From 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 (SBA) 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
So let me urge a bit of caution and planning. I can share a few webinars and information sites which 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.
INJOY Stewardship/Church Fuel: Cares Act resources (includes checklist and recording of webinar)
ECFA webinar: The CARES Act – Key Impacts on Churches and Nonprofits
ECFA has a page for their COVID-19 resources, including PPP.
Church Law & Tax.com webinar: Churches and the CARES Act: Helping Congregations and Employees Weather the Cash Crunch
US Chamber of Commerce: Coronavirus Emergency Loans guidance
Wespath: Coronavirus Resources page
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.
Be patient. Lenders do not know how to deal with churches which are "unincorporated associations', not businesses; do not have "owners"; do not file tax statements annually; and do not have by-laws and articles of incorporation. The banker isn't being difficult, they just don't know how to fit the church into the usual processes and federal regulations. Our by-laws are The Book of Discipline. You can get your 501.c.3 certificate below. Your Trustees, Finance Committee, and Council can authorize the loan even if they can't meet physically (see below).
Again, your lender is just trying to do their job in a difficult time, and the SBA and Treasurery have provided confusing, conflicting, and incomplete guidance. Help your banker help you.
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.
Here's a handy-dandy flow-chart that greatly simplifies the PPP Process, but will help you get your bearings: PPP Flowchart
WHO CAN AUTHORIZE?
Some lenders are asking for a letter of authorization, or signature to authorize the PPP loan.
In the United Methodist Church, the Board of Trustees is usually the committee that can borrow funds (this is mainly because most funds are collateralized by church property). I recommend that you have your Board of Trustees Chair be one of two authorizers, to ensure this requirement is met. I recommend that your Finance Chair be the other authorizer, to demonstrate that the church Finance Committee is also supportive of the loan. Because there is no collateral involved, a charge conference is not necessary to authorize this loan. However, if all or part of the loan is not forgiven, it converts to a regular loan, which must have both charge conference approval and letters from the pastor and DS. If you are able to have a church council meeting via ZOOM or conference call, or take an email tally, to authorize the loan, that is even better. You can find a sample resolution for the Finance Comittee to approve here, and a sample resolution for the church council to approve here.
GETTING THE LOAN FORGIVEN
The legislation says the loan "may be forgiven", but so far no one has drafted the details of what will be required to get the loan forgiven. The focus right now is on getting the funds out; but the focus will shift. Expect it to be easier to get the loan than to get it forgiven.
We recommend these steps to help you when that time comes:
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.