Skip to Main Content
Services Talent Knowledge
Site Search


Our attorneys stay on top of changes in legislation, agency regulations, case law, and industry trends—then craft timely legal alerts to keep clients up to date on legal developments important to their business.

March 15, 2021

COVID-19: Expanded Eligibility for Not-for-Profit Organizations Under the Paycheck Protection Program

On March 11, President Biden signed the American Rescue Plan Act of 2021 (Rescue Act) that, among other things, expanded the eligibility of not-for-profit organizations under the Paycheck Protection Program (PPP).

Previously eligible types of not-for-profit organizations, namely those under 501(c)(3) and 501(c)(4) of the Internal Revenue Code, are now eligible to receive a first draw PPP loan if the organization employs 500 or fewer employees per physical location. The Small Business Association (SBA) has not issued guidance specifically addressing what constitutes a single physical location. The eligibility criteria for a second draw PPP loan remain the same as outlined in our alert from January 25, 2021.

Not-for-profits should calculate their number of employees in accordance with the established guidance. Each person employed is counted as one employee regardless of full-time or part-time status, noting, however, that independent contractors are not included in this calculation or in the calculation of the loan amount. Applicants may use their average employment over the time period used to calculate their loan amount to determine their number of employees for the purposes of applying an employee-based size standard. Alternatively, applicants may elect to use the SBA’s usual calculation: the average number of employees per pay period in the 12 completed calendar months prior to the date of the loan application (or the average number of employees for each of the pay periods that the business has been operational, if it has not been operational for 12 months).

The Rescue Act also added another category of eligible not-for-profit organizations, the “additional covered nonprofit entity,” which is defined as an organization described in section 501(c) of the Internal Revenue Code, other than (3), (4), (6), or (19) and exempt from tax under section 501(a) of the Code. Additional covered not-for-profit entities are eligible for both first and second draw PPP loans if:

  • It does not receive more than 15 percent of its receipts from lobbying activities
  • Lobbying activities do not comprise more than 15 percent of the total activities of the organization
  • The cost of lobbying activities did not exceed $1 million during the most recent tax year that ended prior to February 15, 2020
  • It does not employ more than 300 employees

Expressly excluded from the definition of “additional covered nonprofit entities” are those entities described in 13 CFR § 120.110. This includes:

  • Financial businesses primarily engaged in the business of lending
  • Passive businesses owned by developers and landlords that do not actively use or occupy the assets acquired or improved with the loan proceeds
  • Life insurance companies
  • Businesses located in a foreign country
  • Pyramid sale distribution plans
  • Businesses deriving more than one-third of gross annual revenue from legal gambling activities
  • Businesses engaged in illegal activity
  • Private clubs and businesses that limit the number of members for reasons other than capacity
  • Government owned entities

Finally, the Rescue Act adds $7.25 billion in additional funding to the PPP, but does not extend the application window, which is still currently set to close on March 31, 2021; the majority of lenders are closing the application window before that date.

If you have any questions regarding the content of this alert, please contact Danielle Katz, associate, at, or another member of the firm’s Financial Institutions & Lending Practice Area.

We also have a specific team of Barclay Damon attorneys who are actively working on assessing regulatory, legislative, and other governmental updates related to COVID-19 and who are prepared to assist clients. Please contact Yvonne Hennessey, COVID-19 Response Team leader, at or any member of the COVID-19 Response Team at


Click here to sign up for alerts, blog posts, and firm news.

Featured Media


New York State Law Mandates Employer Notification Regarding the Right to File for Unemployment Insurance Benefits


OMIG's Abbreviated Self-Disclosure Process: What Providers Need to Know


Massachusetts High Court Ruling Raises Standard of Care, Stakes for Broker-Dealers


New York State Passes Law Barring Employers From Mandating Employee Attendance at Captive Audience Meetings


Second Department Declines to Expand Scope of Arons


NYS DOH Issues New Notice Requirement for Facility Fees

This site uses cookies to give you the best experience possible on our site and in some cases direct advertisements to you based upon your use of our site.

By clicking [I agree], you are agreeing to our use of cookies. For information on what cookies we use and how to manage our use of cookies, please visit our Privacy Statement.

I AgreeOpt-Out