CARES Act Could be a Lifeline for Local Churches

The U.S. Congress recently passed three relief bills to help the country navigate the economic impact of the Coronavirus pandemic. The third bill was the 2020 CARES Act, which includes a "paycheck protection plan" that will help pay staff but can also help with mortgage payments, rent, utilities, and payment of benefits. It is a loan, which may be 100 percent forgiven if you maintain your staff through the specified period and meet other requirements. Churches should consult with an accountant, attorney or banker before making their decision about participating in the loan program.

Nonprofits and religious organizations are considered small businesses for the sake of the Small Business Association (SBA) under this bill and only for this bill. Therefore, any entity that qualifies under the SBA is allowed to apply for a loan from the government and the loan would be two and a half times the average monthly payroll costs. For those concerned about Church-State relations, there are no stipulations or specific obligations for religious organizations in this legislation. This is simply an extension of capital for the purpose of keeping employees on the payroll and off of unemployment.

The applying entity has to have no more than 500 employees per physical location, and the loan does not have to be repaid as long as the number of full-time employee equivalents (FTEE) as of June 30, 2020 is equal to or greater than the number of FTEE as of June 30, 2019. In other words, the loan becomes a grant. It is not considered taxable or Unrelated Business Income. (If the number of FTEE drops below previous levels, then the percentage difference in headcount is used to determine how much of the loan will remain, amortized over ten years at four percent. The remainder becomes a grant.)

Funds provided by the loan are to cover ongoing costs such as rent, mortgages, utilities, salaries, retirement contributions, and other qualified expenses.

Applications for loans will be available on the SBA website. Submissions are opening this coming Friday, April 3, and will be allocated on a first come, first served basis. Once the funds are disbursed, no more loans will be issued.

Click here to read about another bill passed that may impact your church, the Families First Coronavirus Response Act (FFCRA).

DOWNLOAD Paycheck Protection Program - What We Know (PDF)

(Grateful to Dr. Thad Austin of Duke Divinity School for passing on this information.)