On December 27, 2020, the Economic Aid to Hard-Hit Small Business, Nonprofits, and Venues Act (the 2021 Act) was signed into law. It includes additional funding for the Paycheck Protection Plan (PPP) and expands eligibility to certain not-for-profit organizations.
The 2021 Act does the following:
- Provides another $284 billion in funding for the PPP;
- Allows borrowers to select a forgiveness period between 8 and 24 weeks; and
- Expands the eligible not-for-profit organizations to include entities described in 501(c)(3), (6), and (19) if they otherwise meet the borrower criteria.
Additionally, public colleges and universities may be eligible if they are FCC license holders. These funds should be used to support locally-focused or emergency information. It will be required to show that the funds are being used in this manner.
Employee Retention Credit
With the second round of the PPP comes new rules. Not-for-Profit organizations that received the Employee Retention Credit will now be eligible to apply for the second round of the PPP. To be eligible for both, the Employee Retention Credit must be used for wages that are different than the PPP.
The expanded PPP will be open through March 31, 2021. For repeat-borrowers or for section 501(c)(6) organizations, there is more restrictive criteria. This includes no more than 300 employees. In addition, the following limitations are 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 must be below $1 million during the most recent tax year.
The 2021 Act also adds “destination marketing organizations” as eligible PPP borrowers. These organizations will have the same restrictions to the eligibility criteria as to section 501(c)(6) organizations. This includes the 300 employee cap.
These organizations must be engaged in marketing and promoting communities and facilities. Or, they must be engaged in and derive the majority of their operating budget from revenue attributable to providing live events.
For questions, always consult a Certified Public Accountant. Submitted by: Allison Harrell, Shareholder, Assurance Services, and THF Not-for-Profit team leader. To contact Allison, click here.