Housing Cooperatives and PPP Loans- Is It Time To Rejoice?
Monday, December 28, 2020

The Consolidated Appropriations Act, 2021 (“CAA”) newly passed by Congress on December 21, 2020 and just signed by the President, should “spark joy” for housing cooperatives (“co-ops”). The CAA renders housing cooperatives eligible for the Paycheck Protection Program (“PPP”). Division N, Title III of the CAA, known as the “Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act” includes significant and retroactive changes to the eligibility and administration of the PPP.

The CAA amends section 7(a)(36)(A) of the Small Business Act (15 U.S.C. 636(a)(36)(A)) to include the term “housing cooperative” with not more than 300 employees. Note: this language refers explicitly to cooperatives. The fate of condominiums (and HOA’s) remains to be seen.

Originally, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed April 2020, Congress created the PPP to help small businesses retain their employees and remain viable. However, the CARES Act did not provide any assistance to co-ops. Pursuant to 13 CFR 120.110(D)(3), passive businesses owned by developers and landlords were deemed ineligible. Additionally, apartment buildings were also excluded.

This oversight was most unfortunate. Each co-op functions as a small business, providing housing and employing various types of workers and managers.  In fact, co-op budgets depend on shareholders maintenance payments and commercial rent from tenants to pay the co-op’s expenses. As a result of COVID-19, both maintenance and rent payments have been reduced or suspended in many cases. Without this income, the ability of co-ops to pay employee salaries, as well as for utilities, taxes, and other expenses was significantly effected. The CAA addresses this issue.

In addition to the inclusion of co-ops, there are other important distinctions in relation to how the loan funds must be allocated and how the rules have changed since the CARES Act passed in April. The CAA specifies that expenses paid with PPP loans are now tax-deductible. The CAA increases the refundable payroll tax credit and allows businesses to take the employee retention tax credit as well as participate in the PPP. The CAA further increases allocations for the Low-Income Housing Tax Credit.

In addition, the CAA expands the definition of eligible expenses that are covered by the PPP. Covered operations expenditures now include “payment for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses.” The definition of covered property damage is expanded to include vandalism that occurred during the 2020 year that was not covered by insurance or a separate compensation.

The definitions of covered supplier cost and covered worker protection expenditure have broadened as well. Covered supplier cost is “an expenditure made by an entity to a supplier of goods for the supply of goods” that are essential to operations or made pursuant to a contract. Covered worker protection expenditure now covers safety protocols related to COVID-19. Said expenditures may include, inter alia, a drive through window facility, air systems, expansion of business space, health screening capability, and other personal protective equipment.

The CAA extends the availability of PPP loans through March 31, 2021, subject to the availability of funds. In order to receive loan forgiveness, borrowers must allocate the funds towards certain expenses as discussed supra. Additionally, 60% or more of the funds must be used for payroll. Borrowers have the option of spending the funds within eight or 24 weeks.

We recommend cooperatives promptly contact their banks to discuss applications and how best to utilize the benefits of this program. High demand is likely, and as with the first set of PPP loans, those who apply early are much more likely to receive funds.  It is important that you work closely and quickly with your banking partner.


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