March 12, 2021

American Rescue Plan Provides Expanded PPP Eligibility to Additional Nonprofit Organizations

By Mary Antonetti, Partner, Tax & Business Services

With the signature of the American Rescue Plan the pool of nonprofit organizations eligible to receive aid under the Paycheck Protection Program (PPP) has expanded. The exciting news your organization may now be eligible for much needed assistance is quickly offset for the need to act fast. The final deadline to apply for the current round of PPP is March 31, 2021.

The American Rescue Plan has expanded PPP eligibility to any “additional covered nonprofit entity”. Additional covered entities include any organization described in Section 501(c) of the Internal Revenue Code except for section (3),(4),(6) or (19). Section 501(c)(3) and (c)(6) organizations were already eligible for PPP loans. A covered nonprofit entity will not include a business concern, which is described in section 120.110 of title 13, Code of Federal Regulation except if described in sections (a) or (k). There are some additional limitations including limitations on lobbying which may prohibit the eligibility of some nonprofit entities.

During round 1 of PPP, many taxable organizations were eligible to apply for PPP using the alternative size test. This enabled single organizations or affiliated groups of organizations with over 500 employees to meet the eligibility requirements to receive a PPP loan. In the nonprofit world, many organization have endowments which made them unable to satisfy the alternative size test. The American Rescue Plan has amended the provision with respect to nonprofit organizations allowing an organization to apply for first round PPP if they have not more than 500 employees per physical location of the organization or to apply for second round PPP if they have not more than 300 employees per physical location of the organization.

The changes with regard to an “additional covered nonprofit entity” are not as clear regarding round 1 PPP loans. However, for round 2 PPP loans the legislation states an organization will be eligible if the covered non-profit entity employs not more than 300 employees per physical location.

What has not changed is the loan necessity requirement. All organizations will need to make sure they can document they need the loan because economic conditions make the loan a necessity. All organizations will need to memorialize the analysis they performed in order to justify their application.

Who will this benefit? If you organization has several affiliated entities with a total number of employees greater than the 500, you may have been ineligible to apply for round 1 PPP funding. If within your structure, you have several locations with under 500 employees, that location may now be eligible to apply.

While the pool of eligible applicants have been extended, the time to apply has not. In speaking with several banks, they may be closing the application window to new applicants as early as Monday. While requests have been made to extend the deadline, nothing has been passed and you need to act quickly if you think this is something that may apply to your organization.

If you have any questions or need assistance, please reach out to your team at Marcum.