Huge stimulus package has a lot for 501(c)(3) associations, but much less aid for 501(c)(6)s
March 30, 2020
By William Ehart
The $2.2 trillion economic stimulus package signed on Friday contains a lot of loan money for small businesses and nonprofit 501(c)(3) associations, along with few strings, substantial incentives to lenders, limited paperwork and the possibility of loan forgiveness. Much less aid is provided—at least for now—for groups organized under 501(c)(6) and (c)(4) of the tax code.
After a hectic week advocating for their members’ and their own interests, associations now are determined to get as much information out as quickly as possible to ensure members can take advantage the stimulus money. The U.S. Chamber of Commerce, ASAE and law firm Venable are among those that have produced guides and online resources.
Banks and other institutions are expected to be able to start making loans this week or early next. But despite the magnitude of the stimulus, experts say the $349 billion federal guarantee for small business loans that 501(c)(3)s can apply for will hit its limit quickly. Charitable organizations, association foundations and many professional societies are organized under 501(c)(3) of the Internal Revenue Code.
Nick Simpson, senior vice president of public affairs for the Consumer Bankers Association, said the group’s 50-strong small-business lending committee has been meeting every day for more than a week to prepare the way for funds to get rolling. Member banks likely will focus on existing customers, he said.
The particular Small Business Administration loan program involved—a modified category of the Small Business 7(a) Paycheck Protection Program—typically handles just $20 billion to $30 billion a year, he said.
Tax-exempt business associations organized under 501(c)(6) of the Internal Revenue Code and 501(c)(4) social welfare organizations will be able to tap some of the $10 billion that the law injects into SBA’s existing Economic Injury Disaster Loan grants program, including $10,000 cash advances upon applying.
Observers say more stimulus likely is on the way, and association interests will be pressing for broader inclusion. Congress is on recess until the Senate reconvenes April 28, but Josh Finestone of Venable, who’s been lobbying lawmakers remotely, said committee work goes on.
“You’ve got people on committees working from their homes, working to try to piece together what the extra response needs to look like,” he said. “The problem is that no one really knows. What you’re going to have is a whole lot of people putting together wish lists to fit a moment that we’re not sure is going to develop to fit the wish list. But they have to do it anyway.”
Tom Sullivan, vice president of small business policy at the U.S. Chamber of Commerce, said on a call with reporters Monday that the organization fought hard for 501(c)(6)s to be included, and will continue to do so. The Chamber’s state and local chapters are under that section of the IRS code.
“Right now we are focused on getting the information on how they can get SBA disaster loans, and that $10,000 cash advance,” he told CEO Update. “We're not really wasting much time kind of crying over what wasn't in the three (stimulus bills so far).”
To help members, it has produced a lending guide available on its website. Sullivan said he was pleased to hear Treasury Secretary Steve Mnuchin say over the weekend that the loans will flow as soon as this week. But the process will be “messy” due to the sheer size of the government’s effort.
“We do not want any small business to fail simply because they weren't aware of what (Mnuchin) was talking about,” Sullivan said. “But we don't have better data (than Mnuchin) quite frankly, on how many small businesses will survive. …
“There's no way for us to micromanage what it's going to take for small business to stay open. Impossible,” he said.
Another benefit for 501(c)(3)s is an expansion of the charitable deduction to all taxpayers this year. In addition, all associations that do not receive paycheck protection loans are eligible for Employee Retention Payroll Tax Credits of up to $5,000 for each employee provided certain conditions are met, Venable said in its summary.