March 15, 2021
The following information just arrived from Barclay Damon. Read carefully.
COVID-19: Expanded Eligibility for Not-for-Profit Organizations Under the Paycheck Protection Program
On March 11, President Biden signed the American Rescue Plan Act of 2021 (Rescue Act) that, among other things, expanded the eligibility of not-for-profit organizations under the Paycheck Protection Program (PPP).
Previously eligible types of not-for-profit organizations, namely those under 501(c)(3) and 501(c)(4) of the Internal Revenue Code, are now eligible to receive a first draw PPP loan if the organization employs 500 or fewer employees per physical location. The Small Business Association (SBA) has not issued guidance specifically addressing what constitutes a single physical location. The eligibility criteria for a second draw PPP loan remain the same as outlined in our alert from January 25, 2021.
Not-for-profits should calculate their number of employees in accordance with the established guidance. Each person employed is counted as one employee regardless of full-time or part-time status, noting, however, that independent contractors are not included in this calculation or in the calculation of the loan amount. Applicants may use their average employment over the time period used to calculate their loan amount to determine their number of employees for the purposes of applying an employee-based size standard. Alternatively, applicants may elect to use the SBA’s usual calculation: the average number of employees per pay period in the 12 completed calendar months prior to the date of the loan application (or the average number of employees for each of the pay periods that the business has been operational, if it has not been operational for 12 months).
The Rescue Act also added another category of eligible not-for-profit organizations, the “additional covered nonprofit entity,” which is defined as an organization described in section 501(c) of the Internal Revenue Code, other than (3), (4), (6), or (19) and exempt from tax under section 501(a) of the Code. Additional covered not-for-profit entities are eligible for both first and second draw PPP loans if:
– It does not receive more than 15 percent of its receipts from lobbying activities
Expressly excluded from the definition of “additional covered nonprofit entities” are those entities described in 13 CFR § 120.110. This includes:
– Financial businesses primarily engaged in the business of lending
Finally, the Rescue Act adds $7.25 billion in additional funding to the PPP, but does not extend the application window, which is still currently set to close on March 31, 2021; the majority of lenders are closing the application window before that date.