American Rescue Plan Act Relief Opportunities for Nonprofits

In early March, President Biden signed the American Rescue Plan Act of 2021 (ARPA), the fourth economic relief package passed since the start of the COVID-19 pandemic. It contains several provisions to help families, businesses, and local governments deal with the resulting challenges, including a $350B State and Local Fiscal Recovery Fund, $10B Capital Projects Fund, $21B for emergency rental assistance, and expansion of the Employee Retention Credit.

The funding will provide immediate relief and new opportunities needed to help a post-pandemic economic recovery. Given the total size of the ARPA, it has been challenging for New Jersey and Pennsylvania-area nonprofits to identify the provisions under the ARPA of most value to their organization.

Key Nonprofit Relief Opportunities

• Paycheck Protection Program (PPP) – $7.25B added to the popular Small Business Administration (SBA) loan program and changed eligibility rules to permit more nonprofits to participate. Under the new regulations, organizations with more than 500 employees operating at multiple locations (with no more than 500 employees at a single location) are now eligible to apply. In addition, organizations can now receive both a PPP loan and a Shuttered Venue Operators Grant. Since the SBA will stop accepting PPP applications on May 31, 2021, it is important to act quickly to ensure loan applications are submitted before the deadline.
• Economic Injury Disaster Loans (EIDL) – An additional $15B allocated to the Targeted EIDL Advance program, which provides nonprofit applicants a non-recoverable advance of $10,000. $5B is allocated to assist those that have suffered a loss of 50% or greater and have less than ten employees. Remember, these loans are designed to help organizations that suffered substantial economic injury from the pandemic.
• Unemployment Reimbursement Extension for Self-Insured Employers – An extension of federal reimbursement for unemployment costs incurred by nonprofit employers that elected to make reimbursing payments in lieu of payment of unemployment taxes.  The extension is through September 6, 2021, and increases the federal coverage of unemployment costs of reimbursing nonprofits from 50% to 75%.
• Employee Retention Credit (ERC) – An expansion of the benefits organizations can receive from the ERC starting on July 1, 2021, through year-end. This includes an extension of the ability to determine eligibility by allowing prior quarter gross receipts for purposes of determining if they were less than 80% of gross receipts when compared against the same period in 2019. It also permits Recovery Start-Up Businesses (RSB) to claim the credit (maximum $50,000 per quarter) if they began the business after February 15, 2020, and did not have more than $1M in average annual gross receipts.  Changes were made in regards to Severely Financially Distressed Employers (SFDE), or those with a gross receipts reduction of 90%. These employers are allowed to claim the credit for all employees regardless of the size of the employer and the number of employees. Finally, the ARPA added a five-year statute to limitations for the IRS to review the credit claim. Learn more about the ERC and if your organization qualifies for the tax credit.
• Paid Sick Leave Credit – There was also an extension of the Paid Sick Leave credit initially implemented under the Families First Coronavirus Response Act, but it is no longer mandatory. For organizations that voluntarily provide leave, the ARPA has increased the annual credit amount from $10,000 to $12,000 per employee and is expanded to include leave needed to obtain or recover from a COVID-19 vaccination.

Essential Program Funding

The ARPA included several funding provisions that indirectly benefit organizations serving various cultural, educational, social, and healthcare needs. This includes $3.8B for mental health services, $39B for childcare services, $350M for child abuse prevention, $5B to help communities with homelessness, and $39.6B to colleges and universities to bolster student funding programs and classroom modifications, COVID-19 testing, and vaccine distribution.

The changes outlined in the ARPA provide a variety of funding and tax relief opportunities for New Jersey and Pennsylvania-area nonprofits. Since many of the benefits are time-sensitive, it is essential to assess your situation and determine the next steps.

Contact Us

If you have questions about the information outlined above or need assistance with a tax or accounting issue, Klatzkin can help. For additional information, click here to contact us. We look forward to speaking with you soon.

©2021 Klatzkin & Company LLP. The above represents our best understanding and interpretation of the material covered as of this post’s date and does not constitute accounting, tax, or financial advice. Please consult your advisor concerning your specific situation.