Paycheck Protection Program

Gross Receipt Considerations for a Not-for-Profit’s Second Round of PPP

Not-for-profit organizations looking to participate in the second round of the Paycheck Protection Program (PPP) will need to provide information about their gross receipts and how they have been impacted. The program allows not-for-profit organizations to participate in the program if they can demonstrate that they have incurred at least a 25% or greater reduction in “gross receipts“ for any quarter of 2020 when compared to the same quarter in 2019.  The quarterly comparison is based on the calendar year and not a fiscal year-end.  Accordingly, not-for-profits will not be able to simply look at their fiscal year-end’s June 30, 2020 numbers and compare them to June 30, 2019. The applicable quarters are those ending March, June, September, and December of 2020 compared to 2019.


Since the revenue reduction calculation is based on “gross receipts“, it’s important to understand how the Small Business Administration (SBA) defines it. For this definition, the SBA has turned to the Internal Revenue Code of 1986 – specifically section 6033 – which essentially defines the gross receipts received by the organization as reported on its tax return Form 990.  So, the question of whether a not-for-profit should be using the cash basis or accrual basis depends on which accounting method it uses when filing and preparing it’s 990 tax return.  Generally, not-for-profits that receive an audit of their annual financial statements are on the accrual basis of accounting.  Accordingly, that will be the basis used for the preparation of the 990 and for the SBA’s revenue reduction test.

The current SBA guidance further goes on to explain that a not-for-profit entity should consider revenues from all sources without any reduction of costs or expenses related to the earning or generating of the revenue.  So, for example, the gross amount received as contributions, gifts, grants, and similar amounts would be at the gross amount and not reduced for any expenses for raising and collecting such amounts.

Other types of income would be items like dues or assessments from members or affiliated organizations, gross receipts from business activities, as well as gross receipts received as investment income, such as interest dividends, rents, and royalties.

A not-for-profit organization would not consider and should exclude any previously received forgiveness from the first round of the Paycheck Protection Program in the comparison of the gross receipts.  In order to substantiate the revenue decline when applying for round two of the Paycheck Protection Program, not-for-profit entities can expect to provide documentation that supports this assertion.

Information that banks will be looking for may include quarterly financial statements of the entity,  and quarterly or monthly bank statements showing deposits for the relevant quarters.  Financial statements that are prepared internally will require some type of attestation as to their accuracy.


Unfortunately, the SBA guidance currently available does not go far enough to address certain instances where the revenue decline calculation may result in the not-for-profit not meeting the required decline due to certain long-term pledges or gifts where only a fraction of the total is to be received currently, with the rest over a longer  period of time.  With long-term pledges and other fundraising campaigns for specific restricted purposes (i.e.: a capital campaign) not-for-profits may find that they cannot demonstrate a revenue reduction.

As we await further guidance from the SBA to specifically address these types of situations, we recommend that not-for-profit entities hold off on applying for the second round of the PPP until we receive further clarifications.

For more information with regards to applying for the first or second round of PPP as a not-for-profit organization, or anything relating to the industry overall, feel free to reach out to Sax’s Not-for-Profit Practice.

About the Author

Al Traverso, CPA is a Partner at Sax and a member of the firm’s Not-for-Profit Practice.  With more than 20 years of experience, Al is able to advise clients on financial strategy, improved operational efficiencies, tax challenges and more.  He can be reached at [email protected].

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