020 when compared to the same quarter in 2019.
- Extension of the ERTC. The Employee Retention Tax Credit (ERTC) was first established as a part of the CARES Act, offering up to 50% of the wages paid to retained team members, up to $10,000 in tax credits. However, in the first iteration, organizations that accepted PPP loans were not eligible for the ERTC. In the Consolidated Appropriations Act, this tax credit was extended to also include those that received the PPP loan. Plus the potential tax credit was increased for nonprofits to 70% of wages, up to $10,000 for each of the first two quarters in 2021.
- Charitable deduction extension. The original CARES Act allowed individuals who didn’t itemize their taxes to take a tax deduction for up to $300 in charitable giving. The Consolidated Appropriations Act extended this policy past 2020 into 2021.
Much of what the Consolidated Appropriations Act did was simply to extend the policies enacted in the original CARES Act as the pandemic continued past its anticipated timeframe. Nonprofits were given more economic flexibility with additional PPP loans and the extension of the ERTC.
However, all of these changes began to make tax season look very different for nonprofits. Therefore, many organizations had to work with an accounting firm or team that could help them sort out all of these changes when it came time to file their taxes.
American Rescue Plan Act
The American Rescue Plan Act was passed March 11, 2021. This Act was designed to continue the aid that organizations and individuals received from the federal government in response to COVID-19. The impact of the American Rescue Plan on nonprofit organizations was both direct and indirect in nature.
The image below summarizes some of the aspects of this act:
There were some elements of the American Rescue Plan that, like the Consolidated Appropriations Act, expanded existing programs that were enacted to aid Americans in response to COVID-19. Some of these continuations included:
- The expansion of the PPP and increased funding to $7.25 billion.
- The expansion and increased budget of the Shuttered Venue Operators Grants.
- The expansion of unemployment benefits for individuals and self-insurance policies for organizations.
Meanwhile, other aspects of this Act added new programs and funding that would help nonprofits fund their programs now and start getting things back to normal, but more indirectly. For example, this Act provided:
- Additional funding for state and local governments. These funds were administered so that state and local governments could take action to help bolster the economy in their specific locations. This economic boost would trickle down to help all organizations in your community, including your nonprofit.
- Funds to help administer new COVID-19 vaccines. As the best protection against the virus and the path back to a semblance of normalcy, there was a major push for everyone who was eligible to receive the COVID-19 vaccine. This took marketing, transportation, and other steps to make sure as many people as possible could receive it.
While this was the most recent COVID-19 stimulus act, it may not be the last. Even as CDC guidelines continue to change and we’re seeing more and more mask-less individuals out and about, we’re not yet out of the weeds.
What’s next?
The emergence and spread of the COVID-19 Delta variant show that we’re not yet done with the pandemic. However, as businesses have opened back up and vaccinations continue to be distributed, we’ve started seeing some trends in the nonprofit sector that give an indication to what the future might look like in the new normal.
These trends include:
- Hybrid events. Supporters of your organization will have varying comfort levels about the world opening up. To accommodate the comfort levels of all supporters, you can host hybrid events so that supporters can choose to attend in person or from the comfort of their homes. This also means that your next giving event will extend past the geographic area of your organization, getting more and more people involved from diverse locations.
- Recurring giving. The pandemic was a time of instability for many individuals and organizations alike, showing the importance of stability in programming. Recurring monthly giving is one of the best ways that nonprofits can add some stability to their fundraising strategy because supporters give on a regular schedule without having to think about it. Start looking for the supporters who will make good candidates for your monthly giving program and reach out to see if they’d be interested in joining to stabilize your fundraising efforts further.
- Diversified funding. Many organizations that relied on a single source of primary income before the pandemic were likely also shaken out of their sense of stability. While some were lucky and retained their primary source of funding, many others were not so lucky and experienced a sharp decline in revenue as their main funder also faced economic hardship. Diversification in funding is another way to increase stability. Rely on a number of sources for income rather than just one. That way, if another crisis were to occur, you don’t have all of your eggs in one basket.
Start considering how the new normal will impact your organization’s strategic plan moving forward. Take steps to start incorporating these emerging strategies now so that you’re ahead of the game when the pandemic begins to wind down.
COVID-19 was unprecedented, chaotic, and an overwhelming period of uncertainty for many individuals, companies, and nonprofits alike. However, with the help of the federal government and generous donors, we’re getting closer to the light at the end of a dark tunnel.
Reviewing everything that happened over the past year can help you determine the takeaways and next steps that your organization can take to move forward with a new outlook and an improved strategy.
Jon Osterburg has spent the last nine years helping more than 100 nonprofits around the world with their finances as a leader at Jitasa, an accounting firm that offers bookkeeping and accounting services to not for profit organizations.