The latest Coronavirus stimulus package, the CARES Act, creates two ways to help nonprofits during the coronavirus pandemic. It implements a temporary Universal Charitable Deduction to encourage charitable gifts and it provides nonprofits with access to emergency loans.
The temporary Universal Charitable Deduction establishes a new above-the-line deduction that applies to all taxpayers for total charitable contributions of up to $300. The incentive applies to donations made to nonprofits this year and can be claimed on personal income tax filings next year. The measure also lifts an existing cap on annual contributions for itemizers of 60 percent of adjusted gross income to 100 percent. For corporations, the same cap was increased from 10 percent to 25 percent.
These changes will hopefully encourage more Americans to support nonprofits across the country facing financial strain due to the COVID-19 pandemic.
Nonprofit advocates have been pushing for a Universal Charitable Deduction since the Tax Cuts and Jobs Act of 2017 was passed, because it reduced the incentive for many Americans to itemize charitable donations on their personal income taxes. The creation of a Universal Charitable Deduction would encourage and reward the largest number of people to engage in charitable giving.
The CARES Act also included other ways help 501(c)(3) nonprofits seek financial relief. Most notably, nonprofits are now eligible to apply for Emergency Small Business Loans of up to $10 million. U.S. Sen Tim Scott’s office has provided guidance to South Carolina nonprofits about this opportunity in a Frequently Asked Questions Document. More helpful information can be found in this Nonprofit Guide to the CARES Act.