Tax-exempt Trade Associations May Become Eligible for Paycheck Protection Loans
Congress is now negotiating amendments to the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, including changes to the eligibility rules for Paycheck Protection Program (“PPP”) Loans. These changes would expand the availability of the loans to organizations exempt from tax under section 501(c)(6).
As originally enacted, small businesses and section 501(c)(3) organizations could apply for a PPP loan. Many other tax-exempt organizations also experienced hardships as a result of COVID-19, but were not eligible to apply for PPP loans. The Senate proposal would expand eligibility for PPP loans to section 501(c)(6) organizations if the organization does not receive more than 10% of receipts from lobbying, and lobbying activities do not comprise more than 10% of receipts. The loans are limited to $500,000 and would only be available to 501(c)(6) organizations with 50 or fewer employees, except in the case of Chambers of Commerce, Destination Marketing Organizations, quasi-government entities, or political subdivisions of a state or local governments which can have 300 or fewer employees.
These organizations should continue to monitor the legislation and plan to apply for a PPP Loan if the current economic uncertainty makes the loan necessary to support ongoing operations. In general, this is a liquidity determination, taking into account the current business activity and the organization’s ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. The professionals at Cherry Bekaert can assist with all aspects of a PPP loan.
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