American Rescue Plan Act: Relief for Nonprofits

By Sibi B. Thomas  |  March 22, 2021

On March 11, 2021, President Biden signed the American Rescue Plan Act (ARPA) into law providing an additional $1.9 trillion in COVID-19 relief. ARPA includes several relief provisions for nonprofits. According to Independent Sector, an advocacy coalition for nonprofits, ARPA “contains important and hard-fought victories for the nonprofit sector and the people we serve during COVID-19 and these challenging economic times.”

Paycheck Protection Program (PPP)

ARPA provides an additional $7 billion in PPP loans and expanded eligibility to more nonprofit organizations.

ARPA expands eligibility to Additional Covered Nonprofits. Additional Covered Nonprofits are entities other than 501( c) (3), (4), (6) or (19), that are exempt from taxation under 501(a). Additional Covered Nonprofits are eligible to receive PPP loans if they meet the following criteria:

• Employ no more than 300 employees
• Does not receive more than 15% of its receipts from lobbying activities
• Lobbying activities do not comprise more than 15% of total activities of the organization; and  
• The cost of the lobbying activities did not exceed $1million during the most recent tax year ended prior to February 15, 2020.

Additional Covered Nonprofits are also eligible to receive second draw PPP loans if they meet the revenue reduction and size criteria.

ARPA expands PPP eligibility to include additional nonprofits such as 501(c)(5) labor and agricultural organizations and community locations of larger nonprofits. 501(c)(3) organizations that employ not more than 500 employees per physical location are now eligible for first draw PPP loans. There are no changes to the second draw PPP loan eligibility.

The House passed a bill ex­tend­ing the dead­line for ap­ply­ing for a Pay­check Pro­tec­tion Pro­gram loan to May 31, send­ing the leg­is­la­tion to the Sen­ate as the cur­rent March 31 dead­line looms.

Shuttered Venue Operators Grant (SVOG)

ARPA provides an additional $1.25 billion for the SVOG grant program and allows eligible applicants to access both the SVOG and PPP loans. The Consolidated Appropriations Act that was enacted at the end of 2020 prohibited eligible businesses from receiving both an SVOG grant and a PPP loan. Eligible entities may now apply for both an SVOG grant and a PPP loan, but the SVOG grant must be reduced by the amount of the approved PPP loan. The SVOG grant is subject to Single Audit requirements for governments and non-profit recipients of these funds.

Economic Injury Disaster Loan (EIDL)

ARPA appropriates $15 billion to the SBA to provide $10,000 EIDL grants to small businesses. Qualifying nonprofits include those with less than 300 employees that experienced at least a 30% reduction in gross receipts during an eight-week period between March 2, 2020, and December 31, 2021. However, $5 billion of the EIDL grants are earmarked for businesses that lost at least 50% of revenue and had fewer than 10 employees. ARPA provides for a phased approach to EIDL distributions beginning with businesses that did not receive the full amount requested in previous applications. These targeted EIDL grants are also excluded from income and will not result in denial of a deduction, reduction of tax attributes or basis increase denial.

Employee Retention Credit (ERC)

ARPA extends the availability of the ERC from the current June 30, 2021, to December 31, 2021. ARPA also increases the availability and value of the ERC to employers who are “severely financially distressed” or experienced a severe decline in gross receipts (more than a 90% reduction in gross receipts due to COVID-19 compared to the same period in 2019) and allows all wages to be taken into account, including wages paid to employees providing no services.

Unemployment Insurance & Self-Insured Employers

ARPA extends the current unemployment insurance benefits through September 6, 2021. The federal coverage for self-insured employers is 50% through March 31 and 75% from April 1 through September 6, 2021. This increase in federal coverage provides additional relief to self-insured nonprofits.

Other Relief Measures

Nutrition: ARPA will extend the 15% increase in SNAP benefits through September 30, 2021 to address the hunger crisis.

Mental Health: The need for mental health and substance use disorder treatment has increased during the pandemic. ARPA includes $3.88 billion to expand on those investments made in the year-end 2020 package to increase availability of treatment.

Community Health Centers and Health Disparities: ARPA includes $7.6 billion for community health centers, $1.44 billion for Older Americans Act programs, $800 million for the National Health Services Corps and more.

Child Care and Head Start: ARPA includes $39 billion for childcare, including nearly $24 billion for Child Care Stabilization grants and nearly $15 billion for the Child Care and Development Block Grant (CCDBG) program. States must use Child Care Stabilization funds to award subgrants to qualified childcare providers that are either open or temporarily closed to help support their operations during the pandemic. Subgrants can be used for expenses such as personnel expenses, rent and mortgage payments, cleaning supplies and personal protective equipment, mental health services for children and staff, and other goods and services necessary to maintain or resume operations of the childcare provider. ARPA gives states the authority to expand eligibility for childcare assistance to essential workers, regardless of their income. The CCDBG funds will expand childcare assistance. ARPA also includes $1 billion for Head Start, to ensure Head Start programs have the resources they need to continue safely providing services to children and families throughout the pandemic.

Family Violence and Child Abuse Prevention and Treatment: ARPA includes $350 million in funding for programs authorized under CAPTA. This includes $250 million in funding for community-based child abuse prevention programs to provide services to strengthen and support families throughout the pandemic.

Assistance for People Experiencing Homelessness: ARPA includes $5 billion to help communities provide supportive services and safe, socially distant housing solutions, including purchase of properties like motels for use as non-congregate shelter, to protect the health of these families and individuals and help control transmission of coronavirus.

Higher Education: ARPA provides $39.6 billion to colleges and universities and their students. At least half of such funding must be spent on emergency financial aid grants to students to help them with college costs and basic needs like food, housing, and health care, with the other half available to institutions of higher education to defray lost revenue and increased costs from declining enrollment, the transition to online learning, closures of revenue-producing services and facilities, and COVID-19 testing, vaccination, PPE, and classroom retrofits.

National Endowment for the Arts and National Endowment for the Humanities: ARPA includes $135 million apiece for the NEA and NEH. These funds will support arts and cultural organizations to address layoffs, budget cuts and implementation of public health protocols to safely reopen.

Corporation for Public Broadcasting. ARPA includes $175 million in support for public broadcasting to help public broadcasters around the country weather the economic fallout to their stations from the COVID crisis.

Marks Paneth will continue to monitor developments and will provide updates as they become available. Contact Sibi Thomas, Partner in Marks Paneth's Nonprofit, Government & Healthcare Group, or your Marks Paneth advisor if you need additional information or assistance.

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About Sibi B. Thomas