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Are faith-based organizations eligible for the Paycheck Protection Program?

Apr 08, 2020

On April 23, 2020, the federal government passed a $484 billion package to re-fund the SBA PPP.

When the CARES Act was passed on March 27, a lot of attention centered round the Paycheck Protection Program (PPP).

The PPP enables the Small Business Administration (SBA), via financial institutions, to provide forgivable loans to organizations that keep their staff on payroll. PPP loans are forgivable only if the organization keeps all employees on payroll for eight weeks and if the loan is used for payroll, rent, mortgage interest and/or utility payments.

The PPP isn’t just for small businesses. Nonprofit organizations also qualify, assuming they meet the requirements laid out — one of which is having no more than 500 employees (or the applicable industry size standard as provided by the SBA).

Faith-based organizations have still questioned their eligibility, which is why we’re answering their top three most commonly asked questions:

1. Are faith-based organizations eligible to receive SBA loans under the PPP?

Yes, they are. Faith-based organizations, including houses of worship, are eligible to receive SBA loans  regardless of whether they provide secular social services. SBA loans include PPP loans and Economic Injury Disaster Loans (EIDLs).

Some SBA regulations do exclude religious entities, but the SBA has clarified that it will not be enforcing those regulations and is seeking to propose amendments to remove them. Furthermore, the CARES Act specifically includes nonprofit entities as eligible for the PPP, thereby superseding existing SBA regulations.

2. Can houses of worship qualify if they have not been informed of their tax-exempt status by the IRS?

Yes, they can. Houses of worship (e.g., churches, temples, mosques and synagogues), their integrated auxiliaries and their associations all qualify for PPP and EIDL loans so long as they meet the requirements of Section 501(c)(3) of the Internal Revenue Code, as well as the PPP and EIDL requirements. They do not have to apply to the IRS to receive tax-exempt status.

3. Are faith-based organizations disqualified from SBA loan programs if they are affiliated with other faith-based organizations?

The SBA says that this is not necessarily the case.

Under SBA regulations, an affiliation can come from common ownership, common management or identity of interest. If your faith-based organization qualifies as “affiliated” with other entities, you would need to add up the total number of employees to see whether there are 500 or fewer, in order to qualify for PPP loans.

However, the SBA has clarified that if the affiliation “is based on a religious teaching or belief or is otherwise a part of the exercise of religion, your organization qualifies for an exemption from the affiliation rules.”

Affiliations that exist for non-religious reasons, such as administrative convenience, will be subject to affiliation rules.

How to apply for a paycheck protection program loan

For more information on how faith-based organizations can participate in the PPP, check out the SBA’s FAQ.

The $349-billion PPP is distributed on a first-come-first-served basis, so if you need further assistance determining your eligibility or preparing your application, contact Wipfli.

You can also learn more about COVID-19 legislation that impacts you and access other resources on our COVID-19 resource center.

Author(s)

Kara L. Fontaine, CPA
Partner
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