Breaking Down the American Rescue Plan Act, Part 1

Paycheck Protection Program Changes

On March 11, 2021, President Biden signed the American Rescue Plan Act (ARPA) into law. This economic plan includes many changes to existing programs that will have major impacts on 2020 and 2021 tax returns. Because there’s so much encompassed in this bill, we’ll be publishing a series of shorter articles that break it down. We’ll start by discussing the new provisions of the Paycheck Protection Program.

Additional Funding

The ARPA allocates an additional $7.25 billion towards the PPP. Unfortunately, though, the application period has not been extended and will still close on March 31, 2021. If you have yet to apply for a first or second draw of the PPP, now is your chance. Take advantage and apply today!

New Eligibility for Small Businesses and Nonprofits

In addition to earlier changes to the PPP (outlined here), the ARPA adds “additional covered nonprofit entity” as an eligible nonprofit for First and Second Draw PPP loans if:

• The organization employs ≥ 300 employees
• Does not receive more than 15% of its income from lobbying activities
• Lobbying activities do not comprise more than 15% of the organization’s total activities
• The cost of lobbying activities does not exceed $1 million during the most recent tax year that ended prior to February 15, 2020

Other entities that are now eligible for PPP loans include:

• Code Sec. 501(c)(3) nonprofit and veterans’ organizations with no more than 500 employees
• Code Sec. 501(c)(6) nonprofit organizations (chambers of commerce, real estate boards, boards of trade, etc.)
• Domestic marketing organizations with no more than 300 employees per physical location
• Internet-only news publishing and internet-only periodical publishers with fewer than 500 employees

The ARPA also ensures that amounts used from the First and Second Draw PPP loans for premiums used to determine the credit for COBRA premium assistance are eligible for loan forgiveness.

There have been a lot of changes to the PPP over the past month. The application period for PPP loans closes on May 31, 2021. If you have any questions, feel free to reach out to us. You can also find information on the SBA website here.

-Kelly & Stanley