FINANCIAL RELIEF FOR CONGREGATIONS DURING THE COVID-19 PANDEMIC
As the financial impact of the coronavirus pandemic continues, congregations can seek financial relief from the federal government. Here are details about relief currently available:
PAYROLL PROTECTION PROGRAM – WHAT CHURCHES NEED TO DO NOW
**The Payroll Protection Program has been endorsed by the Standing Committee. You do not need their prior approval to apply. We only ask that you follow the guidelines to ensure that the loan is used for forgivable purposes. We also ask that you make the Standing Committee aware that you have made application to the Payroll Protection Program.**
The two trillion-dollar federal economic stimulus bill known as the CARES Act was passed and signed last Friday. It includes a provision offering forgivable loans to small businesses, including non-profits, for the purpose of maintaining payroll and paying other qualified expenses, including mortgage interest, rent, and utilities. The maximum amount of the loan is 2.5 times the organization’s average monthly payroll expenditure over the previous twelve months, including most employee benefits, pension contributions, and employer 403(b) contributions. The application period opens on Friday, April 3. The application period ends on June 30, but because the amount available for these loans is capped, churches should apply as soon as possible.
The loans are backed by the Small Business Administration but are administered by banks. You may seek loans from any Small Business Administration-approved lender. Due to the size of the program, banks that have previously not worked with the Small Business Association are now doing so. Contact your bank to see if you can apply through them.
You can find the loan application here. Here are some notes for completing your application:
- The application asks for information about and signatures of owners. Nonprofits, including churches, do not have owners, so these fields can be skipped.
- The form asks for the number of employees you have. This should be your average headcount over the last 12 months, including 1099 contractors. The count should be number of people – there is no differentiation between full-time and part-time employees and contractors for the purpose of this question.
- Special rules apply for any employees whose earnings (including salary and SECA reimbursement) exceed $100,000. See this fact sheet for details.
- There is conflicting information about whether the portion of clergy compensation classified as housing or utility allowance should be included when calculating average monthly payroll. The most recent information we have is that it should be included. Follow your lender’s instructions.
While we are still awaiting specific guidance about exactly what documentation will be required alongside the application, congregations can begin preparing by assembling the following information. It is possible that not all of this information will be required. It is also possible that other information not listed here will be required. This list is based on the guidance we have at the moment, and additional information is emerging quickly.
- IRS 501(c)3 letter
- Copies of driver’s license, passport, or other proof of identity, of parish officers (rector/priest-in-charge, wardens, treasurer)
- Proof of payroll for the last 12 months. Because it is not yet clear exactly what time frame will be requested, you should assemble payroll data beginning January 1, 2019 through the present. This documentation should include payroll summaries and bank statements from the same period. Quarterly IRS forms 940 and 941 may be required. If you do not have this information at hand, please contact your payroll provider.
- Statements indicating a breakdown of payroll-associated benefits, including pension payments, employer 403(b) contributions, health insurance, and dental insurance (if paid by the employer). Note that for clergy health insurance, we are awaiting guidance on whether the congregation or the diocese will be considered the payer for the purposes of this loan program.
- 1099s for individual 1099 contractors. Omit 1099s issued to LLCs or 1099s for payments other than non-employee compensation.
- Recent mortgage or rent statements (if applicable).
- Recent utility bills.
About loan forgiveness:
Most or all of the loan is forgivable, provided the following standards are met:
- Loan proceeds must be spent on qualifying expenses: payroll and associated benefits, rent, utilities, and mortgage interest, within eight weeks following the issuance of the loan.
- Staff and payroll must be maintained for the eight-week period after the loan is issued.
- While not required, it is advisable that churches set up a separate account for administration of loan proceeds, to make it easier to document compliance with these standards.
- For any portion of the loan not forgiven, payments may be deferred for six months, with a maximum 10-year term, a maximum interest rate of 4%, and no prepayment penalty.
**Thank you to the Diocese of Lexington for this copy.