Administrative Services helps navigate the CARES Act
By Dr. Derek McAleer, Director of Administrative Services
President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (HR. 748) into law on Friday, March 27th, 2020. This Act is intended to provide financial relief to individuals, businesses, and non-profits from the economic impact of the Coronavirus. There may be something in it that could help your church. The Act allows for forgivable Paycheck Protection Loans from the Small Business Administration to cover payroll and related employee expenses for the period February 15 through June 30, 2020, to help churches sustain their ministries. The Act also provides for a refundable payroll tax credit for 50% of wages paid by employers to employees during the COVID-19 crisis. (I think you may not be able to take both; it's one or the other, but I'm not sure yet). The payroll loans can probably help churches with preschools that are closed.
This is all happening very quickly, and all of the details are not even written, much less available. I assure you that I am no expert in these matters. The prospect of a forgivable loan is very attractive; at the same time, there are concerns, such as
- the record-keeping to get a loan and have the loan forgiven is detailed;
- employees with salaries over $100,000 are treated differently;
- some lenders do not recognize that, unlike other SBA loans, these are available to religious non-profits;
- it is unclear whether taking such a loan "lets the camel's nose into the tent" in terms of providing a cause for the IRS to require further documentation from a church, such as filing a Form 990 annually;
- some lenders don't know how to process an SBA loan for a non-profit;
- and so forth -- far too many details are unclear.
So let me urge a bit of caution and planning. I can share a few webinars and information sites that may be able to help you as you look to see how your church can get some relief, and whether you want to pursue this path.
- GCFA has provided some guidance here, including some helpful instructions for filling out the application, an offer from LBMC (GCFA's accounting firm) to assist UMC churches in applying for a PPP loan from US Bank
- Horizons Stewardship paper: Resilient Leadership Update #4 - The CARES Act Special Edition
- INJOY Stewardship/Church Fuel: Cares Act resources (includes checklist and recording of webinar)
- ECFA webinar: The CARES Act – Key Impacts on Churches and Nonprofits
- Church Law & Tax.com webinar: Churches and the CARES Act: Helping Congregations and Employees Weather the Cash Crunch
- Guidestone's news release
- US Chamber of Commerce: Coronavirus Emergency Loans guidance
- Wespath: Coronavirus Resources page
- Wespath: Preliminary Summary of CARES Act Potential for UMC
Horizons Stewardship has released a video interview with attorney Jeff Watson, to help you better understand the details of the recent stimulus package and what it means for churches. They also have a webinar scheduled for April 8, when attorney Wilson will go over the details we expect the Small Business Administration to publish between now and then. Register here.
NEW: There are a few lenders who incorrectly believe that churches cannot apply for the PPP for clergy or staff engaged in religious work. While that is normally the case in SBA loans, it is not so for the PPP. The SBA has provided clarification in their "final rule" -- I've put it in red on pg. 27-28. The SBA also issues a specific "clarification" to state that faith-based organizations can apply. You may need to provide this to your lender.
While there is much that is not clear, here are a few steps your church should be taking NOW so that you'll be ready to apply once the details are clear.
- Make sure your 2019 Financial Statements are complete and your first-quarter financial statements are prepared as soon as possible. You'll need your payroll for 2019, as the average monthly payroll for 2019 plays into how much you can borrow.
- Review your church’s polity on receiving a loan and take steps toward notices of meetings that may be required. If a committee or church vote is necessary, think about how you will accomplish that during social distancing using mailed ballots, conference calls, or online meetings (such as Zoom) that can accommodate large numbers of people. Determine if approval is required to apply for the loan or just to sign documents. Those loans are unsecured meaning they won’t require District committee approval and can be forgiven in an amount up to 8 weeks of payroll. If the loan is not forgiven, you will need to talk to your DS about the conversion loan being approved.
- Determine if your bank is an SBA approved bank and let them know you would like to apply. If not, locate such a bank. Ask them to immediately provide you loan documentation requirements once published by the SBA.
NEED PROOF OF YOUR 501.c.3 STATUS?
United Methodist Churches in the South Georgia Conference are covered under the United Methodist Church's "group ruling." You can go to this page to print out your letter of inclusion. You will need your church name and EIN. NOTE: the web site reads like you might be "applying" for your 501.c.3, but you're actually applying to get a copy of the letter. Just go through the website -- you'll have your letter in .pdf form within 2 minutes.
Disclaimer: This information is provided as general guidance and is believed to be accurate upon its presentation. Please seek additional assistance from your legal, tax, financial, lending, and other competent professionals.
Needless to say, you should be consulting with a professional before you take steps. My office is not competent in these matters and will not provide all the guidance you will need. This is complicated -- but it does appear there is some relief out there for your church. Get together with your leadership and figure out who in your church or community can assist you in this. Act quickly.