United States

American Rescue Plan Act provisions affecting exempt organizations

TAX ALERT  | 

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (the Act) into law. The Act (P.L. 117-2) provides $1.9 trillion in funding for relief and recovery from the COVID-19 public health and economic crises and contains numerous provisions affecting tax-exempt organizations.

For further detail and in-depth discussions of the Act, please read RSM’s comprehensive guidance.

Loan and grant programs

Paycheck Protection Program (PPP) modifications

The Act appropriates an additional $7.25 billion to the Small Business Administration for purposes of carrying out the PPP. In addition, it expands the organizations and entities eligible to receive PPP loans. However, the Act does not appear to extend the March 31, 2021, program deadline.

The Act expands PPP eligibility in two ways for nonprofit organizations. First, all organizations described in section 501(c), except for organizations described in section 501(c)(4), are eligible to receive PPP loans if they otherwise meet the eligibility criteria. Second, certain nonprofit organizations qualify for a per physical location employee threshold, which permits an organization with more than one physical location to qualify for PPP provided that the employee threshold is not exceeded on a per physical location basis. The Act does not contain an effective date for these changes and open questions remain as to whether the SBA will interpret them as retroactive “fixes” or prospective expansions.

Entity type

Employee threshold

Per physical location employee threshold

Lobbying limitations

501(c)(3)

500

500

None

501(c)(19)

500

None

None

501(c)(6)

300

None

  • Lobbying income ≤ 15% of gross receipts
  • Lobbying activities ≤ 15% of total activities
  • Lobbying expenses ≤ $1,000,000

All other 501(c)

(other than 501(c)(4)

300

300

 

Shuttered Venue Operator Grants (SVOGs) 

The Act appropriates an additional $1.25 billion to the SBA to carry out the SVOG program, of which $500,000 is restricted to provide technical assistance to help applicants access the System for Award Management (SAM), a successor, or an alternative grant application system. Nonprofit organizations may qualify for SVOG funds if they meet the eligibility criteria for performing arts venues or “relevant” museums, which include aquariums, zoos, and other similarly situated organizations.

The Act removes the limitation that SVOG recipients are ineligible to receive PPP loans after Dec. 27, 2020. Prior to this change, potential SVOG applicants needed to decide between the two programs. As a result of this modification, any PPP funds awarded after Dec. 27, 2020 to an SVOG applicant will simply reduce the amount of SVOG grant dollars the applicant may receive.

Exempt organizations as employers

Employee Retention Credit

The Act extends the employee retention credit (ERC) to Dec. 31, 2021, with certain modifications applicable to wages paid after June 30, 2021:

  • A large employer that is severely financially distressed (more than a 90% decline in gross receipts) can use the small employer “all employee wages” rule in determining the credit.
  • The “Recovery Startup Business” provision allows a company that began carrying on a trade or business after Feb. 15, 2020 that is not otherwise eligible for the ERC under either the gross receipts or the governmental order tests to receive up to a $50,000 maximum credit per quarter. To qualify under this provision, average annual gross receipts for such employer under section 448(c)(3) for the up to three-year period before such quarter may not exceed $1 million. In addition, only wages up to $10,000 can be counted for the quarter and it appears the $7,000 limit also still applies.
  • Five-year statute of limitations period.

Paid sick leave and paid family leave credits

The Act extends tax credits for employer-provided paid sick and family leave established under the Families First Coronavirus Response Act (FFCRA) through Sept. 30, 2021. Effective April 1, 2021, vaccination-related events constitute eligible leave reasons, and wages covered by the paid family leave credit to increases to $12,000 per worker, from $10,000. The Act also implements a five-year statute of limitations and nondiscrimination rules for the paid leave eligible for the credit. 

Unemployment benefits

The Act extends through Sept. 6, 2021 most unemployment provisions originally enacted as part of the CARES Act. Included among these extensions is the unemployment reimbursement for nonprofit and government employers. In addition, from April 1, 2021, through Sept. 6, 2021, the reimbursement rate increases from 50% to 75%.

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