Requirements for Churches and Religious Non-Profits Applying for CARES Act Forgivable Loans
Practical Advice From Those Who Have Already Applied for Funding
- You will need to apply through your bank and most participating banks have created online application portals on their websites. Smaller banks may still be using paper forms. Not every bank is participating in the program. If your bank is not, you may need to find one that does (which could present a challenge).
- Some banks are imposing additional requirements. For example, Bank of America was at one point requiring applicants to fill out a line of credit apart from the loan. They have been criticized for this, but banks are authorized to add additional requirements.
- Apply in the presence of your bookkeeper who has access to your organization’s financial information and tax records. Banks will ask for various supporting documents to complete your application. The types of documents asked for may include:
- 2019 Payroll Cost and YTD Payroll Cost through February 15, 2020
- Number of employees as of December 31, 2019
- Number of employees as of February 15, 2020
- Industry or business classification (NAICS Code which can be found on tax return)
- IRS Form 940 Employers Annual Federal Unemployment Tax Return (FUTA)
- IRS Form 941 Employer’s Quarterly Federal Tax Return
- Payroll Summary Report 2019 with corresponding bank statements
- W2 Summary
- List of employees earning more than $100,000 in compensation (salary, wages, commission and tips)
- 1099 Summary
- Breakdown of payroll benefits (vacation, allowance for dismissal, group healthcare benefits, retirement benefits, etc.)
- Be patient. Many banks are offering these types of loans for the first time ever and are still setting up their processes, while already backlogged with a flood of requests.
- Don’t be surprised if it is a two-step process. Step one, you will apply with your bank online. Step two, they will send you an email to let you know you need to upload your documents (securely).
- Remember most of these loans will be applied for by businesses and not churches so the forms and questions may seem out of place answering as a church. Ex. what percentage ownership? Etc.?
- While it is not required, the best practice from an accounting standpoint is when the money is wire transferred into your account, open a separate account to keep it in and write checks from that account to make it clear what the money was spent on.
How to Apply For Funding
Coronavirus Relief: What Churches and Nonprofits Need to Know About Accessing SBA Loans (Family Research Council)
Loan Eligibility Requirements
- Church must have fewer than 500 employees
- Churches should be registered as 501(c)(3) with the IRS
- Churches not registered with the IRS can still apply if they can show:
- They are organized & operated exclusively for religious, educational, scientific or other charitable purposes;
- Their net earnings do not benefit any private individual or shareholder;
- They do not spend a substantial amount of the church’s time and money on lobbying for legislative issues;
- They do not intervene in political campaigns;
- Their purposes and activities may not be illegal or violate fundamental public policy. (This is to ensure a group trying to argue for a fake church like the “Church of Abortion Rights” cannot scam the system)
- The loan can cover eight weeks of necessary expenses.
- Churches must have been operational and paying salaries and payroll taxes on February 15, 2020, to be eligible for loans.
- The maximum a church can apply for and receive a loan is based on a calculation that will come out to 2.5 times the average monthly payroll.
- If the loan is used to for payroll, health care benefits and or premiums, employee salaries, mortgage or rent payments, or interest payments, the loan will be forgiven.
- The CARES Act also waives borrower fees, collateral and credit requirements, as well as automatically defers any payments for six months.
- If the church documents to the lender bank that the loan was used for appropriate expenses outlined in the Act, then the loan will become a federal grant with no need to pay it back.
- If the church or non-profit uses the loan for the following unauthorized categories, then the loan must be paid back with an interest rate of 4%:
- Compensating an employee in excess of an annual salary of $100,000.
- Federal payroll taxes
- Compensating an employee whose principal place of residence is outside of the U.S.
- Emergency sick leave or emergency family leave payments that qualify for a credit under the Families First Coronavirus Response Act
- Under this program, in order to obtain a loan, a church should be able to show:
- Certify in good faith, that the uncertainty of the current economic conditions makes the loan necessary to support the ongoing operations of the borrower.
- The funds will be used for payroll costs, paid sick, medical, or family leave, mortgage interest (but not principal), interest on other debt obligations incurred before February 15, 2020, including rent, and utilities.
- The church in operation on February 15, 2020, and
- The church had employees for whom it paid salaries and payroll taxes of independent contractors as reported on Form 1099-MISC as of February 2020.
About Paid Sick Leave
NOTE: The information provided above is based on the Florida Family Policy Council’s research regarding the CARES Act at the time the information was provided and therefore may contain inaccuracies. All information above is subject to correction and/or clarification as more complete and reliable information and interpretations of the new law become available. The information on this website is for educational purposes only and does not constitute professional legal or accounting advice. For professional advice regarding the subject matter addressed herein, the services of a competent professional should be obtained.
The above information is provided with the understanding that Florida Family Policy Council is not rendering a legal opinion, accounting advice, or other professional services. We highly recommend you seek professional counsel from an accountant and/or lawyer.