Section 501(c)(5) and 501(c)(9) organizations are now eligible for Paycheck Protection Program (PPP) loans under the American Rescue Plan Act (ARPA) that was signed into law on March 11, 2021. The ARPA did not extend the final day of the program – it remains March 31, 2021. Among other provisions though, it expanded the Employee Retention Tax Credit for 2021.
Under the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), the Small Business Administration (SBA) has provided economic assistance to smaller businesses and organizations through PPP forgivable loans. Initially, only tax-exempt organizations with an exemption under section 501(c)(3) or (19) were eligible. They must have had at most 500 employees. More recently, certain section 501(c)(6) organizations became eligible for PPP loans.
Benefit to Borrowers
Borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs in the year prior to the loan or calendar year.
The loans can also be forgiven – so long as at least 60% of the funds are spent on payroll costs over either an 8-week period or 24-week period. The remainder can be spent on rent, utilities, and covered mortgage interest.
Eligibility Under the American Rescue Plan Act of 2021
Under the ARPA, and similar to certain section 501(c)(6) organizations, section 501(c)(5) and 501(c)(9) organizations can have no more than 300 employees to be able to qualify. Other conditions include the following:
- Lobbying activities cannot provide more than 15% of its receipts.
- Cost of lobbying activities cannot be more than $1 million during the most recent tax year, ending by February 15, 2020.
- Lobbying activities cannot exceed 15% of total activities.
Certification to Borrower
In applying for a PPP loan, borrowers will need to certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant”. The SBA also informed borrowers they were required to consider their ability to access other sources of liquidity before certifying in their loan applications.
If you need further information, please contact us.
Ethan Gewolb, CPA, EA | Senior Tax Manager