By Cheryl Magness
On Friday, March 27, President Donald J. Trump signed the CARES (Coronavirus Aid, Relief, and Economic Security) Act into law.
The act includes the Paycheck Protection Program (PPP), an emergency source of funding administered by the U.S. Small Business Administration (SBA) to assist small employers that have been financially impacted by COVID-19. The program is designed to help employers with 500 or fewer workers avoid laying off staff in the wake of the pandemic.
In the first days following the passage of the CARES act, there was some question about whether it would apply to nonprofits such as churches and religious schools. On April 2, the SBA issued guidance indicating that tax-exempt nonprofits as described in section 501(c)(3) of the Internal Revenue Code are eligible to apply.
The SBA guidance also said:
“All loans guaranteed by the SBA pursuant to the CARES Act will be made consistent with constitutional, statutory, and regulatory protections for religious liberty, including the First Amendment to the Constitution, the Religious Freedom Restoration Act, 42 U.S.C. 2000bb-1 and bb-3, and SBA regulation at 13 C.F.R. 113.3-1h, which provides: ‘Nothing in [SBA nondiscrimination regulations] shall apply to a religious corporation, association, educational institution or society with respect to the membership or the employment of individuals of a particular religion to perform work connected with the carrying on by such corporation, association, educational institution or society of its religious activities.’ SBA intends to promptly issue additional guidance with regard to religious liberty protections under this program.”
According to the SBA website, the PPP “prioritizes millions of Americans employed by small businesses by directing $349 billion towards job retention and business operating expenses. … If all employees are kept on payroll for eight weeks, SBA will forgive the portion of the loans used for payroll, rent, mortgage interest, or utilities. Up to 100 percent of the loan is forgivable.”
Key provisions of the program include:
- Loan payments of up to $10 million for eligible participants. The loan amount is determined by 250 percent of the business’s (or nonprofit’s) monthly payroll, or eight weeks of prior average payroll plus an additional 25 percent.
- Deferred loan payments for six months.
- Loan forgiveness for the first eight weeks after the loan is dispensed. This forgiveness is contingent upon the business keeping all its workers on the payroll.
To be eligible for the program, an employer must be able to demonstrate that it was adversely affected between Feb. 15 and June 30 by the COVID-19 pandemic. In addition, the employer must use program funds to maintain payroll and other operating expenses such as rent and utilities, and the employer must not be receiving funds for the same use from another SBA program.
Workers who were previously laid off during the program period may be brought back onto the payroll with loan funds. Any portion of the loan that is not covered by the loan forgiveness provision may be carried forward at a rate of .5 percent for a two-year term.
Concordia Plan Services (CPS), the Synod’s benefits provider, has been updating LCMS workers in light of the COVID-19 pandemic. The CPS website includes information on legislation, FAQs for both workers and ministries, communications from CPS leaders, and other resources. The most current information about the COVID-19 crisis can be found at concordiaplans.org/hub/covid-19-what-you-need-to-know. Click on the CARES Act tab to find out more about the PPP and its implications for religious nonprofits.
CPS President and CEO James F. Sanft said, “There are many provisions of the CARES Act, but at CPS we believe that, for most LCMS ministries, the Small Business Administration loans available through the Paycheck Protection Program are likely the best fit. We are happy to have worked with the Church Alliance and our champions in Washington, D.C., to advocate for clear SBA guidance that religious entities are eligible to apply for these loans. We encourage ministries to visit our website at concordiaplans.org for guidance and to access the loan application.”
In a March 31 update at lcef.org, Lutheran Church Extension Fund (LCEF) encouraged its borrowers to take advantage of this government program. “It will NOT be an event of default on your loan with LCEF if you obtain an SBA loan. You are free to pursue this option,” LCEF stated.
“Apply as soon as you can,” said Dan Brown, LCEF vice-president of national lending. “Demand for these loans will be high. The process may take time, so if you need financial relief now, look for other sources in the meantime.”
LCEF is also continuously updating its clients about the impact of the pandemic. In a March 30 video message posted on the LCEF website, LCEF Pesident and CEO Rev. Bart Day said, “LCEF is here to support you as you continue to focus on serving the people of your community and sharing the Gospel of Jesus Christ.”
Visit lcef.org/business-continuity-statement for more information.
A March 31 eblast from the LCMS Office of the President observed, “Given the speed with which the CARES Act was adopted, additional guidance may be forthcoming regarding PPP eligibility requirements and terms. Nevertheless, any organization interested in learning more about the PPP or applying for a PPP loan is encouraged to speak with an SBA lender to obtain additional information and begin the application process.”
SBA lenders will begin receiving applications for PPP loans on April 3. A list of SBA lenders (LCEF is not one) is available at sba.gov.
A March 30 article in Christianity Today noted, “There are roughly 350,000 churches in the United States. Most are small and have a single (often part time) staff member. … If you sense your church might not make it out of this crisis, or if you expect to be laying off staff or taking significant pay cuts during this crisis, you might want to consider this option.”
For ongoing updates from the Synod about the COVID-19 pandemic, visit lcms.org/coronavirus.
To watch a discussion of the SBA loans/PPP by LCMS President Rev. Dr. Matthew C. Harrison and CPS CEO Sanft, click here.
This notice regarding the CARES Act and the PPP is for general information purposes only. This notice is not a detailed or complete summary or analysis of the CARES Act or the PPP and may not be relied on as legal advice. This notice reflects the CARES Act provisions without governmental guidance on March 31, 2020. The CARES ACT and PPP are subject to additional guidance and interpretations which may be issued by one or more governmental agencies.
Posted April 3, 2020