PPP eligibility expanded to certain section 501(c)(6) organizations
TAX ALERT |
Authored by RSM US LLP
The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the 2021 Act), signed into law on Dec. 27, 2020 as part of the Consolidated Appropriations Act, 2021, includes additional funding for the Paycheck Protection Program (PPP), a new shuttered venue operator grant program, and funding for new Economic Injury Disaster Loan Assistance (EIDL) grants for eligible entities located in low-income communities. In addition, the Act expands PPP eligibility to certain organizations described in section 501(c)(6).
The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) established PPP forgivable loans administered by the Small Business Administration (SBA) to provide economic assistance to certain small organizations affected by the COVID-19 pandemic. Under the original terms of the program, the only nonprofit organizations eligible to participate were organizations described in sections 501(c)(3) and (19) that employed no more than 500 individuals, subject to SBA affiliation rules.
The 2021 Act provides another $284 billion in funding for the PPP, allows borrowers to select a forgiveness period between eight and 24 weeks, and expands the eligible nonprofit organizations to include entities described in section 501(c)(3), (6), and (19) if they otherwise meet the borrower criteria. In addition, public colleges and universities (described in section 511(a)(2)(B)) may be eligible if they are FCC license holders and represent that the PPP funds will be used by the relevant component to support locally-focused or emergency information.
After the SBA begins accepting applications, the expanded PPP will be open through March 31, 2021. For first-time borrowers that are not section 501(c)(6) organizations, the CARES Act eligibility requirements continue to apply (e.g., employing no more than 500 employees and being in operation as of Feb. 15, 2020). However, for repeat borrowers or for section 501(c)(6) organizations, more restrictive criteria apply, including employing no more than 300 employees. In addition, there are additional limitations imposed on section 501(c)(6) organizations:
- Must not be a professional sports league
- Must not have a purpose of promoting or participating in a political campaign or other activity
- May not receive more than 15% of its receipts from lobbying activities
- Lobbying activities may not comprise more than 15% of the organization’s total activities
- Cost of lobbying activities of the organization did not exceed $1 million during the most recent tax year ended before Feb. 15, 2020.
Finally, the 2021 Act adds “destination marketing organizations” as eligible PPP borrowers, adding the same restrictions to the eligibility criteria as apply to section 501(c)(6) organizations (including the 300 employee cap). These entities are described in section 501(c), quasi-governmental, instrumentalities, or political subdivisions. They must be engaged in marketing and promoting communities and facilities through a range of activities (e.g., assisting with the location of meeting and convention sites, providing maps, and organizing group tours of local, historical, recreational, and cultural attractions) or must be engaged in and derive the majority of its operating budget from revenue attributable to providing live events.
The SBA has not yet opened applications for the expanded PPP. We expect additional guidance, interpretation, and rules to be issued in the coming weeks. More information about the 2021 Act is available here.
You can email us at firstname.lastname@example.org, call us at (631) 845-5252 (Long Island) or (212) 684-2414 (NY) or fill out the form below and we'll contact you to discuss your specific situation.
This article was written by Alexandra Mitchell, Ryan Corcoran , Morgan Souza and originally appeared on 2021-01-06.
2020 RSM US LLP. All rights reserved.
The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Nussbaum, Berg, Klein & Wolpow, CPAs LLP is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.
For more information on how Nussbaum, Berg, Klein & Wolpow, CPAs LLP can assist you, please call (631) 845-5252 (Long Island) or (212) 684-2414 (NY).