When we shared our first article on the CARES stimulus package, we received a ton of questions about its broad implications for private schools.
This is a brand new federal aid package and the rollout is immediate, so the details are changing frequently. We hosted a webinar on Friday, April 3, with Dean Quiambao, CPA, Relationship Partner, and Matthew Petroski, Tax Director, from Armanino, one of the top 25 independent accounting and business consulting firms in the U.S.
They answered many questions about the package and how it impacts schools, so we wanted to share their answers below.
What is the goal of the loan program?
This program is designed for businesses to keep their employees on their payroll for the eight-week period before June 30, hoping that the immediate danger will have subsided by then.
Does our school qualify for the loan program?
For-profit and 501(c)(3) organizations qualify, as long as there are 500 or fewer paid employees (full-time, part-time, and by any other designation). It is also available for religiously affiliated schools. Since the webinar, additional SBA guidance has generally exempted the affiliation rules for any relationship of any church, faith-based organization, or entity that is based on a sincere religious teaching or belief. That said, this could be considered federal financial assistance, but there isn’t clear guidance on what this means when it comes to A-133 audits.
How does the loan program work?
Businesses must use the loan for the designated purposes: payroll, health insurance premiums, facilities costs, and debt service. You must certify that you will use the funds for the intended purpose—75% or more toward payroll costs—but that hasn’t been officially shared yet. Some banks may require projections.
How does our school demonstrate “significant impact” from COVID-19?
During the application process, you must certify under penalty of perjury that your school needs this money for continued operations. That doesn’t necessarily mean you will shut down without the money tomorrow—but you should be able to demonstrate the impact caused by the coronavirus.
Therefore, consider documenting spring fundraisers that were cancelled, activities that won’t happen and therefore won’t produce auxiliary income, and the like. You can also show decreased enrollment numbers or increased financial aid requests. Again, the guidance isn’t clear so prepare everything you can.
While there isn’t clear guidance on what documentation is needed, the application says you must prepare to submit such documentation as is necessary to establish eligibility, such as payroll processor records, payroll tax filings, or Form 1099-MISC. Each bank will be different and may handle documentation differently.
Who should sign our application?
An officer authorized to sign on the organization's behalf. This is probably your Business Officer, School Head, or Board Chair.
Tune in to live webinars every Wednesday during the school year to get specific, research-backed insight you can immediately apply at your school.
What is the time period for which our school can use the loan?
From the date you receive it until June 30.
When will we receive the funds?
There is no definitive timeline, but some applicants have already received their loan funds. The government has 15 days to register the loan, but it could take a few weeks.
How does the loan forgiveness aspect work?
The actual amount of loan forgiveness depends, in part, on the total amount of payroll costs (must be 75% of the expenditures), payments of interest on mortgage obligations incurred, rent, and utility payments over the eight-week period following the date of the loan.
Additional limitations may also apply. The amount of the loan forgiveness will be reduced if the number of FTEs decreases in the covered period compared to a test period. The amount eligible to be forgiven may also be limited if salaries decrease by more than 25% for employee wages. However, employers have until June 30, 2020, to restore employment and salary levels for any decreases that occurred from February 15, 2020, through April 26, 2020.
What happens if employees apply for unemployment? Some of our employees would benefit more from the extra $600 per week. What are the implications of keeping some on payroll and laying others off?
There’s no definitive answer here. Our best recommendation is to look at what’s best for your school and your employees. If certain positions can’t work from home, you might consider laying them off, especially if you determine they will be better off on unemployment. You can rehire them by June 30 and that won’t count against you when it comes to the loan forgiveness.
Can you apply for the payroll protection program and the economic injury disaster loan?
Yes. The caveat is it can't be for the same expenses for the same time period.
What changes have been made for charitable donations?
For small donations, individuals can now get an above-the-line deduction of up to $300. For larger donations, donors can now deduct 100% of their AGI for cash contribution. These are important to know as you continue to work with your donors and strengthen your relationships.
We know there are many more questions about this program and we’re here to help. Submit your questions through our contact form and we’ll get back to you as soon as possible.
