ERC for Churches and Non-Profits
Have the effects of COVID-19 been felt by your church or nonprofit organization? COVID-19 had a tremendous impact on millions of churches and non-profits throughout the world, but especially in the US. If this applies to you, you are eligible for $26,000 per employee. The Employee Retention Credit (“ERC”), a cash refund provided by a payroll tax, is available to churches and other non-profit organizations if they:
- saw significant decreases in revenue
- were impacted by government regulations limiting the number of people who could attend services and other events
ERC Qualifications for Churches and Non-Profit Organizations
Eligible employers may include tax-exempt religious or non-profit organizations whose operations have been completely or partially stopped as a result of government directives to limit commerce, travel, or group gatherings because of COVID-19. The employer must provide qualified wages while the government regulations are in effect.
If the church’s or charitable organization’s gross receipts are more than 20% lower than those in the corresponding calendar quarter of 2019, it will be regarded as an eligible employer in the first, second, and third quarters of 2021. The requirements for 2020 are harder to meet because a decrease in gross receipts must be more than 50%.
The greatest benefits are available to religious and charitable organizations with 100 or fewer full-time employees that meet the requirements for qualified employers under the Government Mandate Test or the Gross Receipts Test for the 2020 ERC. For the 2021 ERCs, this requirement was loosened by raising the minimum number of full-time employees to 500 or fewer.
Credit Rate
- 2020 Credit: Each employee will receive 50% of their qualified pay, which includes any employer-paid healthcare benefits. $10,000 is the maximum eligible pay per employee.
- 2021 Credit: For the first, second, and third calendar quarters, each employee was entitled to receive 70% of their quarterly qualified wages, which included any healthcare benefits given by the company. Each employee may receive up to $10,000 in eligible pay per quarter.
PPP Loan Interplay
The ERC is also available to churches or nonprofit organizations that received Paycheck Protection Program (“PPP”) loans. When the ERC was initially established as a component of the CARES Act, no organization that had received funds through PPP was legally permitted to submit an ERC claim. The Consolidated Appropriations Act, which expanded and strengthened the ERC, later abolished the statutory restriction against PPP customers receiving ERC benefits in December 2020.
Religious organizations and nonprofits alike ought to think about revisiting their ERC eligibility. Due to the huge number of government restrictions prohibiting routine activity in 2020 and 2021, several companies are obtaining sizable cash benefits in addition to the PPP benefits previously earned.
