Hello Nonprofit Friends! 

We want you to know we are ready to help as you face the challenge of keeping employees on the payroll and operating at the level necessary to serve our community during this unprecedented time.  We at KT have had a chance to digest the Families First Coronavirus Response Act and the Coronavirus Aid, Relief and Economic Security Act (CARES).   We’ve been deep in the details and are continuing to learn more every day. All these laws have little caveats and triggers that need to be carefully considered.  We are continuing to update our website with information as we get it.  If you are not receiving our emails and newsletters, please let me know so you can be added to our list.

  • See the attached summary of the Families First Coronavirus Response Act for details regarding specific eligibility, amount of payment, exemptions, etc.  This is effective April 1, 2020.  The basic premise of this law is as follows:
    • Emergency family and medical leave must be provided to employees who can’t work because their child’s school or daycare provider is closed or unavailable due to coronavirus emergency/declaration. 
    • Emergency paid leave must be provided to employees if they are missing work because of coronavirus (i.e. government or medical quarantine/isolation of employee or someone they are caring for, seeking medical diagnosis, or caring for child whose school or daycare is closed). If employees choose to self-isolate, this provision does not apply.
    • Tax credits are available to offset wages paid under the above provisions – you can reduce your payroll tax deposit by the amount of the credit.  Forms will be available soon to submit a refund claim if the reduction in payroll tax deposit is not enough to cover employee wages paid under these provisions.
  • See the attached SBA Loan Program Summary – this is the best summary we have found. These loans are good until they run out and are available to nonprofit organizations.
    • The Paycheck Protection Program (PPP) covers the cost of retaining employees.  These loans are available through your banker – visit them soon to make sure this loan is right for you and to get an application started – funds are not unlimited!
      • Loan amounts are based on 2.5X the prior year’s average payrolls.  See page 4 regarding forgiveness of these loans. 
      • For the 8 weeks following the date you receive the loan, four things are totaled to figure the amount of the loan forgiven (interest on mortgage debt and secured equipment loans, rent, utilities, and payroll costs).  However, there is a catch – the amount of forgiveness is reduced by a ratio of employees maintained during the 8 weeks compared to the average FTE’s in prior periods.
      • A couple of hints to maximize amounts you can receive under this loan program: (1) if you lease your building from a third party and are asking for rent relief, ask for that relief after the 8-week period has passed; (2) pay as many bills as possible related to the above eligible costs during the 8-week time frame.
    • If you choose not a pursue a PPP loan, two other options may be available to your organization (see page 10):
      • The employee retention credit is equal to 50% of wages for employees who were furloughed or had their hours reduced.  Employers are eligible in the event of a government order limiting your operations or if you experience over 50% reduction in quarterly receipts.   
      • Payroll tax deferral of 2020 employer social security taxes (6.2%) – half must be paid in 2021, with the remaining half paid in 2022.
    • The Economic Injury Disaster Loans & Emergency Economic Injury Grants (EIDLs – see page 7) – these loans provide an immediate grant, as well as additional loan funds. Amounts can be used for any expenses that could have been met if the disaster had not occurred, including payroll and other operating costs.  The application process does not go through the bank, but you will need to apply quickly before funds run out!
      • Within 3 days of application, your organization receives an advance of $10,000 to be used for employee sick leave, payroll, rent, or mortgage costs. This grant does not have to be repaid, but is subtracted from the PPP loan amount forgiven.
      • Additional funds are in the form of loans up to $2M.  Interest rates are set at 2.75%, and payments of principal and interest are deferred for 4 years.
  • Unemployment benefits have been significantly expanded, and any layoffs due to COVID-19 will not impact your experience rating.  This may be an option that will allow employees to stay afloat in the short-term, keep only essential staff on the payroll, and then bring them back when you are ready.
  • Many of your employees may be working remotely, taking home confidential information, performing different job responsibilities, or not working at all. In addition to the stress this creates on normal operations, it can also create significant segregation of duties issues as your processes are required to change.  Extra stress on employees, combined with new opportunities to circumvent internal controls, can result in errors or fraud.  Don’t forget to maintain as much monitoring and segregation of duties as possible.
  • Also consider budget revisions, cash flow projections, debt covenant waivers, and granting agency compliance waivers.
  • Charitable contributions up to $300 can be deducted in 2020 even if an individual can’t itemize on their tax return.  Limits are also reduced for corporations making donations.  Small amounts add up, so reach out to donors as the economy begins to recover!

Our team is available to answer your questions and support your efforts – please reach out when you need us.