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Will the CARES Act help our church?

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

  • 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;
  • it will be far easier to get the funds than to get them forgiven later.  Expect audit-like scrutiny on the back end when you ask for forgiveness.
  • 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 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.

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). 



  • 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 issued a specific "clarification" to state that faith-based organizations can apply. You may need to provide this to your lender.
  • The SBA has ruled that a minister's housing allowance can be included inthe overall copmensation costs, up tot he $100,000 max per employee.  It's #32 in their SBA PPP FAQ.
  • Your banker may ask for the NAICS code; this part of the normal SBA rules does not apply to the PPP program, but the code for churches is 813110.
  • Your banker may want to see your IRS Form 990.  Many charitable organizations are required to file this annually; but churches are not.  Here are the instructions for the Form 990 -- note pg 4 specifically says churches do not file it.  You may need to provide this to your banker.

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



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.



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:

  • Do not borrow more than you can spend in 8 weeks on compensation, rent, and utilities.
  • Plan to spend a minimum of 75% on compensation, and no more than 25% on rent and utilities (the legal requirement).  It is better if you spend 80-90% on compensation.
  • Deposit the loan funds into a separate bank acocunt, so the funds do not get co-mingled.  Spend them only on apporoved items, and keep a clear record of such expenditures.  If you have the funds segregated, any funds not spent on forgiveable items will be readily available to be returned to the bank.
  • The purpose of these loans is to keep people employed.  As far as possible, have the same number of staff at the end of the loan that you had at the beginning.
  • Do not reduce anyone's salary more than 20%.
  • Only include W-2 employees in the loan calculations.  Do not include those who may get a 1099.


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.

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