Coronavirus Aid, Relief and Economic Security (CARES) Act
Do any of the programs created by the Coronavirus Aid, Relief and Economic Security (CARES) Act apply to churches?
Yes, the CARES Act is certainly focused on the business world, but there are several items of interest to churches and church staff.
- Anyone, regardless of their place of employment, with adjusted gross income of less than $75,000 ($150,000 for married filing jointly) will receive $1,200 ($2,400 for married filing jointly). If you have an adjusted gross income higher than $75,000 ($150,000 for married filing jointly) you may still receive a check, but at a reduced amount.
- The CARES Act creates a temporary charitable deduction available even if taxpayers do not otherwise itemize their deductions. This new deduction will equal the amount given to a tax-exempt organization capable of receiving tax deductible gifts, including churches, up to $300. You will want to make sure your congregation is aware of this new benefit.
- The stimulus package makes Small Business Administration loans available to churches and nonprofits for the first time. In particular, the CARES Act creates a program called the “Paycheck Protection Program.” Loans offered under this program can be taken out with extremely favorable terms. For example, churches would have up to 10 years to pay back the loan and interest would be capped at 4%. Ordinarily, these loans will not require collateral and therefore may be taken without mortgaging any real estate. This means you do not need District Committee for Building and Location approval, but you should keep your DS informed of your actions. In certain situations, the Act even makes loan forgiveness available, though such forgiveness will not be available in every situation. To apply for the loans contact a qualified SBA lender or visit the SBA website at: www.sba.gov. Here are a few things to remember about the Paycheck Protection Program:
- The maximum amount of any loan in the Program will equal 250 percent of the average monthly payroll costs during the time period between February and June 2019;
- The loan can be used to cover payroll costs, including housing allowance (though not the rental value of a parsonage), costs related to the continuation of group health care benefits, rent, utilities, and certain other expenses;
- The church may apply for loan forgiveness equal to the sum of payroll costs and payment of interest on covered mortgage obligations, rent, and utility payments;
- Finally, bear in mind that the Small Business Administration is new to working with churches and charitable organizations. It may take some time for lenders to learn the process for working with our churches. Terms will apply to these loans and church leadership should still exercise caution when incurring debt.
- For individuals with money in the United Methodist Personal Investment Plan, those who have lost jobs or been furloughed, the Act allows for early distributions and borrowing against retirement savings in amounts above previously permitted and without the typical penalties. Before taking such action, individuals should consult with their own financial planners to understand the consequences for borrowing against retirement funds. They may contact Wespath Benefits & Investments for more information (www.wespath.org).
Churches may also be eligible for payroll tax credits on payroll taxes paid for lay staff. The credits will be obtained through the typical payroll tax return process and may reduce the amount typically owed by the local church. This is particularly true if employees have requested the additional sick leave or extended Family Medical Leave offered by the Families First Coronavirus Response Act and the church incurs the related expenses. Additional credits are being made available to organizations who have been forced to suspend operations entirely or who have experienced a reduction of 50% or greater in gross receipts. These credits will only apply to compensation paid between March 13, 2020 and December 31, 2020. For churches utilizing a payroll provider, you will need to consult with the provider in order to obtain the credit.
The stimulus legislation also contemplates tax deferrals for Self-Employment Compensation Act (SECA) Contributions. SECA is paid by clergy in particular. However, how these deferrals will work has not yet been made clear. More guidance will be needed from the IRS. For now, all taxpayers, clergy included, have been granted an extension for 2019 tax returns until July 15. However, it is not yet clear whether delaying the filing of tax returns will also result in a delay of the cash stimulus payments highlighted above.
- Learn more about the CARES Act with a resource developed by the Conference’s legal firm, Husch Blackwell.
- Learn more about what to do once receiving your PPP loan with a resource by Husch Blackwell.
- View Wespath CARES Act Summary here.
- An easy-to-understand Guide and Checklist is available from the U.S. Chamber of Commerce
- SAMPLE SBA (PPP) Loan Application
- SAMPLE PPP Board Resolution