On March 18, the SBA released a new Interim Final Rule related to changes to the Paycheck Protection Program made by the American Rescue Plan Act signed into law on March 11, 2021. The new legislation expands the category of organizations who are eligible to obtain PPP loans, as well as adds some exclusions from payroll costs for purposes of PPP loan forgiveness. This new Interim Rule modifies the prior Interim Rules issued in January following the enactment of the Economic Aid to Hard-Hit Small Business, Nonprofits and Venues Act.
Under the new law, all tax-exempt entities other than those under 501(c)(4) who meet the applicable employee test are now eligible for PPP loans. Section 501(c)(3) organizations must have 500 or fewer employees per location, but most other non-profits are limited to no more than 300 employees per location. A limit on lobbying activities and receipts from lobbying activities generally applies to eligibility.
Also added as an eligible borrower are internet-only news or periodical publishers (with an NAICS code of 519130) that collect and distribute local, regional or national news and have not more than 500 employees. This eligibility began on March 11, 2021.
Previously, payroll costs attributed to the Employee Retention Credit created by the CARES Act were not eligible for PPP loan forgiveness. The new legislation adds to this exclusion payroll costs constituting qualified wages attributable to a new Employee Retention Credit created by the statute, as well as premiums taken into account for the credit related to COBRA coverage. These changes apply only to applications for PPP loan forgiveness received on or after March 11, 2021.
Shuttered Venue Operator Grants. The new statute modifies the interaction between PPP loans and Shuttered Venue Operator grants. A SVO grant issued to a venue that receives a PPP loan after December 27, 2020, but before receiving such grant will be reduced by the amount of the PPP loan. But a venue operator is not eligible for a PPP loan if it has already been approved for a SVO grant. As the SBA still has been unable to open a portal to begin to accept applications for SVO grants (although it now states this should happen in early April), eligible venues may obtain a PPP loan before applying for a grant if so desired, knowing the grant will be reduced if the PPP loan is approved.
Restaurant Revitalization Fund. Following the Shuttered Venue Operator grants created in December, the new statute creates a Restaurant Revitalization Fund of $28.6 billion, with substantially fewer criteria than the SVO grants. The maximum grant is $10 million and is limited to $5 million per location. It relates to the period beginning February 15, 2020, and runs through December 31, 2021, and is for premises “where the public may taste, sample, or purchase products” or other similar places “in which the public or patrons assemble for the primary purpose of being served food or drink”. Specific examples include restaurants, food trucks, food carts, lounges, bars and caterers, so long as they are not government-owned, have more than 20 locations, or have a pending application for a SVO grant. This grant is to be used for specified expenses largely tracking those of PPP loan proceeds. If, however, a business ceases operations, it is required to return all unused grant proceeds.
Unlike eligibility for a PPP loan or SVO grant, a business did not need to be in operation in March 2021, or even be open for business currently; an entity that has not yet opened as of the date of application but has incurred expenses is eligible for a grant equal to those expenses. Generally, the grant is to replace lost revenue, so for a business in operation for all of 2019, the loss would be the excess of 2019 revenues over 2020 revenues; if only in operation for part of 2019, then the average monthly receipts in 2019 are multiplied by 12 and compared to 2020. If the business only opened in 2020, then the loss would be expenses less revenue. In each case, the eligible losses must be reduced by any PPP loans received.
Once the SBA gets its portal for these grants running (they are so new there is not yet any mention of them on the SBA website), during the first 60 days $5 million is to be applied to business with gross receipts in 2019 of $500,000 or less. Further, during the first 21 days, the priority will go to small business concerns owned by women and veterans, and socially and economically disadvantaged small business concerns (all of which are statutorily defined in prior law).
Interim Final Rule: https://home.treasury.gov/system/files/136/Interim-Final-Rule-Paycheck-Protection-Program-as-Amended-by-American-Rescue-Plan-Act.pdf