Paycheck Protection Round 2 Adds Relief for Exempt OrganizationsFebruary 10, 2021
The Economic Aid Act expands first-time loan eligibility under the Paycheck Protection Act (PPP) to certain exempt organizations, while also allowing certain exempt organizations to apply for additional PPP loans.
Trade Associations, Chambers of Commerce, Housing Cooperatives and More Now Qualify
Under the initial PPP program, only exempt organizations described as Code Section 501(c)(3) organizations and veterans organizations were eligible to receive PPP loans. Now, Code Section 501(c)(6) organizations, housing cooperatives, certain public broadcasting entities and destination marketing organizations are all eligible to apply for a PPP loan.
If these newly qualified organizations obtain funding from a first draw loan, they are eligible to apply for a second draw loan provided they:
- use the first draw proceeds prior to applying for the second draw; and
- apply for the second draw loan before the application period ends on March 31, 2021
Special Eligibility Rules for Code Section 501(c)(6) Organizations
To ensure that PPP loan funds are not used to support lobbying activities, Code Section 501(c)(6) organizations must meet certain additional eligibility requirements to receive a PPP loan. Specifically, a Code Section 501(c)(6) organization must:
- receive less than 15% of its receipts from lobbying activities;
- have less than 15% of its total activities classified as lobbying activities; and
- have less than $1,000,000 as a total cost for lobbying activities during the most recent tax year that ended prior to February 15, 2020
Second Draw PPP Loans
Exempt organizations that received PPP loans in 2020 may be eligible to apply for a second draw PPP loan of up to $2 million.
To qualify, the exempt organization must have:
- fewer than 300 employees;
- used the entire amount of its first draw PPP loan; and
- experienced a decline in gross receipts of at least 25% during any quarter of 2020 when compared to the same quarter of 2019
An organization’s “gross receipts” is determined using the same accounting basis used by the organization for Form 990 reporting purposes. Special rules apply if the organization did not operate in 2019.
Applications for PPP loans under the Economic Aid Act will be accepted through March 31, 2021, or until the funding is exhausted.
Fox Rothschild’s Nonprofit Organizations Practice provides legal services and resources to various community service and charitable organizations. For more information, please contact a member of Fox Rothschild’s Nonprofit Organizations Practice.