PPP Loan Update #2

You have probably already seen a number of news reports on the recent approval of additional PPP funding that may benefit your churches.  I wanted to highlight how it might specifically affect our churches and send you a few good links to information on the new funding approved by Congress.

1.      Who is eligible for additional PPP Funding?

• Churches that didn’t apply for initial funding last year.  If you didn’t apply for funding in 2020, you are able to newly apply, subject to the same rules that applied last year.  Contact me if you have any specific questions on how to begin this process if you are interested.

• Churches that received a PPP Loan last year.  Churches that already received funding in 2020 are eligible to apply for additional funding if they experienced at least a 25% reduction in giving in any one calendar quarter comparing 2019 to 2020.

2.      How much can I receive, and what is the forgiveness process?

• If you qualify per above, the amount of funding in both cases is still tied to the amount you spent on payroll, up to 2.5 times your average monthly payroll.

• A few additional types of expenditures were added to what qualifies.  Otherwise, the same rules apply as last year.

• A simplified one-page forgiveness application process was added for loan amounts under $150K.

• If you previously applied for the loan and returned it, you are eligible to re-apply.

• The deadline for applying under the new law is March 31, 2021.

3.      What are some good links to find additional information on the new PPP funding?  

•  Nonprofitcpa.com

• The National Law Review, Monday, Dec 28, 2020

• Nav.com

• Investopedia.com 

If you have any questions on how this might affect your church, I would be glad to discuss them with you.

Grateful to be able to serve all of you!

Tommy Hill

Tommy Hill serves as the Director of Finance for Sovereign Grace Churches. He is also the Administrator for Cornerstone Church of Knoxville where he lives with his wife Elizabeth and their children.

PPP Loan Guidance Update

You likely have seen recent updates on Paycheck Protection Program (PPP) Loan Guidance.  But I want to make sure you are aware of this important update. 

The Small Business Administration (SBA) released FAQ #46 addressing how they will review whether a borrower’s good faith certification concerning the necessity of their PPP loan request.  The key point that affects all our churches is that PPP loans of less than $2,000,000 will be deemed to have made the required certification concerning the necessity of the loan request in good faith.  Their reasoning is primarily that small businesses and non-profits whose loan amount is less than this don’t readily have access to alternative sources of funding and financing and are presumed to need access to these funds.

For all our churches that received (or in the process of receiving) a PPP Loan, I would consider the following:

• Make sure that you continue to involve your local leadership and financial advisory teams and make them aware of all matters pertaining to this loan, including this update, and involve them in any decisions made with respect to the PPP Loan.

• Make sure that you are accurately tracking your expenditures on payroll, mortgage, and utilities for your eight week period from the receipt of loan proceeds to help you calculate your potential loan forgiveness.

• Given that certification is no longer an issue, I would recommend not trying to make any determination at this time whether you believe your church needs to accept forgiveness of the loan at this time.

  • Processing of forgiveness doesn’t begin until after June 30, and just like this guidance, many changes can take place over the next six weeks.  I would just keep a close eye on what further guidance may come.

  • In this season of economic uncertainty and delayed effect of job losses, churches that were doing well in March and April could see larger declines in their giving this summer or even into the fall.  The intent of these programs are to maintain full employment.  My hope would be that a local church could make this final evaluation of whether to benefit from the loan forgiveness at the end of 2020.  This further guidance from the SBA that automatically confirms certification of the need (assuming none of our churches received a $2 Million loan!) makes that more possible to wait until year-end.

• I understand that there as some who still question the wisdom of whether to receive financial aid from the government at all.  Each local church should discuss this matter and how to explain to your church your position on this if necessary. I have discussed this issue extensively with the leadership team and a number of pastors have reached out to me for counsel.  I am available to discuss with you if you believe it would help your team.

Please feel free to contact me personally if you have any questions on this or any other financial matters that may be affecting your local church. It is my great privilege and joy to serve you all!

Tommy Hill serves as the Director of Finance for Sovereign Grace Churches. He is also the Administrator for Cornerstone Church of Knoxville where he lives with his wife Elizabeth and their children.

Financial Update #5: COVID-19 Financial Relief

Dear SGC Pastors,

Please be aware of the following updated information relating to COVID-19 Financial Relief that I will discuss in our next zoom meeting:

Best Resources Online

I regularly track these sites for the latest information: ECFA, NonprofitCPA, AICPA, Wagenmaker & Oberly blog, and Vanderbloemen.  Here are some recent helpful posts on these sites:

• Wagenmaker & Oberly provide an excellent overview of issues most affecting churches and non-profits in the CARES Act in their April 7 blog post.

• Mike Batts, CPA, has an updated great summary of all the provisions in the CARES Act that pertain to churches and non-profits.

• ECFA has a good summary of most common questions churches are asking about the CARES Act.

• Nonprofit Special Alert from Batts on required Emergency Paid Sick Leave and Family and Medical Leave effective April 1, 2020 (discussed below).

Paycheck Protection Program Update

The Treasury Department released an FAQ on PPP Loans that should give clarity to your banks in processing applications.  The most relevant info that could affect some churches is:

• The $100,000 salary limitation does not include benefits.

• Gross Payroll will be used for calculation of the loan and loan forgiveness.

• The time period for the calculation can be either calendar year 2019 or the previous 12 months before application (or seasonal application).

• There is still no clear guidance on housing allowance.  If your bank allows you to include, then great.  But be prepared for that amount to ultimately not be forgiven.

• Beginning April 10, independent contractors and self-employed individuals can begin applying for PPP loans. So, make every effort to apply this week if you are able to.  Also, as you are helping your church members, make sure the self-employed are aware of this relief that is available for them.  If you choose to not pursue the PPP, remember to consider the other relief available through the CARES Act, like the Employee Retention Credit for Employers, or the FFCRA payroll credit.

COVID-19 Economic Injury Disaster Loan Application

Some smaller churches are considering this loan in lieu of the PPP loan because it is simpler to apply for (direct with SBA online) and provides a $10K advance that does not have to be repaid.  However, there is still conflicting information on whether churches either qualify or are subject to restrictions on how the money is used. 

The application online still includes this certification that is required to be signed (below).  However, the SBA has issued this FAQ on application to faith-based organizations.  Note that his FAQ applies to both the PPP AND EIDL.

I hereby certify UNDER PENALTY OF PERJURY UNDER THE LAWS OF THE UNITED STATES that any proceeds of the Economic Injury Disaster Loan or grant will only be used to provide secular social services to the general public, and that I have the authority to make this certification, and that all of the foregoing is true and correct.

We will discuss how to address these conflicts.  But again, this is a loan process that would be valuable to make church members aware of whose business is at risk.  Note Question 9 on the Wagenmaker & Oberly blog post I linked to above.

Families First Coronavirus Response Act effective April 1, 2020.

Because of all the attention given to the PPP loan applications, little has been covered on how this law affects churches that is effective April 1, 2020 (now!).  For churches with non-pastoral staff, it is IMPERATIVE that you understand this law and being tracking sick leave and paid family leave properly.  The best review of this law I have found is currently from Batts (mentioned above).

This new law requires that all small employers (including churches) provide:

• Emergency Paid Sick Leave (EPSL).  Required payment of two weeks to all full and part-time employees relating to COVID-19.

• Emergency Family and Medical Leave (EFML).  Required 2/3 payment of an additional 10 weeks of leave to all full and part-time employees relating to COVID-19.

FFCRA also provides a credit for this paid leave. However, if you use this credit, it reduces the amount of loan forgiveness if you applied for a PPP Loan.  It appears that even if you received a PPP loan and had it forgiven on June 30, 2020, that you would still be required to provide EPSL and EFML through December 31, 2020.

• What is important today, while we still try to better understand this law, is to make sure you are tracking paid time off that may be related to COVID-19 beginning April 1.

• If a nonprofit or church must close its doors or if they no longer have work to perform due to reduced programming, this law may not apply.  In this case, new federal unemployment benefits may be available to churches.

Tommy Hill serves as the Director of Finance for Sovereign Grace Churches. He is also the Administrator for Cornerstone Church of Knoxville where he lives with his wife Elizabeth and their children.

Financial Update #4: (Urgent) COVID-19 Paycheck Protection Program

Please note the following timely information to help you prepare your PPP Application.

• SBA Form 2483 Application updated today

• Interim Final Rules for PPP from the SBA that affect the application process.

• Please note the bottom of page 27 and top of page 28 where further assurances are given to religious organizations on the application to current law.

• There is still confusion over whether housing allowance is included in the calculation.  It likely will not be included.  My counsel is to compute the loan amount however your bank interprets.  Worst case, you would just not be forgiven for the portion that is for housing allowance

As I discussed in our zoom call yesterday, the MOST IMPORTANT step is to contact your bank as soon as possible to see what documentation they require and how they want you to calculate payroll to determine the loan amount.  Each bank will have their own standards for how to interpret the calculation and you will want to follow their interpretations.  If you decide to pursue this loan, please do so as quickly as possible.  There is a good chance that the funding from this program could quickly run out.

Tommy Hill serves as the Director of Finance for Sovereign Grace Churches. He is also the Administrator for Cornerstone Church of Knoxville where he lives with his wife Elizabeth and their children.

COVID-19 Financial Update #2: Unemployment Benefits

I have had several pastors ask me about whether church staff can qualify for unemployment compensation if they are laid off as a result of the economic impact of COVID-19.  Here are some key highlights (as brief as I can be!).  Be sure and pass this on to whoever helps your church with compensation and benefits.

Do church employees qualify for unemployment compensation normally?

No.  As a general rule, churches are exempt from purchasing unemployment insurance; and most don’t purchase it.  Thus, terminated employees don’t qualify for unemployment compensation.  For this reason, it is important to consider these two key factors:

1. When hiring staff, make sure they are aware that unemployment benefits are not available for church employees.  Also, make sure this is highlighted in your benefits policy manual.

2. Because there are no unemployment benefits available for terminated staff, try to be more generous with your severance policy than you might if you were a small business paying unemployment insurance.  There are other reasons to be generous with this policy beyond the scope of this review.

Are some States now offering new unemployment benefits available as a result of the COVID-19 crisis?

Yes.  I know of at least two states (Ohio and Tennessee) that are now providing some level of unemployment benefits for employees not eligible for regular unemployment benefits if their loss of employment is due to the current COVID-19 crisis.

• If you are faced with the difficult decision of having to let go of an employee, check your state for these potential new benefits.

• You may also have church members in this situation.  Make sure and ask them to pursue unemployment benefits if they have lost their jobs, including this new benefit in some states. 

What about Federal unemployment benefits?

The CARES Act includes federal funding to provide some level of unemployment benefits for church and non-profit employees who have lost their jobs.  I haven’t found any specifics on how this relief is provided yet.  I will update you when more information is available.

The key point at this moment is being prepared to serve your employees if you find yourself in the difficult position of needing to eliminate any staff.  Also, remember to consider the potential effect these decisions could have if you applied for the Paycheck Protection Program Loan/Grant.

For more detailed information on this and other economic benefits available to churches, I recommend ECFA and BMWL.

Tommy Hill serves as the Director of Finance for Sovereign Grace Churches. He is also the Administrator for Cornerstone Church of Knoxville where he lives with his wife Elizabeth and their children.

COVID-19 Financial Update #1: Families First Coronavirus Act and CARES Act

I just wanted to let you know that we are monitoring information that could affect churches, particularly relating to government-sponsored relief through the Families First Coronavirus Act and the CARES Act.  As we become aware of information to help you understand the impact on your church, we will let you know where helpful resources are available. 

Specific parts of the laws that could directly affect churches include (1) payroll tax credits for up to two weeks paid leave for employees related to COVID-19; (2) Paycheck Protection Program Loans/Grants; and (3) Expanded Unemployment Benefits.  Here  are a few places that I have found helpful to keep up-to-date currently for those who aren’t afraid to dive into the details (or send to your finance committee team to review):

• ECFA COVID 19 Resources

  • https://www.ecfa.org/Content/ECFA-COVID-19-RESOURCES

• BMWL CPAs COVID-19 Resources

  • https://www.nonprofitcpa.com/covid-19-updates/

• Also, here is an excellent review today by Mike Batts on the CARES act as it affects churches

  • Mike Batts Cares Act Summary

• Vanderbloemen Church Resources for Navigating COVID-19

  • https://www.vanderbloemen.com/covid19 

There will be a rush of articles and materials interpreting these things for all businesses and churches.  For now, I would recommend letting the experts spend more time interpreting these things and the government to provide us clear guidelines and instructions for how to best apply these new laws.

Tommy Hill serves as the Director of Finance for Sovereign Grace Churches. He is also the Administrator for Cornerstone Church of Knoxville where he lives with his wife Elizabeth and their children.