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What the American Rescue Plan Act Means for Nonprofits

by Sarah Skillin Woodard

President Biden signed the American Rescue Plan Act on March 11, 2021, enacting one of the largest economic relief programs in U.S. history. Below is an analysis of the nonprofit priorities included in the act. MANP thanks the National Council of Nonprofits for their quick analysis of the act.

Paycheck Protection Program (PPP) Loans

The law adds $7.25 billion to the program and expands eligibility to nonprofits with more than 500 employees that operate at multiple locations as long as no more than 500 employees work at any one location. In a win for performing arts nonprofits, the bill allows them to apply for funds under both the PPP and Shuttered Venue Operators Grants (SVOG) program, although a SVOG grant would have to be reduced by the amount of any PPP loan. Although Congress just added billions for more PPP loans, it did not extend the March 31 deadline for submitting loan applications. Join nonprofits and for-profits across the country to tell Congress it must extend the deadline by supporting the PPP Extension Act.

Federal Unemployment Coverage

The bill extends various federal benefits for unemployed workers through September 6, 2021, including a provision that increases from 50% to 75% the federal coverage of the unemployment costs of reimbursing nonprofits. The new law also provides continued coverage for self-employed workers and staff of religious and very small nonprofits.

Aid to State, Local, Tribal, and Territorial Governments

The law provides $350 billion in aid, but imposes restrictions on how governments may spend the funds. Permissible uses include providing: “assistance to households, small businesses, and nonprofits, or aid to impacted industries”; funding services that governments cut due to declines in revenue brought on by the pandemic; and making “necessary investments” in water, sewer, or broadband infrastructure. The money may not be used to subsidize tax cuts or pay public pension obligations.

Charitable Giving Incentives

The new law does not expand incentives for charitable giving, but on Tuesday, March 9, Senators and Representatives introduced the Universal Giving Pandemic Response and Recovery Act618 and H.R. 1704. If enacted, the legislation would allow taxpayers who claim the standard deduction on their tax returns, rather than itemizing deductions, to take a deduction for charitable giving valued at up to one-third of the standard deduction (around $4,000 for an individual filer and $8,000 for married joint filers). This added giving incentive would be available for tax years 2021 and 2022.

Take Advantage of the ERTC Refund

Nonprofits and other employers can claim both PPP loan forgiveness and the employee retention tax credit (ERTC) for 2020. This means that employers may qualify for the refundable payroll tax credit with respect to wages that are not paid for with forgiven PPP proceeds. What You Can Do Now: File with the IRS to receive the refundable payroll tax credit. Learn more by reading the article Nonprofits, Don’t Overlook Your Potential Refund Under the Employee Retention Tax Credit.

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