Financial Update #5: COVID-19 Financial Relief

Dear SGC Pastors,

Please be aware of the following updated information relating to COVID-19 Financial Relief that I will discuss in our next zoom meeting:

Best Resources Online

I regularly track these sites for the latest information: ECFANonprofitCPAAICPAWagenmaker & Oberly blog, and Vanderbloemen.  Here are some recent helpful posts on these sites:

  • Wagenmaker & Oberly provide an excellent overview of issues most affecting churches and non-profits in the CARES Act in their April 7 blog post.

  • Mike Batts, CPA, has an updated great summary of all the provisions in the CARES Act that pertain to churches and non-profits.

  • ECFA has a good summary of most common questions churches are asking about the CARES Act.

  • Nonprofit Special Alert from Batts on required Emergency Paid Sick Leave and Family and Medical Leave effective April 1, 2020 (discussed below).

Paycheck Protection Program Update

The Treasury Department released an FAQ on PPP Loans that should give clarity to your banks in processing applications.  The most relevant info that could affect some churches is:

  • The $100,000 salary limitation does not include benefits.

  • Gross Payroll will be used for calculation of the loan and loan forgiveness.

  • The time period for the calculation can be either calendar year 2019 or the previous 12 months before application (or seasonal application).

  • There is still no clear guidance on housing allowance.  If your bank allows you to include, then great.  But be prepared for that amount to ultimately not be forgiven.

  • Beginning April 10, independent contractors and self-employed individuals can begin applying for PPP loans. So, make every effort to apply this week if you are able to.  Also, as you are helping your church members, make sure the self-employed are aware of this relief that is available for them.  If you choose to not pursue the PPP, remember to consider the other relief available through the CARES Act, like the Employee Retention Credit for Employers, or the FFCRA payroll credit.

COVID-19 Economic Injury Disaster Loan Application

Some smaller churches are considering this loan in lieu of the PPP loan because it is simpler to apply for (direct with SBA online) and provides a $10K advance that does not have to be repaid.  However, there is still conflicting information on whether churches either qualify or are subject to restrictions on how the money is used. 

The application online still includes this certification that is required to be signed (below).  However, the SBA has issued this FAQ on application to faith-based organizations.  Note that his FAQ applies to both the PPP AND EIDL.

I hereby certify UNDER PENALTY OF PERJURY UNDER THE LAWS OF THE UNITED STATES that any proceeds of the Economic Injury Disaster Loan or grant will only be used to provide secular social services to the general public, and that I have the authority to make this certification, and that all of the foregoing is true and correct.

We will discuss how to address these conflicts.  But again, this is a loan process that would be valuable to make church members aware of whose business is at risk.  Note Question 9 on the Wagenmaker & Oberly blog post I linked to above.

Families First Coronavirus Response Act effective April 1, 2020.

Because of all the attention given to the PPP loan applications, little has been covered on how this law affects churches that is effective April 1, 2020 (now!).  For churches with non-pastoral staff, it is IMPERATIVE that you understand this law and being tracking sick leave and paid family leave properly.  The best review of this law I have found is currently from Batts (mentioned above).

This new law requires that all small employers (including churches) provide:

  • Emergency Paid Sick Leave (EPSL).  Required payment of two weeks to all full and part-time employees relating to COVID-19.

  • Emergency Family and Medical Leave (EFML).  Required 2/3 payment of an additional 10 weeks of leave to all full and part-time employees relating to COVID-19.

FFCRA also provides a credit for this paid leave. However, if you use this credit, it reduces the amount of loan forgiveness if you applied for a PPP Loan.  It appears that even if you received a PPP loan and had it forgiven on June 30, 2020, that you would still be required to provide EPSL and EFML through December 31, 2020.

  • What is important today, while we still try to better understand this law, is to make sure you are tracking paid time off that may be related to COVID-19 beginning April 1.

  • If a nonprofit or church must close its doors or if they no longer have work to perform due to reduced programming, this law may not apply.  In this case, new federal unemployment benefits may be available to churches.

Tommy Hill serves as the Director of Finance for Sovereign Grace Churches. He is also the Administrator for Cornerstone Church of Knoxville where he lives with his wife Elizabeth and their children.