FINANCIAL ASSISTANCE FOR NOT-FOR-PROFIT ORGANIZATIONS IN NEW YORK CITY

By Pierre Ciric on April 9, 2020

In a previous article we discussed various financial assistance programs available to small businesses in New York City due to the COVID-19 pandemic. This article focuses on the financial assistance programs available to not-for-profit organizations in New York City as a result of the pandemic.

FEDERAL ASSISTANCE

The Coronavirus Preparedness and Response Supplemental Appropriations (CARES) Act, which was signed by the President on March 6, 2020, expanded access to federal loans and grants through the U.S. Small Business Administration (SBA). However, these program funds are being quickly exhausted. Congress is currently evaluating additional funding to further finance the programs.

1. SBA Economic Injury Disaster Loan Program

The CARES Act expanded the Economic Injury Disaster Loan (EIDL) Program for not-for-profit organizations. EIDLs are only available to “private nonprofits,” but the term is not defined in the statutory provisions.

While not part of the CARES Act, the U.S. Senate Committee on Small Business & Entrepreneurship came out with a guide, which includes a statement as to the types of not-for-profit organizations that qualify for the EIDL program. According to the guide, an EIDL is not available to not-for-profit organizations that are principally engaged in religious, political or lobbying activities. Further, the Senate committee guide qualifications include the requirement that the not-for-profit either be exempted from certain sections of the federal tax law by the IRS in a ruling letter, or that the not-for-profit provides satisfactory evidence from its state of residence that it is a not-for-profit organized or doing business under that state’s law.

However, the SBA came out with its own guidance contradicting the Senate committee. The SBA permits churches (including temples, mosques, synagogues, and other houses of worship), integrated auxiliaries of churches, and conventions or associations of churches to qualify for EIDLs provided they meet all other EIDL requirements and the requirements of Internal Revenue Code §501(c)(3). SBA loans constitute federal financial assistance and carry with them application of certain nondiscrimination requirements. More on these restrictions can be found here.

Besides these requirements, not-for-profit organizations must have been in operation before January 31, 2020, and meet the SBA size requirements. Size standards are measured by the average annual receipts or the average number of employees. For example, a museum must have average annual receipts of $30 million or below to qualify. There is no maximum number of employees for this type of organization to qualify. To see if your organization qualifies, view the SBA’s size standards here.

If your organization qualifies, low-interest loans for up to $2 million are available to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the pandemic’s impact. The actual amount of each loan is limited to the economic injury, as determined by SBA.

The interest rate is determined by formulas set under the law, with the maximum interest rate for loans to not-for-profits set at 2.75%. The law authorized loan terms up to a maximum of 30 years. SBA determines the loan terms based on the financial condition of each borrower.

For more information on EIDLs, and to apply, click here.

In addition, not-for-profit organizations can apply for an EIDL emergency grant of up to $10,000. Unlike the loans, the grants do not have to be repaid if used to provide paid sick leave to employees unable to work due to COVID-19, maintain payroll to retain employees during business disruptions or substantial slowdowns, meeting increased costs to obtain materials due to interrupted supply chains, rent or mortgage payments, and repayment of obligations that cannot be met due to revenue loss. These funds will be made available within three days of a successful application, and this advance will not have to be repaid. It appears this grant is available to not-for-profit organizations without employees, but the SBA has released no specific statement or guidance on this matter.

For more information and to apply for this emergency grant, click here.

2. SBA Paycheck Protection Program

Under the CARES Act, the SBA was granted the authority to distribute up to $359 billion to incentivize small businesses and not-for-profit organizations to keep their workers on payroll under the Paycheck Protection Program (PPP).

PPP loans are only available to not-for-profits designated under §501(c)(3) or §501(c)(19) (veterans’ organizations) having no more than 500 employees. The method for counting employees includes individuals employed on a full-time, part-time, or other basis. Besides these requirements, a not-for-profit must have been in operation on February 15, 2020, and paid employees or independent contractors.

As with the EIDL requirements, the SBA has come out with guidance that religious institutions qualify for PPP loans as long as they meet all other PPP requirements and the requirements of Internal Revenue Code §501(c)(3). As mentioned above, SBA loans constitute federal financial assistance and carry with them application of certain nondiscrimination requirements. More on these restrictions can be found here.

If your organization qualifies, the loan is for up to 2.5 times the average total monthly payroll costs for the one-year period prior to the date of application, but cannot exceed $10 million in total. The loans may be used for payroll costs, mortgage interest payments, rent, utilities, and interest on prior debt during the 8-week period following loan origination.

Employers that maintain employment for the 8 weeks after the loan origination, or rehire employees by June 30, will have loans forgiven in whole or in part, essentially turning the loan into a grant. Since this loan is based on payroll costs, it appears it is only available to not-for-profit organizations with employees.

For more information, and to apply, click here.

3. Other SBA Programs

The SBA offers a variety of other assistance, such as mid-size organization loans and guarantees as part of the industry stabilization fund program. This program is available to not-for-profit organizations having between 500 to 10,000 employees. For more information on this, and other assistance, click here.

NEW YORK CITY PHILANTHROPIC ASSISTANCE

Below are just some of the options available to not-for-profit organizations located in New York City. This list is not exhaustive and only includes loans and grants specifically created as a response to the COVID-19 pandemic.

1. New York Community Trust/Nonprofit Finance Fund

The NYC COVID-19 Response & Impact Fund was created specifically by The New York Community Trust to aid not-for-profits struggling due to the effects of the COVID-19 pandemic. The fund offers both grants and loans to NYC-based organizations.

The New York Community Trust’s loans are given through the Nonprofit Finance Fund. Your organization is eligible to apply for a loan if you:

Are designated as a tax-exempt not-for-profit under §501(c)(3) of the Federal tax code
Are based in New York City
Have annual non-governmental revenue of $20 million or less
Receive New York City or New York State government funding
Have a track record of delivering effective programs and services equitably for New York City residents.

The loans are geared toward not-for-profits with an annual revenue of at least $750,000.

You can learn more, and apply for a loan, here.

The New York Community Trust’s grants will cover a twelve-week period, and are expected to range between $10,000 and $250,000, and have the same eligibility requirements as the loans being offered.

Grants are applied for by responding to a Request for Proposal (RFP). The RFP for Arts & Culture Organizations gives priority to small and mid-sized arts and cultural organizations, particularly those working in underserved communities. The RFP for Human Services Organizations gives priority to direct service providers, particularly those supporting essential healthcare, food delivery, and education services.

You can learn more, and apply for a grant, here.

2. Robin Hood

Robin Hood is currently accepting applications for its COVID-19 Relief Fund. They will only make grants to not for-profits designated as a tax-exempt under §501(c)(3) of the Federal tax code providing services in New York City. The initial grants are expected to last three months in duration and will average $45,000.

Robin Hood lists the following among the priorities for its COVID-19 grant program:

Service to vulnerable populations, including low-income children and families, low-wage workers, homeless individuals and families, and immigrant communities
Expanding emergency assistance services (e.g. food, shelter, and other basic needs)
Organizations at risk to gaps in government contracts due to interruption of services
Unexpected expenses incurred due to the pandemic (e.g. overtime pay, technology)
Not-for-profits with a track record in administering emergency cash grants to individuals and families.

You can learn more, and apply for a grant, here.

By: Mackenzie E. Roach, Esq.
Of Counsel, the Ciric Law Firm, PLLC

This material is for general information purposes only and should not be construed as legal advice or any other advice on any specific facts or circumstances. No one should act or refrain from acting based upon any information herein without seeking professional legal advice. The Ciric Law Firm, PLLC makes no warranties, representations, or claims of any kind concerning the content herein. The Ciric Law Firm, PLLC and the contributing presenters or authors expressly disclaim all liability to any person in respect of the consequences of anything done or not done in reliance upon the use of contents included herein.