Nondiscrimination and Additional Eligibility Criteria Update on the Payroll Protection Program

This article was updated on May 7, 2020.  Updates to this article will be made as new information becomes available.

Schneider Downs continues to track the evolving landscape of Federal financial programs offered due to the disruption of the coronavirus crisis (COVID-19).  On May 5, 2020, the U.S. Small Business Administration (SBA) published an Interim Final Rule (IFR) which supplements the previously posted IFRs by providing guidance on nondiscrimination obligations and additional eligibility requirements.

The following summarizes the key points of this IFR that are either new or provide clarification to previous guidance.

Non-Discrimination

Prior to the CARES Act, nonprofit organizations were not eligible to participate in SBA’s 7(a) Loan Program.  Section 1102 of the CARES Act expanded eligibility, limited to the Payroll Protection Program (PPP), to include certain nonprofit organizations, among other organizations. 

Because of various discrepancies between SBA regulations and Federal Government policies, organizations have faced uncertainty about whether participation in the PPP would require them to substantially change their operations for a short period of months.  

To provide certainty to recipients of PPP loans and to address the burdens that SBA regulations may impose on recipients, this IFR provides guidance clarifying that for purposes of the PPP, nonprofits recipients of PPP loans are entitled to exemptions on the grounds provided in Federal nondiscrimination laws for certain sex-specific admission practices (under Title IX of the Education Amendments of 1972), sex-specific domestic violence shelters and coreligionist housing (under the Fair Housing Act of 1968), and Indian tribal preferences in connection with adoption or foster care practices (under the Indian Child Welfare Act of 1978).

In addition, for purposes of the PPP, SBA regulations do not bar a religious nonprofit entity from making decisions with respect to the membership or the employment of individuals of a particular religion.

Student Workers

While student workers generally count as employees, the IFR has made an exception for institutes of higher learning where student workers’ services are performed under the Department of Education’s Federal Work-Study regulations. 

Specifically, to enable certain eligible small educational institutions to participate in PPP, this IFR provides that institutions of higher education shall exclude work study students when determining the number of employees for purposes of PPP loan eligibility and must also exclude payroll costs for work study students from the calculation of payroll costs used to determine the PPP loan amount.  

Educational institutions that filed loan applications prior to the issuance of this IFR are not bound by this interpretation but may rely on it.

If you need more information or assistance regarding the PPP or the forgiveness calculations for PPP loans, please reach out to any of your contacts at Schneider Downs or contact Joel Rosenthal (jrosenthal@schneiderdowns.com).

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2020 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

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