Note: You will see in the article below allowable entities now include 501(c)(7) organizations. There remains many specific requirements for the PPP program and each organization will need to consider the totality of the program and their situation to see if they qualify. However, the deadline to apply for funding has not been moved and is still March 31, 2021. If you are considering whether your organization should apply for funding, start gathering the necessary information now for the application process. If you have any questions, please contact us and we will be happy to help you.
On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (ARPA).
This coronavirus emergency bill addresses the ongoing economic challenges facing employers and employees as the pandemic continues. The bill includes provisions that modify the Paycheck Protection Program (PPP).
About the Paycheck Protection Program
The CARES Act established the Paycheck Protection Program (PPP) which permitted the U.S. Small Business Administration (SBA) to provide loans to qualified businesses impacted by the coronavirus pandemic. The 100% federally guaranteed loans must be used for payroll and certain non-payroll costs.
The Consolidated Appropriations Act 2021 included the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act that authorizes $284 billion towards the Paycheck Protection Program and extends the PPP until March 31, 2021. The Economic Aid Act also expanded access to First Draw PPP Loans to other entities, expanded additional eligible expenses, clarified terms, and authorized Second Draw PPP Loans for smaller borrowers.
Modifications to Paycheck Protection Program (PPP) in the American Rescue Plan Act
The American Rescue Plan Act (ARPA) allocates an additional $7.25 billion towards PPP funding, however, the application period has not been extended and remains March 31, 2021.
Eligibility of additional covered nonprofit entities for First Draw and Second Draw PPP loans
The ARPA adds “additional covered nonprofit entity” as an eligible nonprofit eligible for First Draw and Second Draw PPP loans. An “additional covered nonprofit entity” is an organization listed in Code Sec. 501(c) other than those listed in Code Sec. 501(c)(3) (an example is Community Foundations), Code Sec. 501(c)(4) (an example is civic leagues), Code Sec. 501(c)(6) (an example is chambers of commerce), or Code Sec. 501(c)(19) (an example is an organization made up of past members of the armed forces).
An “additional covered nonprofit entity” is eligible for a PPP loan if:
- the organization employs no more than 300 employees.
- it does not receive more than 15% of its receipts from lobbying activities.
- lobbying activities do not comprise more than 15% of the organization’s total activities; and
- the cost of lobbying activities does not exceed $1,000,000 during the most recent tax year that ended prior to February 15, 2020.
This makes PPP funds accessible for entities such as 501(c)(7) organizations (examples are Fraternities/Sororities and Country Clubs).
Eligibility of certain nonprofit organizations with up to 500 employees
The ARPA adds Code Sec. 501(c)(3) nonprofit and veterans organizations that employ no more than 500 employees per physical location and Code Sec. 501(c)(6) organizations (business leagues, chambers of commerce, real estate boards, boards of trade and professional football leagues) and domestic marketing organizations with no more than 300 employees per physical location.
Eligibility of internet publishing organizations
The ARPA adds Internet-only news publishing and Internet-only periodical publishers to businesses eligible for First and Second Draw PPP loans.
To be eligible, the organization must employ no more than 500 employees, or the size standard established by the SBA administrator for the organization’s North American Industry Classification code, per physical location of the publishing organization.
Additionally, the organization must make a good faith certification that loan proceeds will be used to support expenses to support local or regional news.
Coordination with COBRA
ARPA provides that amounts used from First Draw and Second Draw PPP loans for premiums used to determine the credit for COBRA premium assistance as provided under Code Sec. 6432 are eligible for loan forgiveness.
As always, if you have any questions please contact your local Blue & Co., LLC advisor.