Nonprofit organizations are eligible for the employee retention credit even if they work with a PEO. The CARES Act (ERC) presents a unique opportunity for organizations to receive tax credits, as it is refundable and deducted from payroll taxes. This is one of the largest credits available to business owners, offering thousands of dollars in credits per employee with qualifying salaries. Examples of non-profit organizations that have already taken advantage of the credit are hospitals, schools, museums, performing arts centers, and churches.
The ERC was first authorized as part of the CARES Act, and any organization that received funding under the PPP was prohibited by law from applying for an ERC. To avoid a mass unemployment crisis and provide assistance to employers, the federal government included an employee retention tax credit (ERC) in the Coronavirus Aid, Relief and Economic Security Act (the CARES Act). Tax-exempt organizations that suffer a total or partial suspension of their operations due to the order of a corresponding government authority to limit trade, travel or group meetings due to COVID-19 may qualify as eligible employers for the purposes of the ERC. Eligible organizations that are considered “large employers” can only apply for the ERC for salaries paid to employees for the time that employees do not provide services.
The ERC has already provided millions of dollars to a wide range of employers, including nonprofit organizations and churches. To learn more about the employee retention credit and to receive information on how to qualify for this credit, contact your Cherry Bekaert advisor or Martin Karamon, tax director and leader of Cherry Bekaert's ERC services team. This credit can be requested along with other aid options, such as the Check Protection Program (PPP) and the Enclosed Facility Operators Grant (SVOG). Since tax-exempt organizations are considered to be engaged in a trade or business in relation to their entire operations, companies that kept their employees on the payroll during the pandemic still have the opportunity to access a significant reduction in cash through a refundable employee payroll tax credit, the employee retention credit (ERC).
Whether or not Congress replenishes other forms of pandemic related aid for nonprofit organizations and churches, the ERC is still available now.