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ACT NOW: Forgivable PPP Loan Eligibility for Labor Unions and Certain Benefit Plans

A provision of the American Rescue Plan Act of 2021 extends eligibility for forgivable Paycheck Protection Program (“PPP”) loans to labor organizations and certain benefit plans.

Following are the eligibility requirements for “additional covered nonprofit entities”:

  1. Employs no more than 300 employees,
  2. The organization does not receive more than 15% of its receipts from lobbying activities
  3. Lobbying activities do not comprise more than 15% of the total activities of the organization, and
  4. The cost of lobbying activities did not exceed $1m during the most recent year ending prior to February 15, 2020.

The additional eligibility opens up the potential for organizations tax-exempt under IRS Section 501c (including labor organizations and health and welfare plans). Unfortunately, organizations under IRS Section 501a, such as pension plans, are not included.

Otherwise, eligibility and loan forgiveness for PPP loans were unchanged. This includes a statement that organizations must affirm during the application process stating that the “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”

Particularly for labor organization and benefit plans, there are 2 additional important items to give special consideration as part of assessing eligibility:

  1. In cases where payroll costs are allocated among one or more other organizations, the only organization that can consider applying for a PPP loan is the one under whose EIN payroll is paid and the related payroll tax forms are filed (e.g., 941s).
  2. Be mindful of these affiliations and where applicable, consider aggregation rules when assessing eligibility (e.g., employee counts, lobbying activities, etc.)

The Basics of the PPP Loan (1st Draw) and Forgiveness

Your organization may qualify for up to a $10m loan, calculated as follows:

  • Step 1: Compute 2019 payroll costs based on the formula noted here
  • Step 2: Divide Step 1 by 12
  • Step 3: Multiply Step 2 by 2.5

After all loan proceeds are used, your organization can request forgiveness of the loan if, during the 8- to 24- week period following the loan disbursements:

  • Employee and compensation levels are maintained;
  • The loan proceeds are spent on payroll costs and other eligible expenses; and
  • At least 60 percent of the proceeds are spent on payroll costs.

Next Steps for Your Labor Organization or Benefit Plan

The Federal Reserve Board announced earlier this week that it will extend the expiration date of the PPP servicing from March 31, 2021 to June 30, 2021. However, it is unclear whether this will also be followed by the Treasury, Congress and/or the SBA. So, do not delay to get your labor organization or benefit plan’s PPP loan application submitted by the March 31, 2021 deadline.

Authors: Ashleigh Hall, CPA, Senior Manager | ahall@withum.com, Scott Price, Partner, CPA, Team Leader | sprice@withum.com

Click here for the full details and more information and resources provided by the SBA. This includes more information on the loan application process and eligibility requirements for applying for a loan and obtaining loan forgiveness.

Labor Union Services

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