The American Rescue Plan Act (Act) was signed into law on March 11, marking the sixth piece of COVID-19 legislation since last March. The Act extended several tax benefits temporarily, authorized the third round of individual economic stimulus checks, and allocated several billion dollars to vaccine manufacturing and distribution.

Among other updates, the Act’s changes to the Paycheck Protection Program (PPP) make it easier for more not-for-profit (NFP) organizations to receive funding – but as of now, the deadline to apply for PPP funds remains March 31.

Paycheck Protection Program

The Act allocated an additional $7.25 billion for PPP funding and expanded eligibility for more NFPs. Under the new rules, organizations with 500 or fewer employees per location now qualify. This is a change from previous legislation, which capped total employees at 500.
The Act added a new eligible category for NFPs called “additional covered nonprofit entity,” which includes any organization listed in Section 501(c) except for Sections 501(c)(3), 501(c)(4), 501(c)(6), and 501(c)(19). Note that 501(c)(3) and 501(c)(6) organizations are already eligible for funding.

An “additional covered nonprofit entity” must not take in or spend more than 15 percent from lobbying activities, they must not spend more than $1 million per year on lobbying activities, and they must not have more than 300 employees.

Economic Injury Disaster Loans

EIDL advances are back with a $15 billion infusion. Entities are limited to $10,000 and must have experienced at least a 30 percent reduction in gross receipts during any eight-week period since March 2, 2020. $5 billion in EIDL funding is allocated specifically to organizations that suffered at least a 50 percent decline in receipts and have less than ten employees.

This time, EIDL advances will be rolled out in phases. Organizations that previously applied but didn’t receive the full amount will be given priority in the first round.

Congress also confirmed that EIDL advances will not be treated as taxable income.

Grant Programs

The Community Navigator Pilot Program authorizes $100 million for community grants and $75 million for outreach and education. NFPs may receive grants or contracts for these programs along with state and local governments, tribes, and Small Business Association partners. The deadline for Community Navigator grants is September 30, 2022.

The Shuttered Venue Operator Program (SVOP) received $1.25 billion with $500,000 set aside to help entities apply for grants. The Act modified previous guidance that excluded SVOP recipients from applying for new PPP funds after December 27, 2020. New rules state that SVOP recipients may apply for PPP funding in addition to a grant, but the amount of the PPP funding will be reduced based on the SVOP grant amount.

Unemployment Insurance

Federal subsidies for unemployment costs will increase from 50 to 75 percent starting April 1, 2021 and running through August 29, 2021. This is especially helpful for self-insured NFPs.

Tax Credits

The Act extended paid and sick leave family tax credits from March 31, 2021, to September 30, 2021, and after March 31, 2021, the timeline for eligible days off resets. 501(c)1 governmental organizations, which includes credit unions, are now eligible to claim paid sick leave family tax credits.

Time off to recover from receiving a vaccination is now covered by FFCRA tax credits.

Other rule changes from the Consolidated Appropriations Act are still in effect; for example, the amount of eligible wages increases from $10,000 to $12,000 per employee.

The Employee Retention Credit (ERC), which NFPs were already eligible for, has been expanded and extended through December 31, 2021.
The IRS also clarified that an organization may claim the ERC in the same period as a PPP loan even if PPP funds are later forgiven. In their recent FAQs, the IRS stated that any excess payroll not included in PPP forgiveness can be allocated to the ERC. This new rule is not retroactive but does expand eligibility for both PPP funding and ERC credits.

Like FFCRA paid family sick leave credits, changes made to the ERC in December 2020 are still in effect. These changes include an increase of the amount of eligible wages from 50 to 70 percent and the ability to claim a maximum of $10,000 in eligible wages per quarter.

Additional Aid to Nonprofit and Charitable Organizations

Two programs within the Act provide grants and financing to NFPs as well as small businesses.

  • $3 billion to the Economic Development Administration to support nonprofits, state and local governments, and higher education with grants to spur economic development and job creation.
  • $35 billion for low-interest loans and capital to nonprofits and small businesses.

The Act also set aside nearly $1.5 billion to community service, national endowments, and other charitable associations. These include:

  • $1 billion to the Corporation for National and Community Service (60 percent is allocated to increasing the number of AmeriCorps volunteers to respond to communities most impacted by COVID-19)
  • $135 million each to the National Endowment for the Arts and National Endowment for the Humanities; 60 percent of funds will go to direct grants
  • $200 million to the Institute of Museum and Library Services
  • $20 million to Native American Language Preservation

NFPs can also look to the $350 billion in funding to state and local governments, as some of these funds can be directed toward local charitable organizations to oversee certain programs.

For organizations involved in food distribution and delivery, SNAP and WIC benefits have also been extended and expanded.

What’s Ahead

Though the legislation is seen as a win for the nonprofit industry, many nonprofit experts note that the relief will not fully deliver needed solutions for many struggling organizations. Many are pushing for an extension of the PPP application deadline, including the AICPA, which has asked Congress for a 60-day delay.

Not-for-profit organizations and their Boards may have several questions about how they will be affected by the American Rescue Plan Act. Moreover, now that access to PPP loans and employee retention credits are expanded to include more organizations, NFP leaders should not hesitate to act if there are available resources to shore up their payroll and cash flow.

Contact Bo Garner, CPA, MBA, Team Leader of the PBMares Not-for-Profit practice, for more guidance.