04/27/2020

Provisions of the CARES Act: Paycheck Protection Program

Understanding which organizations qualify

Paycheck Protection Program (PPP) loans under the CARES Act expand on existing Small Business Association (SBA) loans available to businesses and nonprofit organizations. Eligible organizations include §501(c)(3) tax-exempt charities and §501(c)(19) veterans’ organizations in existence on Feb. 15, 2020 with 500 or fewer employees.

Loan proceeds may be used to cover certain operational needs, such as payroll, rent, health benefits, utilities and mortgage interest payments. The maximum amount of the loan is the lesser of 1) 250 percent of the organization’s average monthly payroll1 for the prior year or 2) $10 million.

An attractive feature of the PPP loan is the forgiveness of the loan for proceeds used to pay payroll, mortgage interest, rents and utility payments for the eight-week period after the loan is originated. No more than 25 percent of the loan forgiveness may be for non-payroll costs. The loan forgiveness amount is reduced for reductions in employment and employee compensation that is not restored by June 30, 2020.