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The Consolidated Appropriations Act of 2021: Great news for 501(c)(6) nonprofits

Jan 19, 2021

The Consolidated Appropriations Act of 2021 provides that, for the first time, 501(c)(6) not-for-profit organizations will be eligible to receive Paycheck Protection Program (PPP) loans. 

The second round of PPP loans is being referred to as PPP2. 

Many 501(c)(6) organizations have been negatively affected in various ways by the COVID-19 pandemic. One example is the reduction in revenue as a result of the cancellation of in-person events, such as major annual membership events, professional education and seminars, and other events. 

On top of reductions in revenue, these organizations are needed more than ever by their membership in these uncertain times. The stimulus package will help them become more flexible with how they can spend their money and allow them to continue their focus on industry-wide improvements by providing education, resources and a united voice to effect change for its members. 

Here are the PPP2 eligibility requirements for 501(c)(6) organizations:

  • 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.

The costs eligible for loan forgiveness in PPP2 include payroll, rent, covered mortgage interest and utilities (same as PPP1). PPP2 also makes the following potentially forgivable:

  • Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
  • Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.
  • Covered operating costs such as software and cloud computing services and accounting needs.

To be eligible for full loan forgiveness, PPP2 borrowers will have to spend no less than 60% of the funds on payroll over a covered period of either eight or 24 weeks (same as PPP1).

PPP2 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 the calendar year, the same as with PPP1, but the maximum loan amount has been cut from $10 million in the first round to the previously mentioned $2 million maximum. 

If your organization needs advice or assistance with applying for the PPP2 loan, contact Wipfli. We’ve also put together a COVID-19 resource center to help organization’s navigate the pandemic’s impact. 

Related content:

Changes the Consolidated Appropriations Act of 2021 made to the Employee Retention Tax Credit
Provisions you may not know about in the Consolidated Appropriations Act
PPP and other SBA loan provisions in Consolidated Appropriations Act of 2021

Author(s)

Rachel Most, CPA
Senior Manager
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