Articles

501(c)(6) PPP Loans: Use the Lobbying Disclosure Act to Measure Lobbying Expenses

Last month we reported that trade associations, chambers of commerce and other 501(c)(6) organizations are now eligible to receive Paycheck Protection Program loans provided that lobbying is not more than 15% of an applicant’s activities and the cost of its lobbying did not exceed $1 million in the most recent tax year prior to February 15, 2020.  As we noted, the law was silent as to how the term “lobbying” should be defined, and at the time of our last article, the SBA had not provided any guidance on the issue.   

Fortunately, the SBA provided needed clarification earlier this month.  In a PPP Frequently Asked Questions release, the SBA stated that for purposes of determining the eligibility of section 501(c)(6) organizations for First Draw and Second Draw PPP Loans, “lobbying activities” is defined by the Lobbying Disclosure Act, rather than the Internal Revenue Code.  It is not unusual for a 501(c)(6) organization’s calculation of lobbying for LDA reporting purposes to be lower than its IRC calculation of lobbying for IRS Form 990 reporting purposes.  This results from the fact that expenses relating to certain lobbying activities, such as grassroots and state and local lobbying, are not included in the LDA definition of lobbying, but are included in the IRC definition.  This important guidance could bring relief to many organizations.

Whiteford’s COVID-19 Response Team is familiar with all aspects of the PPP program.  Guidance and resources on a wide range of COVID-19 related issues can be found at this link.

---

The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.