COVID-19 Archives - Urish Popeck

Enhancing Your Nonprofit Organization In A New World Norm

Posted on July 2021July 2021 by info

By Vivian Gant

During the height of the COVID-19 pandemic, the future was still very uncertain. Many nonprofits found themselves applying for government assistance, such as Paycheck Protection Program (PPP) loans, as they braced for continued negative financial impacts. Although the road ahead is still not completely clear, organizations are now looking to the future and considering how to ensure they are set up for success in both the near and long term.

For some organizations, this includes facing a very different challenge: considering how to use a surplus of funds, many of which came from an increase in contributions amid the pandemic as donors looked to support nonprofits’ missions. This leads to a completely different set of questions about how to maximize this advantageous position. The post-pandemic landscape is an opportune time for nonprofits to use these extra funds to re-invest not only in their organization but also their people and, ultimately, their mission.

Although there are a number of ways for nonprofit organizations to reinvest for growth, they should consider focusing on the following:

Enhance Cybersecurity

With cyberattacks on the rise, it has never been more critical for nonprofits to ensure they – and their information – are protected. Nonprofits have access to sensitive donor data, which can make them a target. Organizations should consult with experts to study their current security environment, locate vulnerabilities and make recommendations for improvements. These organizations can then upgrade their current security in order to reduce the chances of an attack, which can lead to diminished trust with donors and stakeholders.

Strengthen Tech Capabilities
As the pandemic taught us, technology helps us stay connected. Nonprofits can use this time to reassess the tools they have in place, those they added amid the pandemic and those they need for future success. Investing in tools that will allow the organization to operate in a hybrid work model, communicate with donors when they can’t be face to face and streamline internal operations will foster better communication and strengthen relationships. The connected workplace that became commonplace amid COVID-19 is not likely to go away anytime soon – in fact, nonprofit leaders should only expect to see an increase in digital tools moving forward. Investing soon and doing so strategically will ensure nonprofits are not left behind in a technology-first future.

Improve Internal Infrastructure

Enterprise resource planning (ERP) systems have come a long way. Nonprofits can reinvest in the organization by updating their current ERP systems, which can be used to manage day-to-day activities and streamline their internal processes. Upgrading to the latest ERP technology can assist not only with fundraising activities, but also with event management, online payment processing for donors, marketing efforts and more. ERP systems can typically also automate back-office functions, which can help to eliminate redundancies in the organization’s overall operations, helping it to stay focused on its mission.

Establish a Board-Designated Endowment

Another way nonprofits can utilize excess funds is to set up a board-designated endowment. This allows nonprofit boards to set aside funds specifically for board initiatives.

These funds can be invested with a trusted financial institution. To do so, the board should create an investment policy that outlines how the funds are to be invested and establishes what these funds are to be used for – which should align with the organization’s mission.

Invest in Human Capital

The pandemic was a trying time for employees. Compensation increases were likely limited during 2020 as nonprofits attempted to cut costs and save for the unknown, and a lack of in-person interaction left little room for team bonding or training opportunities. Investing in programs or events that promote team bonding or providing opportunities for ongoing education can help make employees feel valued and build trust and goodwill between leadership and staff.

In these unique times, nonprofits should be creative in ways that will help not only their mission but also their workforce. Financial decisions made by nonprofits during this time will likely have lasting effects for years to come, so thinking ahead about how to reinvest in your organization is key.

Expect Your Stimulus Payment As Soon As This Week

Posted on March 2021 by info

On March 10, 2021, the U.S. House of Representatives passed a modified version of the American Rescue Plan Act of 2021 (ARP bill), President Biden’s $1.9 trillion COVID-19 relief package aimed at stabilizing the economy, providing needed relief to individuals and small businesses, and improving and accelerating the administration of coronavirus vaccines and testing. The House was required to re-vote on the bill after the House version passed on February 27 was modified by the Senate on March 6. The relief package, which is Biden’s first major legislative initiative, is one of the largest in U.S. history and follows on the heels of the Trump Administration’s $900 billion COVID relief package enacted in December 2020 (Consolidated Appropriations Act, 2021 (CAA)).

The House-approved bill will now be sent to President Biden for his signature, and it is expected that the legislation will be enacted before the current supplemental federal unemployment benefits expire on March 14.

The most significant measures included in the Act are the following:

A third round of stimulus payments to individuals and their dependents
Extension of enhanced supplemental federal unemployment benefits through September 2021
Expansion of the child tax credit and child and dependent care credit
Extension of the Employee Retention Credit (ERC)
$7.25 billion in aid to small businesses, including for the Paycheck Protection Program (PPP)
Increased federal subsidies for COBRA coverage
Over $360 billion in aid directed to states, cities, U.S. territories and tribal governments, and the Senate added $10 billion for critical infrastructure, including broadband internet, and $8.5 billion for rural hospitals
$160 billion earmarked for vaccine and testing programs to improve capacity and help curb the spread of COVID-19; the plan includes funds to create a national vaccine distribution program that would offer free shots to all U.S. residents regardless of immigration status
Other measures that address nutritional assistance, housing aid and funds for schools.

The original House version of the bill included a plan to gradually increase the federal minimum wage to $15/hour. This minimum wage provision was stripped from the Senate version following a ruling by the Senate parliamentarian that the minimum wage provision did not conform to the budget reconciliation rules.

Measures Affecting Individuals

The bill includes several measures to help individuals who have been adversely affected by the impact of the coronavirus pandemic on the economy. The additional round of stimulus checks, in conjunction with supplemental federal unemployment benefits, should provide some measure of relief to individuals. A temporarily enhanced child tax credit offers another area of assistance.

Cash Payments

Immediate cash relief will be granted to individuals and families in the form of new stimulus payments. While a $1,400 stimulus check (compared to the $600 under the CAA) will be paid to qualifying individuals and their dependents, the final version of the bill was narrowed by the Senate as a compromise to accommodate concerns of certain members and to secure votes, with the result that fewer taxpayers will receive a stimulus payment than was the case with the previous stimulus checks. The relief payments are expected to start shortly after President Biden signs the bill.

Under the final bill, individuals earning up to $75,000, single parents earning $112,500 and couples earning up to $150,000 are eligible for the $1,400 check, with the amount decreasing for individuals making between $75,000 and $80,000. Individuals earning more than $80,000, single parents earning $120,000 and couples earning more than $160,000 are disqualified from receiving stimulus checks. The House version of the bill would have allowed single taxpayers earning up to $100,000, single parents earning up to $150,000 and couples earning up to $200,000 to have qualified for the $1,400 payment.

An additional $1,400 check will be sent to each dependent of the taxpayer, including adult dependents (e.g., college students, parents). The previous two stimulus payments limited the additional checks to dependent children 16 years old or younger.

The amount of the stimulus check will be based on information in the taxpayer’s 2020 tax return if it has been filed and processed; otherwise, the 2019 return will be used. The amount of the check will not be taxable income for the recipient.

Extended Unemployment Benefits

The current weekly federal unemployment benefits (which apply in addition to any state unemployment benefits) of $300 will be extended through September 6, 2021; the Senate cut back the $400 that would have applied through August 29 under the House version. Additionally, the first $10,200 of unemployment insurance received in 2020 would be nontaxable income for workers in households with income up to $150,000.

The extension also covers the self-employed and individual contractors (e.g., gig workers) who typically are not entitled to unemployment benefits.

Child Tax Credit

The child tax credit will be expanded considerably for 2021 to help low- and middle-income taxpayers (many of the same individuals who will be eligible for stimulus checks), and the credit will be refundable.

The amount of the credit will increase from the current $2,000 (for children under 17) to $3,000 per eligible child ($3,600 for a child under age six), and the $3,000 will be available for children that are 17 years old. The increase in the maximum amount will phase out for heads of households earning $112,500 ($150,000 for couples).

Because the enhanced child tax credit will be fully refundable, eligible taxpayers will receive a check for any credit amount not used to offset the individual’s federal income tax liability. Part of the credit will be paid in advance by the IRS during the period July through December 2021 so that taxpayers do not have to wait until they file their tax returns for 2021.

Child and Dependent Care Tax Credit

The Child and Dependent Care Tax Credit will be expanded for 2021 to cover up to 50% of qualifying childcare expenses up to $4,000 for one child and $8,000 for two or more children for 2021 (currently the credit is up to 35% of $3,000 for one child or 35% of $6,000 for two or more children). The credit will be refundable so that families with a low tax liability will be able to benefit; the refund will be fully available to families earning less than $125,000 and partially available for those earning between $125,000 and $400,000.

Earned Income Tax Credit (EITC)

The EITC will be expanded for 2021 to ensure that it is available to low paid workers who do not have any children in the home. The maximum credit will increase from about $530 to about $1,500, and the income cap to qualify for the EITC will go from about $16,000 to about $21,000. Further, the EITC will be available to individuals age 19-24 who are not full-time students and those over 65.

Measures Affecting Businesses

The ARP bill contains provisions designed to assist small businesses, in particular.

Small Businesses and Paycheck Protection Program

An additional $7.25 billion is allocated to assist small businesses and for the Paycheck Protection Program (PPP) forgiven loans. The current eligibility rules remain unchanged for small businesses wishing to participate in the PPP, although there is a provision that will make more non-profit organizations eligible for a PPP loan if certain requirements are met.

The PPP—which was originally created as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) enacted on March 27, 2020—is designed to help small businesses that have suffered from the disruptions and shutdowns related to the coronavirus pandemic and keep them operational by granting federally guaranteed loans to be used to retain staff at pre-COVID levels. A PPP loan may be forgiven in whole or in part if certain requirements are met.

The Economic Aid Act, which is part of the CAA, had earmarked an additional $284 billion for PPP loans, with specific set asides for eligible borrowers with no more than 10 employees or for loans of $250,000 or less to eligible borrowers in low- or moderate-income neighborhoods. The program ends the earlier of March 31, 2021 (the application period under the PPP is not extended under the ARP bill) or the exhaustion of the funds—additional funds are now allocated under the ARP bill.

It should be noted that the Biden Administration recently designated the 14-day period between February 24 and March 10, 2010 for businesses and nonprofits with fewer than 20 employees to apply for a PPP loan.

Employee Retention Credit

The ERC, originally introduced under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and enhanced under the CAA, aims to encourage employers (including tax-exempt entities) to keep employees on their payroll and continue providing health benefits during the COVID-19 pandemic. The ERC is a refundable payroll tax credit for wages paid and health coverage provided by an employer whose operations were either fully or partially suspended due to a COVID-19-related governmental order or that experienced a significant reduction in gross receipts.

The CAA extended the eligibility period of the ERC to June 30, 2021, increased the ERC rate from 50% to 70% of qualified wages and increased the limit on per-employee wages from $10,000 for the year to $10,000 per quarter ($50,000 per quarter for start-up businesses). The new bill extends the ERC for another six months to December 31, 2021 under the same terms as provided in the CAA.

Other Measures

Employers offering COVID-19-related paid medical leave to their employees would be eligible for an expanded tax credit through September 30, 2021.
The bill increases the proposed subsidies of insurance premiums for individual workers eligible for COBRA after they were laid off or had their hours reduced to 100% (85% under the version of the bill passed by the House) through September 30, 2021.
Funds are allocated for targeted Economic Injury Disaster Loan advance payments, as well as for particularly hard-hit industries such as restaurants, bars, and other eligible food and drink providers; shuttered venue operators; and the airline industry.
Effective for taxable years beginning after December 20, 2020, the bill repeals IRC section 864(f), which allows U.S. affiliated groups to elect to allocate interest on a worldwide basis. This provision was enacted as part of the American Jobs Creation Act of 2004, and has been deferred several times. The provision is relevant in computing the foreign tax credit limitation under IRC section 904.
The bill does not cancel student debt but there is a provision that would make student loan forgiveness passed between December 31, 2020, and January 1, 2026, tax-free (normally the cancellation of debt is considered taxable income).
A deduction will be disallowed for compensation that exceeds $1 million for the highest paid employees (e.g., the CFO, CEO, etc.) for taxable years beginning after December 31, 2026.
The limitation on excess business losses of noncorporate taxpayers enacted as part of the Tax Cuts and Jobs Act will be extended by one year through 2026.
The threshold for third-party payment processors to report information to the IRS is lowered substantially. Specifically, IRC section 6050W(e) is revised so that the current threshold of $200,000 for at least 200 transactions is reduced to $600. As a result, such payment processers will have to provide Form 1099K to sellers for whom they have processed more than $600 (regardless of the number of transactions). This change, which applies to tax returns for calendar years beginning after December 31, 2021, will bring many more sellers, including “casual” sellers, within the 1099K reporting net.

An Outlook On The Real Estate Industry

Posted on March 2021 by info

If the real estate industry has learned anything from the economic cycles of the past three decades and from crises like the savings and loan collapse, it’s patience.

On the surface, the global pandemic seems to have had a uniform impact on the global economy—the tendency is to look at the big picture impact on national economies, job losses and stock markets. While there is no arguing that the effects of this singular event in modern history will be felt—and studied—for years to come, the devil is in the details.

Those who own real estate assets across sectors and around the country see varying realities: Some industries, like restaurants, are harder hit than others. Yet within the restaurants industry itself there is variation: Many quick-serve and fast-food concepts are thriving, while others, like fine dining, are struggling.

For the real estate industry, lessons learned from past cycles and crises are translating into wait-and-see mode. Sellers are not willing to meet buyers’ expectations. On the commercial side, 61% of buyers expected a discount from pre-pandemic prices while only 9% of sellers were willing to offer them, according to CBRE’s Q3 2020 cap rate report. While some institutional investors may expect to see more distressed deals, unlike the Great Recession of 2008, there is significantly more capital sitting on the sidelines, enabling would-be sellers to wait out the current disruption.

With the vaccine rollout underway, the questions for those with real estate holdings are: When will the return to normal occur, will we be dealing with a new normal, what can be done in the meantime, and how can we position ourselves for the upside?

While lending has tightened, banks are still willing to be flexible

Since the Great Recession, when banks ended up owning and taking losses on real estate assets that borrowers could no longer make payments on, banks have been hesitant to foreclose on properties in default. Today, they are looking closely at de-risking their loan portfolios, and in some cases are selling debt to private credit funds to reduce losses. The private credit funds look at this as a way to become owners of real property at a lower price point.

Many banks and real estate owners are waiting for a recovery, as they know from history that the economy eventually comes around. In the meantime, banks have also allowed late or delayed payments or let borrowers tap into loan reserves to meet payment deadlines.

Office + retail real estate

More than any other sector in the industry, offices will look very different post-pandemic. The new reality that employees can—and want to—work remotely, at least part of the time, has forced conversations about contingency plans for how office space and layouts should look going forward, what the new demand for square footage may be, the extent to which companies will move to a hub-and-spoke or hybrid model, and the comeback of coworking. Office landlords will need to sell more of an experience as opposed to just a space. That experience could center around additional concierge type services to suit evolving office tenant needs.

Cap rates for offices vary based on location and occupancy. For a fully occupied prime office location, particularly in central business districts like New York City, Los Angeles and Chicago, deals have closed at around 6%, down to 4% for trophy assets. Underscoring the theme of variation within segments, cap rates for niche office segments like life sciences remain lower than non-life sciences properties, as demand for these types of defensive properties rises. In terms of new office leases in 2020, the tech sector accounted for 18% of the top 100 leases, according to CBRE. National cap rates for the office sector in the third quarter of 2020 were 7.12%, closely in line with the five-year rolling average of 7.16%, according to CBRE.

If they aren’t already, office buildings with vacant ground floor retail or restaurant space should be considering leasing to life sciences or medical businesses, which are and will continue to be in high demand. Meanwhile, the conversion of second- and higher-floor office space, as well as shuttered hotels, for residential use is expected to continue to increase.

Retail and restaurants/hospitality have seen the greatest disruption; retail brick-and-mortar closures are expected to range from 20,000 to 25,000 in 2021, on top of the more than 10,000 stores closures that have already occurred in 2020.

Retail cap rates have increased for freestanding net lease real estate, while for retailers seen as defensive, such as Dollar General, cap rates have declined 50 basis points at most. On the flip side, for typically well-occupied properties seeing vacancies, cap rates have increased 50 to 75 basis points. Cap rates for assets of troubled retailers are, of course, much higher.

Mom-and-pop or “quirky” retail tenants, such as shoemakers or instrument repair shops, who were priced out of central business districts or high-rent downtown areas may see an opportunity to return to cities. Landlords who heretofore were willing to go for years advertising vacant retail space may be more willing to consider working with such prospects on affordable lease terms.

Lease terms should be top of mind, of course. Tenants with less than a year left on their leases are likely surveying the market for alternatives, depending on their evolving workplace needs. Landlords should be willing to work with them to accommodate these needs and to renegotiate leases.

Industrial real estate

Industrial real estate has been the most resilient sector of real estate throughout the pandemic, in large part due to the increase in demand for e-commerce as the U.S. population largely sheltered in place. As such, the largest distribution tenants—Amazon and Walmart, for example—have been fueling the sector’s success. The average cap rate is 6.2% for industrial sales, falling by 119 basis points over the course of 2020, according to CoStar data. However, for Class A properties, cap rates are lower—4.3%, which represents a decline of 171 basis points from the fourth quarter of 2019, according to CoStar.

Industrial tenants’ new needs (e.g., on-demand warehousing) have altered business as usual for landlords. E-commerce sales are estimated to hit $1.5T by 2025, creating demand for 1 billion square feet of industrial space, according to JLL.

Suburban migration’s impact

The great migration to the suburbs is driving single-family home values up; multifamily home values remain steady and cap rates have compressed. In central business districts, the story is a little different. Multifamily class B and C properties are seeing vacancies rise and the cap rate increase about 50 basis points.

Suburban landlords and developers should be aware that urban migrants will take with them their desire for urban amenities. Ultimately, urban tastes may help support suburban businesses like restaurants, which will also see support from a surge in demand for in-person dining as more of the U.S. population gets vaccinated.

Many industries, as we approach a return to normalcy, may be quite altered from how they looked pre-pandemic. Brick-and-mortar retailers will continue to give way to e-commerce, offices will need to be overhauled and locations across sectors will migrate from cities to more suburban locations. At the same time, those who previously could not afford urban real estate may seek to move to central business districts if the lease terms are right.

Real estate owners are not panicking. As the vaccine rollout continues and the light at the end of the pandemic tunnel eventually appears, deal making will pick up. With $300 billion of global available capital for real estate investment—much of which is aimed at North America, according to CBRE—willingness to sell at discounted prices will remain elusive.