On May 5, 2020, the U.S. Small Business Administration (“SBA”) posted an eighth Interim Final Rule on Nondiscrimination and Additional Eligibility Criterion. This Interim Final Rule supplements the previously posted interim final rules and provides guidance on nondiscrimination obligations and additional eligibility requirements. For purposes of the Paycheck Protection Program (“PPP”), nonprofits must meet their nondiscrimination obligations under existing Federal laws and Executive Orders. This Interim Final Rule also provides guidance with respect to the religious employer exemption to ensure harmony with Section 702 of Title VII.
In addition, to enable certain eligible small educational institutions to participate in PPP, this Interim Final Rule provides that institutions of higher education shall exclude work study students when determining the number of employees for purposes of PPP loan eligibility. Our summary will focus on the sections of this Interim Final Rule which supplement previous guidance for borrowers:
Section 1 indicates that with respect to any loan or loan forgiveness under the PPP, the nondiscrimination provisions in the applicable SBA regulations incorporate the limitations and exemptions provided in corresponding Federal statutory or regulatory nondiscrimination provisions for sex-specific admissions practices at preschools, non-vocational elementary or secondary schools, and private undergraduate higher education institutions under Title IX of the Education Amendments of 1972 (20 U.S.C. 1681 et seq.), for sex-specific emergency shelters and coreligionist housing under the Fair Housing Act of 1968 (42 U.S.C. 3601 et seq.), and for adoption or foster care practices giving child placement preferences to Indian tribes under the Indian Child Welfare Act of 1978 (25 U.S.C. 1901 et seq.).
In addition, Section 1 indicates that 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 to perform work connected with the carrying on by such nonprofit of its activities.
Section 2 indicates that student workers generally count as employees, unless (a) the applicant is an institution of higher education, as defined in the Department of Education’s Federal Work-Study regulations, 34 C.F.R. § 675.2, and (b) the student worker’s services are performed as part of a Federal Work-Study Program (as defined in those regulations) or a substantially similar program of a State or political subdivision thereof. Institutions of higher education must exclude work study students when determining the number of employees for PPP loan eligibility, and must also exclude payroll costs for work study students from the calculation of payroll costs used to determine their PPP loan amount.
The Administrator has determined that this is a reasonable interpretation of section 1102(a) of the CARES Act’s reference to “individuals employed on a full-time, part-time, or other basis.” Such programs generally provide part-time jobs for students with financial need, and their services are incident to and for the purpose of pursuing a course of study. Work study students are excluded from the definition of employees in other areas of federal law. For example, in the regulations implementing the Affordable Care Act, Treasury defined an employee’s “hours of service” to exclude work study hours.
*****
For additional information on the Paycheck Protection Program, as well as other Federal, state and local relief measures, please visit our COVID-19 Resource Center on our website. If you have any questions, please contact your Tronconi Segarra & Associates advisor or a member of our response team at covid19team@tsacpa.com
This website has been prepared for general guidance on matters of interest only; it does not constitute professional advice. You should not act upon the information contained in this website without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy of completeness of the information contained in this publication; and, to the extent permitted by law, Tronconi Segarra & Associates LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this website or for any decision based on it.
Copyright 2020 Tronconi Segarra & Associates. All rights reserved.
