ASAE Announces Positive News for 501(c)(6) Organizations
If enacted, the HEALS Act would provide some expanded assistance
Yesterday, Senate Republicans released several bills that comprise the Health, Economic Assistance, Liability Protection, and Schools (HEALS) Act – their proposed relief measure to begin negotiations with the Democrat-led House of Representatives. Today, Senate Small Business Committee Chairman Marco Rubio (R-FL) and Senator Susan Collins (R-ME) released an updated proposal that would expand eligibility under the Paycheck Protection Program (PPP) to 501(c)(6) organizations, including nonprofit associations, chambers of commerce, destination marketing organizations and others with 300 or fewer employees. Critically, this updated measure also removes the $500,000 max loan amount that initially applied to 501(c)(6) nonprofit associations. Finally, the updated proposal would make ineligible any 501(c)(6) organization whose “lobbying activities comprise more than 10 percent of the total activities of the organization.” As you may know, nonprofit associations use an average of about five percent of total resources on lobbying.
Following the release of the updated proposal, the American Society of Association Executives (ASAE) thanked Senators Rubio and Collins on Twitter. OSAE and ASAE encourage you to do so as well to help ensure our community is included in final legislation. Thank you for your steadfast advocacy to help move the needle on this issue.
Other PPP Provisions
While Rubio proposed a new total loan amount of $2 million for any borrower, the small business language within the HEALS Act also improves several aspects of the PPP and would, among other provisions:
- Establish new and existing funding of $190 billion;
- Reauthorize the PPP until Dec. 31, 2020;
- Expand eligible uses for non-payroll funds, up to 40 percent of a total loan, including for use on personal protective equipment; and
- Simplify the application process for PPP loans of $150,000 or less.
The bill also proposes a new “second draw” program in which organizations that already received a PPP loan could apply for a second if their organization employs 300 or fewer people and can demonstrate a 50-percent or more reduction in revenue.
Two important notes:
- This language is the Senate Republicans’ initial marker for negotiations with Senate Democrats and the House. As you may recall, the House already passed the HEROES Act, which would expand eligibility under the PPP to all 501(c) nonprofit organizations of any size and with simpler lobbying restrictions. ASAE's focus is to help move negotiations as close to the HEROES Act marker as possible.
- While legislative language will be finalized in a few weeks, if PPP expansion to 501(c)(6) organizations indeed passes into law, such entities will need to move fast to secure PPP loans and the financial relief they need. You are encouraged to consider your options now so, if needed, you can expeditiously pursue PPP loan funds when the time comes.
Rubio’s bill would also authorize $100 billion in long-term, low-cost loans to help small businesses and seasonal businesses in lower-income areas (according to census data) recover. They would be available to employers with no more than 500 employees that can demonstrate a 50-percent reduction in gross revenues and meet the applicable SBA revenue size standard. Loans would be available up to twice the borrower’s annual revenue, capped at $10 million. The loans would have a 100-percent SBA guarantee and a maturity of up to 20 years with a one-percent fixed interest rate.
The HEALS Act proposes several important tax credits to provide additional financial relief:
- Expanded Employee Retention Tax Credit (ERTC)– The ERTC would be increased to 65 percent, up from 50 percent. This tax credit is available to employers for wages paid to employees if they have had to partially or fully suspend their business or if they have seen a significant decline in gross receipts. The required decline in gross receipts for eligibility would be reduced to 25 percent, down from 50 percent. The maximum amount of qualified wages would be increased to $30,000 this year, up from $10,000. Finally, the threshold for employees under which all wages are qualified for the credit would be raised to 500, up from 100. ASAE called for these expansions in its July 21 letter.
- Expanded Work Opportunity Tax Credit (WOTC)– The WOTC would be expanded to include qualified COVID unemployment insurance recipients hired prior to Jan. 1, 2021. The credit amount applicable to this new group would be 50 percent of the first $10,000 in first-year wages.
- Safe and Healthy Workplace Tax Credit– The bill would establish a refundable payroll tax credit equal to 50 percent of an employer’s qualified employee protection expenses. These include personal protective equipment, cleaning supplies, COVID testing for employees and qualified workplace reconfiguration expenses. Each quarter, the credit cannot exceed the cap based on the number of employees. The cap is equal to $1,000 for each of the first 500 employees, plus $750 for each employee between 500 and 1000, plus $500 for each employee that exceeds 1,000. The credit would be available retroactive to March 12, 2020 and through Jan. 1, 2021.
In addition to the provisions outlined above, the HEALS Act includes, among many others, several broad provisions that would provide:
- Another round of stimulus check to qualified Americans;
- $200 federal unemployment benefit add-on for two months (down from the current $600/week set to expire on July 31, 2020);
- Liability protections for businesses that reopen in the pandemic;
- More than $100 billion for reopening schools and colleges;
- Flexibility for state and local aid; and
- Funds for testing and vaccines.
As congressional negotiations begin in earnest, ongoing developments are expected; OSAE, with assistance from ASAE, will keep you apprised.