APRIL 1, 2020


Virtually every day, your inbox is filled with offers to help your church navigate provisions of the federal relief and stimulus bill that might benefit the church you pastor. Some of those require you to register and become part of their continued marketing. So many sources. So much advice. Brian Ehlers has also been researching the CARES Act, which includes benefits for nonprofits, including churches. Instead of overwhelming you with information and many links Brian has worked to boil the information down into the provisions that are most directly beneficial for churches, provides you with a tool to use and, for those who desire more information, two links to reputable sources. Timing is important! You should not delay in taking action. There will be many applicants for the financial assistance that is available for churches and other nonprofits.

Finally, I respect that there will be a range of views regarding whether churches should accept assistance of any kind from the government. You might find this article helpful as you consider your decision. If your view is churches should not accept funds that have been made available for the purpose of helping churches and other nonprofits through this difficult financial stretch, then you will do nothing with the following information. Your views will be respected. Thank you for respecting the views of those who choose to move forward to apply for benefits provided in the Care Act.

Randall Bach, President
CARES Act
Possible Benefits for your Church
The CARES Act was passed and signed in to law last Friday. Below is a concise summary of a couple of the provisions that I believe are the most pertinent to our churches. The Paycheck Protection Program offers churches and non-profits the opportunity to receive loans that are guaranteed by the federal government which are up to 100% forgivable. The forgiveness of the loans is based on funds being used for allowable purposes and the retention of employees and their salaries. The other program discussed briefly below is The Federal Disaster Unemployment Benefit. This program offers laid off employees of churches and non-profits federal unemployment benefits even if the employer doesn’t pay into the state unemployment program. More details and other provisions of the CARES Act are available in the Evangelica l Council for Financial Accountability (ECFA) outline provided. Also, a link to a webinar with Richard Hammer , a well-respected attorney and CPA, is made available.
Paycheck Protection Program
ELIGIBILITY

Employer with not more than 500 employees

BORROWER REQUIREMENTS

Good faith certification of:
  • Uncertainty of current economic conditions makes necessary loan request
  • Acknowledge the funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments or utility payments.
  • No application is pending for another loan under this provision
  • No other loan has been received from 2/15/20 – 12/31/20 under this provision

CONSIDERATIONS

Lender must consider whether the borrower:
  • Was in operation on 2/15/20
  • Had employees for whom the borrower paid salaries and payroll taxes or paid independent individual contractors, as reported on a form 1099-Misc

ALLOWABLE USES OF THE LOAN

Although calculation of a loan amount is based upon payroll (see below) the loan may be applied to a variety of uses , such as:
  • Payroll costs
  • Costs related to continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums.
  • Employee salaries, commissions, or similar compensations (i.e. housing allowance)
  • Payments of interest on any mortgage obligations (which shall not include any prepayment of or principal payment on a mortgage)
  • Rent
  • Utilities
  • Interest on any other debt obligations incurred before the covered period

CALCULATION OF LOAN AMOUNT

The calculation of a loan amount is entirely based upon payroll:
  • Monthly average of 1 year of payroll costs (prior to loan origination) x 2.5
Payroll Costs Include:
  • Salary, Wage, similar Compensation (Housing Allowance) incl. 1099 individual contractors
  • Payment of cash tip or equivalent
  • Payment for vacation, parental, family, medical, or sick leave
  • Allowance for dismissal or separation
  • Employer paid group health care benefits including insurance premiums
  • Employer paid retirement benefits
  • Employer paid state or local tax assessed on compensation of employees
(See the following worksheets. One provides an example of how to calculate a loan and the other is a template for you to calculate your potential loan eligibility.)


  • you may need to download and enable editing before filling in the worksheet
FORGIVENESS

Amounts eligible for forgiveness are those spent over an 8-week period beginning the date of the loan for:
  • Payroll costs
  • Mtg. interest payments for loans incurred before Feb. 15, 2020 (prepayments and principal payments not included)
  • Rent for leasing agreements in place before Feb. 15, 2020
  • Utilities for service began before Feb. 15, 2020

(Please take note that the forgivable uses do not include interest on other debt that is included in allowable uses)

Forgivable amount is reduced by
  • Calculations to determine if number of full-time equivalent employees were reduced.
  • If wages of an employee are reduced by more than 25% from Feb. 15, 2020 – June 30, 2020. Forgiveness is reduced by the amount more than the 25%.

               Proof will be required for forgiveness such as
  • Payroll tax filings with the IRS
  • State income, payroll, unemployment insurance (if applicable) filings
  • Cancelled checks, payment receipts, transcripts of accounts or other documents verifying payments on covered mortgage obligations, payments on lease obligations and covered utility payments and other documents as determined by the Administrator

LOAN TERMS

Any amount not forgiven will be subject to the following terms:
  • No more than 4% interest rate
  • Maturity of 10 years of less
  • Payment deferral for 6 – 12 months
  • No prepayment penalty

HOW

  • Contact your local lender and ask if they are a participating and approved lender for Paycheck Protection Program. Previous SBA lenders may be better prepared.

  • Lenders may not be prepared yet to take applications, but a borrower can get in line. The amount of funding for this program is presently limited so it is advisable to not delay. Some churches have reported that, if asked, some banks may consider revising the principal payments on existing loans at the time of this loan’s application. However, this is totally at the banks discretion and is not included in the Payroll Protection Program.
Federal Disaster Unemployment Benefits
Unemployment benefits for unemployed employees from churches or other organizations that do not pay into state unemployment programs should be available.

The laid off employee should contact the individual’s state unemployment administration who will administer the federal program.

The employee should make clear they are seeking Federal Disaster Unemployment Benefits when contacting the state unemployment administration and not state unemployment benefits.

This benefit appears to provide $600 per week.
Brian Ehlers
Secretary/Treasurer,
Open Bible Churches
This publication is designed to provide accurate information regarding the subject matter covered. It is provided with the understanding that the material contained herein does not constitute legal, accounting, tax, or other professional advice. If such advice or assistance is required, the services of a competent professional should be sought.