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Nonprofit Alert: House Passes the HEROES Act

5/19/20 – Bryan Pautsch

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Allows All 501(c) Organizations to Participate in the Paycheck Protection Program and Other Nonprofit Provisions

The U.S. House of Representatives passed the Health and Economic Recovery Omnibus Emergency Solutions Act (H.R. 6800), or the “HEROES Act,” by a vote of 208-199, last Friday May 15, 2020. The HEROES Act was introduced earlier last week by House Democratic Leadership in an effort to start negotiations on the next COVID-19 pandemic relief effort. The Senate is not expected to consider the bill.

Although the HEROES Act is not anticipated to pass as written, it is important to know the potential new provisions that will be debated.

The HEROES Act is over 1,800 pages and changes some of the provisions of the CARES Act including the Paycheck Protection Program (“PPP”) provisions. Below are some of the key changes:

  • The HEROES Act suggests all Section 501(c) organizations will be eligible to participate in the PPP. The CARES Act limited the eligibility to only Section 501(c)(3) and 501(c)(19) organizations.
  • The HEROES Act allows for deductions for expenses paid or incurred with proceeds from the PPP loans that are ultimately forgiven. The CARES Act provides the forgiven amount isn’t required to be added to taxable income. The IRS has recently stated that companies receiving PPP loan forgiveness cannot deduct the related costs used in calculating the forgiven amount.
  • The HEROES Act eliminates the current CARES Act provision that no more than 25 percent of the forgiven loan amount may be used to pay for non-payroll costs and allows payments of interest on pre-existing debt.
  • The HEROES Act expands the covered period from 8 weeks to the earlier of 24 weeks or December 31, 2020.
  • The HEROES Act increases the maturity to five years from two years and the deferment of principal and interest for one year from six months.
  • The HEROES Act sets aside 25% of the existing PPP funds for nonprofits.
    • 50% for nonprofits with 500 or fewer employees
    • 50% for nonprofits with more than 500 employees
    • The HEROES Act allows nonprofits receiving PPP loan forgiveness to delay payment of the 2020 employer portion of payroll taxes into 2021 and 2022.
    • The HEROES Act streamlines the provisions of Charities who self-insured their state unemployment tax responsibilities. Charities can waive 50% of the amount owed rather than paying the entire liability and seeking reimbursement.
    • The HEROES Act enhances the Employee Retention Credit to a maximum of 80% of $15,000 of wages for up to 3 quarters; increasing the credit from $5,000 to $36,000 per employee.
    • The HEROES Act provides an additional credit of 50% refundable payroll tax credit for qualified fixed costs, including rent, mortgage and utility payments.

For any questions related to the HEROES Act, or any COVID-19 related legislation, please contact your VonLehman at bpautsch@vlcpa.com or 800.887.0437. Our team will continues to monitor the new provisions, and will provide updates accordingly.