Nonprofit Libraries and the CARES Act

The CARES Act contains a number of provisions for 501c3s that can be used by nonprofit libraries to pay staff, cover costs, and weather the immediate financial crisis due to Coronavirus economic slowdowns.

The CARES Act contains several new financial supports that could be used by 501(c)3 nonprofit libraries in the face of the Coronavirus economic slowdown. These new provisions are administered by the SBA and are intended to help nonprofits (as corporations) make payroll, pay the rent or mortgage, and meet other obligations for 2.5 months and up to $10 million. Key programs are structured as "forgivable loans" which turn into grants if certain criteria are met. They focus on supporting the non-profit sector, so libraries with a nonprofit corporate structure would be wise to understand the programs and access this federal funding if needed. 

Libraries across the country are going to face significant financial challenges because of the Coronavirus economic slowdown. The way that any specific library will experience these challenges - and to what extent - will depend a great deal on the legal structure of that library and the type of taxes that fund its operations. While the CARES Act (passed March 27) contains a number of provisions for state and local government, 501c3 nonprofit libraries have a specific set of financial reliefs that don't come through those government focused provisions. Nonprofit libraries are eligible for financial relief not because they are libraries but because they are nonprofit corporations. 

According to the 2017 IMLS dataset, there are 1,340 libraries whose legal structure is as a "nonprofit". If they are all registered as 501(c)3 organizations with the IRS, then they are potentially eligible for financial help through Small Business Administration programs that have been enacted or expanded in the CARES Act. The two most significant programs for nonprofit organizations are the Paycheck Protection Program and the Expanded Economic Injury Disaster Loan and Emergency Grants Program. Both are administered by the SBA (Small Business Administration) and are intended to temporarily fund operations and payrolls to keep people employed at the nonprofits. Please consult the SBA website for current guidelines and forms

The Paycheck Protection Program is a "forgivable" loan to a nonprofit organization to help cover payroll and other operating expenses for 2.5 months. "Payroll" can be to FTE, PTE or contractors. Beyond payroll costs, this forgivable loan can be used for mortgage interest payments or rent, utilities, and interest on prior debt. Nonprofits under 500 employees can access up to $10 million through this program. It is "forgivable" and converts to an SBA grant if certain conditions, such as continued employment and other activities, are met.

The other smaller nonprofit library program is the Expanded Economic Injury Disaster Loan and Emergency Grant Program. It provides a much smaller amount of funding per nonprofit $10k but it does so very quickly (3 days upon approval). The loan or grant terms are specific to the size of the non-profit and clear instructions are still pending from the SBA as of this writing. But in general, these Emergency funds can be used for expenses like paid sick leave, payroll, and meeting increased costs due to disrupted supply chain, mortgage, or debt services. If a nonprofit library has an immediate need this could be a good mechanism to bring in needed funding to continue operations.

Aside from those two programs, large nonprofits with more than 500 employees can potentially use the Mid-Size Business Loan Program. Under the CARES Act, nonprofit organizations are also eligible for an "Employee Retention Tax Credit" and have access to new provisions in the way that Unemployment Insurance is funded by the federal government. However, because the Payroll Protection Program, above, is intended to help keep people employed some of these tax credit programs are mutually exclusive and cannot be combined. Both the Payroll Protection Program and the Emergency Loans / Grant programs are rapidly being deployed by the SBA. While there is nothing in our review of the available guidance that should disqualify libraries that are legally structured as nonprofit corporations in their state and registered with the IRS as a 501(c)3 organization from making an application, the rules are still being written.

The EveryLibary Institute, our companion 501(c)3 organization, is a member of Forefront and the National Council of Non-Profits. These organizations lobbied extensively for these new nonprofit provisions in the CARES Act. The National Council of Non-Profits has a comprehensive guide to these new provisions at https://www.councilofnonprofits.org/trends-policy-issues/loans-available-nonprofits-the-cares-act-public-law-116-132 along with a great webinar on the topic to orient leaders in the nonprofit sector to these key benefits (see the March 31st webinar links at https://www.councilofnonprofits.org/nonprofits-and-coronavirus-covid-19). Likewise, Inside Charity magazine has an overview of additional nonprofit-focused financial relief programs at https://insidecharity.org/2020/03/28/cares-act-for-nonprofits/.

As an industry, we may not think about nonprofit libraries as the corporations they are. The EveryLibrary Institute is co-hosting a webinar next week for library-related nonprofit organizations with our colleagues from the Friends of the Dallas Public Library to provide advice and guidance on the "business side" of running a mission-driven library aligned nonprofit in the current crisis. They will cover topics like financial issues, volunteer and donor relations, communications, and working with philanthropy as well as an overview of the CARES Act provisions then as well. Please RSVP now to join them on Tuesday, April 7th at 3pm EDT or to get immediate on-demand access anytime thereafter. 


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