Significant PPP Changes for Nonprofits in American Rescue Plan Act (2021)
On March 12, 2021, President Biden signed the American Rescue Plan Act of 2021 (ARPA), a $1.9 trillion package intended to help recovery from the COVID-19 pandemic. ARPA adds $7.25 billion into the Paycheck Protection Program (PPP) and expands eligibility for forgivable loans under the PPP for nonprofit organizations.
Expanded Nonprofit Eligibility
Congress initially limited PPP loan eligibility under the CARES Act to nonprofit organizations described in Sections 501(c)(3) and 501(c)(19) of the Internal Revenue Code as long as they met size limitations.
The Act now extends PPP eligibility to most nonprofits other than 501(c)(4) organizations.
In addition to expanding eligibility to new types of nonprofit entities, the Act also expands eligibility to larger nonprofit organizations. The Act allows 501(c)(3), 501(c6), and 501(c)(19) entities to qualify as long as they have no more than 500 employees per physical location (based on pure headcount – full-time, part-time, and “other” employees and NOT a full-time equivalent calculation). Additional covered nonprofit entities are eligible as long as they have no more than 300 employees per physical location and meet limitations on lobbying similar to those for 501(c)(6) organizations.
Nonprofit organizations, including additional covered nonprofit entities, are eligible for second draw PPP loans if they otherwise meet the requirements for a second draw loan (at least a 25 percent reduction in gross receipts, having received and expended a first draw PPP loan and have no more than 300 employees).
For more information about PPP loans, please visit the SBA website. (The website also includes a link to find a lender near you.)