In an effort to provide additional clarity with respect to 501(c)(7) eligibility for the Paycheck Protection Program (PPP), NCA is sharing additional information received from the Office of Financial Assistance with the Small Business Administration, which may be of use in determining whether certain 501(c)(7) private clubs are eligible for the PPP. An individual club’s ability to qualify is dependent on that club’s facts and circumstances. NCA does not provide legal advice on whether clubs are eligible for the PPP and encourages clubs to consult with an attorney knowledgeable and experienced in these matters.
As we have reported previously, Title 13, Section 120.110(i) states that private clubs and businesses which limit the number of memberships for reasons other than capacity are ineligible for the PPP. It appears the test for “reasons other than capacity” is focused on the following:
Discrimination prohibited. To the extent not covered or prohibited by part 112 of this chapter, recipients of financial assistance may not;
- (a) Discriminate with regard to goods, services, or accommodations offered or provided by the aided business or other enterprise, whether or not operated for profit, because of race, color, religion, sex, handicap, or national origin of a person, or fail or refuse to accept a person on a nonsegregated basis as a patient, student, visitor, guest, customer, passenger, or patron.”
Organizations may charge a membership fee and/or monthly dues. According to the SBA, these are not considered restrictive practices. Title 13 CFR Section 113.3(a) provides guidance on what types of businesses are ineligible. You can find the relevant language on page 108 of the document, but it is also included below.
“Businesses that restrict patronage for any reason other than capacity are not eligible.” For example, a men’s or women’s only health club is not eligible, whether the business is a franchise or not.
Circumstances exist in which certain businesses, like fitness centers that market to one gender, may be eligible if they permit both men and women to join and/or use the facility. Lenders must document the file with the following:
- i. Affidavit signed by the Applicant that the business is open to both men and women; and
- ii. Evidence that the facility is open to both men and women, such as appropriate bath/locker rooms, or documented membership demographics.
Earlier today, the Senate passed legislation that would extend the PPP application deadline to May 31, 2021. President Biden is expected to sign the measure into law.
If you have any questions, would like further information on these or any other issues affecting the club industry or would like to get more involved with our advocacy efforts, please contact Joe Trauger, NCA Vice President of Government Relations, at [email protected] or 202-684-8753.