PPP Loans Now Open to Certain Labor Organizations

Tax code section 501(c)(5) labor organizations now can apply for Paycheck Protection Program loans, but they need to act quickly before funding and time run out.

For the first time, Tax Code Section 501(c)(5) labor organizations can apply for Paycheck Protection Program (PPP) loans, provided they file their applications by May 31, 2021, and meet certain criteria. Given the fact that PPP loans in 2020 were distributed on a first-come, first-served basis, eligible unions wishing to avail themselves of this program should act immediately.

PPP loans are private bank loans supported by the U.S. Small Business Administration and designed to help businesses survive the pandemic. Prior COVID-19 relief bills excluded labor organizations from applying for PPP loans.

The American Rescue Plan Act signed into law on March 11, 2021 opens up PPP loan eligibility to a Tax Code Section 501(c)(5) labor organization if: (a) it has 300 or fewer employees at the applying location; (b) no more than 15% of its revenue comes from federal lobbying activities; (c) no more than 15% of its activities are federal lobbying; and (d) it spent no more than $1 million on federal lobbying in the tax year ending on or before February 15, 2020.

A PPP loan can be up to 2.5 times monthly payroll costs or $10 million, whichever is less. It can be spent on payroll, rent, mortgage interest, utilities, and other items. So long as 60 percent of a PPP loan is used for payroll costs over an up-to-24-week period, the loan may be forgiven. An applicant must certify that “[c]urrent economic uncertainty makes this loan request necessary to support ongoing operations.”

If your labor organization is interested in applying for a PPP loan, it should immediately contact its bank and its accountant to prepare and submit an application, as the deadlines are uncertain and the funds are limited.

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