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PPP2 For Nonprofits Charities & Ministries – Key Differences

PPP2 For Nonprofits Charities & Ministries – Key Differences

PPP2 For Nonprofits Charities & Ministries overviews the key differences between the Consolidated Appropriations Act, 2021 and the first stimulus package approved this past March by Congress ($2 trillion CARES Act.)

Please note that guidance and regulations related to this second round of PPP have NOT yet been issued. The SBA is required to

 provide these regulations within 10 days of the enactment of the Act. INSIDE CHARITY will continue to provide relevant updates as such guidance and regulations become available.

This new $900 billion COVID relief package includes $284 billion in aid for nonprofits and small businesses through a second round of Paycheck Protection Program (PPP) forgivable loans. PPP2 contains several important differences from the first round of PPP. PPP2 loans will be available to first-time qualified borrowers as well as nonprofits that previously received a PPP loan.

PPP2 For Nonprofits Charities & Ministries – Key Differences

Second-Time Borrower Eligibility: Previous PPP recipients will be eligible for another loan of up to $2 million provided they (NOTE: The eligibility requirements stated below do not apply to first-time borrowers.):

  • Have 300 or fewer employees;
  • Have used or will use the full amount of their first PPP loan; and
  • Can show a 25% gross revenue decline in Q1, Q2 or Q3 (applicants applying after January 1, 2021 may use Q4) compared with the same quarter in 2019. It is unclear how this would apply to new businesses without a 2019 operating history.

Maximum Loan: PPP2 borrowers may calculate their maximum loan about by multiplying the borrower’s average monthly payroll in (i) the trailing 12-month period as of the date the loan is made, or (ii) calendar year 2019, by 2.5x. The maximum loan for second-time borrowers is $2 million while the cap for first-time borrowers remains at $10 million. Like the first round of PPP loans, seasonal employers will calculate their maximum loan amounts differently.

Flexibility added to “Covered Period”: While the CARES Act originally provided for an 8-week covered period (time in which borrower must use loan proceeds to qualify for forgiveness) beginning on the day loan proceeds were disbursed, subsequent amendments allowed borrowers to alternatively elect for a 24-week covered period. PPP2 borrowers will now be permitted to choose the length of their covered period provided it is not less than 8 weeks and no more than 24 weeks.

Expansion of Covered Expenses: Previously, PPP proceeds were to be used for payroll, rent, covered mortgage interests and utilities in order to qualify for 100% forgiveness. Pursuant to the act, PPP proceeds may also be allocated to the following expenses:

  • Operation Expenditures: software and cloud computing service payments used to facilitate, without limitation, business operations, service or product delivery, payroll, processing, billing, accounting, inventory and HR functions.
  • Supplier Costs: payments to suppliers of goods that are essential to operations at the time made pursuant to an order or contract in effect prior to the covered period (or in effect at any time during the covered period if good are perishable).
  • Property Damage: costs related to any public disturbances that occurred in 2020, to the extent not covered by insurance or other compensation.
  • Worker Protection Costs: costs related to compliance with regulations issues by CDC, HHS, OSHA or any state or local government authority after the period beginning on March 1, 2020 and ending on the date when the national emergency declared by the president related to COVID-19 safety measures expires.

EIDL Impact on Forgiveness: The Act provides that the proceeds of any EIDL Advances provided to PPP borrowers will no longer need to be reduced from the amount eligible for forgiveness.

Simplified Forgiveness Applications: The Act created a simplified forgiveness application process for loans of $150,000 or less. Such borrowers will be eligible for forgiveness if they sign and submit to the lender a one-page certification including: a description of the number of employees the borrower was able to retain because of the loan; the estimated total amount of the loan spent on payroll costs; and the total loan amount.

501(c)(6) organizations are now eligible:

Business leagues, chambers of commerce, real estate boards, boards of trade and professional football leagues, which are not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder. To be eligible, such organizations must meet the following criteria:

  • The organization must not employ more than 300 employees;
  • The organization does not receive more than 15% of receipts from lobbying;
  • The lobbying activities do not comprise more than 15% of total activities; and
  • The cost of lobbying activities of the organization did not exceed $1,000,000 during the most recent tax year that ended prior to February 15, 2020.

In addition to first-time eligibility for Section 501(c)(6) not-for-profit organizations, destination marketing organizations and housing cooperatives have also been made eligible.

Please note that guidance and regulations related to this second round of PPP have not yet been issued. The SBA is required to provide these regulations within 10 days of the enactment of the Act. We will continue to provide relevant updates as such guidance and regulations become available.

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PPP2 For Nonprofits Charities & Ministries – Key Differences and other INSIDE CHARITY content and comments are for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. All content on this site is information of a general nature and does not address the circumstances of any particular individual or entity. Nothing on this site constitutes professional and/or financial advice, nor does any information on the site constitute a comprehensive or complete statement of the matters discussed or the law relating thereto.

PPP2 For Nonprofits Charities & Ministries – Key Differences was first posted at INSIDE CHARITY

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