At the onset of the COVID-19 pandemic last March, Congress enacted three pieces of legislation over a few short weeks – the largest being the $2.3 trillion CARES Act. The CARES Act provided relief to individuals and businesses and introduced the popular Paycheck Protection Program (“PPP”) loans and Employer Retention Credit (ERC).
After months of back-and-forth, Congress finally moved forward with the latest COVID-19 relief and stimulus package. Congress passed the “Consolidated Appropriations Act, 2021 (H.R.133)” (CAA) on December 21, 2020. On December 27, President Trump signed the Stimulus and Relief legislation, which established a second round of PPP loans and enhanced the ERC.
Since then, not-for-profit organizations struggled to understand and address complex questions regarding the recent COVID-19 relief packages. This article offers some answers to these pressing questions:
Under guidance from the SBA and Treasury, not-for-profit entities should reference Section 6033. The regulations for this section state that “gross receipts means the gross amount received by the organization during its annual accounting period from all sources without reduction for any costs or expenses.” It goes on to state:
Thus “gross receipts” includes, but is not limited to (i) the gross amount received as contributions, gifts, grants, and similar amounts without reduction for the expenses of raising and collecting such amounts, (ii) the gross amount received as dues or assessments from members or affiliated organizations without reduction for expenses attributable to the receipt of such amounts, (iii) gross sales or receipts from business activities (including business activities unrelated to the purpose for which the organization qualifies for exemption, the net income or loss from which may be required to be reported on Form 990-T), (iv) the gross amount received from the sale of assets without reduction for cost or other basis and expenses of sale, and (v) the gross amount received as investment income, such as interest, dividends, rents, and royalties.
These amounts vary by the organization’s tax return type. Amounts used by not-for-profit entities on Form 990 should include the sum of lines 6b(i); 6b(ii); 7b(i); 7b(ii); 8b; 9b; 10b; and 12 (column (A) of Part VIII. For those filing Form 990-EZ, include the sum of lines 5b; 6c; 7b; and 9 of Part I.
Please note that the forgiveness of initial PPP loan funding is excluded from gross receipts.
The organization must sign and date the first page of the statements and initial all other pages to verify accuracy if the financial statements are not audited. The statements must clearly identify which line items constitute gross receipts.
According to the SBA’s guidance, it may consider two or more not-for-profit entities under common control to be “affiliated.” This relationship could cause an entity to not meet the employee count or gross receipts eligibility requirements. The determination can be complex and may require a legal opinion. The organization could consider Form 990 Schedule R reporting as a guide in this determination.
Please note that these rules do not apply to faith-based not-for-profit organizations.
Eligible tax-exempt organizations (including Section 501(c)(6) entities) must meet the following qualifications:
We are still awaiting additional guidance on the appropriate time period to distinguish the number of employees for the first requirement.
There are additional requirements which include:
Click here to read our article summarizing this question in full:
https://www.sikich.com/insight/commonly-asked-questions-employee-retention-credit/.
Religious organizations are eligible for PPP and ERC. If the entity does not file Form 990, they must use the Section 6033 regulation language above to calculate gross receipts.
The CAA adds that these entities are eligible for this credit in 2021.
This Sikich article answers that question. Click here: https://www.sikich.com/insight/employee-retention-credit-deeper-dive-full-or-partial-suspension-of-operations/.
The “Shuttered Venue Operators Grant” program may apply for live venue or performing arts operators, museums, zoos, or aquariums. The entity must not have received a PPP loan on or after December 27, 2020 to qualify.
If an organization believes they may be eligible, more information and updates can be found here: https://www.sba.gov/document/support-shuttered-venue-operators-grants-faq.
Borrowers with an original principal amount of $2 million or greater are required to complete SBA Form 3510, Loan Necessity Questionnaire (Non-Profit Borrowers):
For more information on the stimulus relief packages, please contact our not-for-profit experts.
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