RECENT DEVELOPMENTS REGARDING THE PPP, EIDL AND PUA PROGRAMS AND RELIGIOUS INSTITUTES

RECENT DEVELOPMENTS REGARDING THE PPP, EIDL AND PUA PROGRAMS

AND RELIGIOUS INSTITUTES

 Members may recall receiving on April 2, 2020 from RCRI two documents, the first detailing highlights of the FFCRA Act (“Phase 2”) and the second detailing highlights of the CARES Act (“Phase 3”) that may be of benefit to religious institutes.

Since the release of this legislation and the aforementioned documentation, guidelines continue to be forthcoming. Some of the more recent developments are highlighted below.

Payroll Protection Program (“PPP”) and Economic Injury Disaster Loans (“EIDL”)

In addition to the previous update regarding PPP released by RCRI in the afternoon of April 3, 2020 (“SBA Interim Final Rule Regarding PPP and First Amendment Concerns”), the Small Business Administration released at 11:00 PM on Friday, April 3, 2020 a series of Frequently Asked Questions:

https://www.sba.gov/sites/default/files/2020-04/SBA%20Faith-Based%20FAQ%20Final.pdf

These FAQ’s should be reviewed and consulted by religious institutes, especially if a religious institute should approach a lender regarding a PPP or EIDL loan but is informed by the lender the institute is not eligible for such a loan as it is a non-profit religious organization. A copy of these FAQ’s should be shared with the lender, if necessary.

First Amendment free-exercise issues

The FAQ’s detail the information shared by RCRI earlier on April 3, 2020, namely, that “under these [outbreak] circumstances, the Establishment Clause does not place any additional restrictions on how faith-based organizations may use the loan proceeds received.”

The FAQ’s provide that churches and religious organizations will not sacrifice autonomy or First Amendment free-exercise rights by requesting and receiving a loan. Further, the only legal requirements imposed on churches and religious organizations in exchange for receiving loans are those required of all entities participating in the program. At the same time, religious institutes should also note the caution from the FAQ regarding some activities:

- SBA therefore clarifies that its regulations apply with respect to goods, services, or accommodations offered generally to the public by recipients of these loans, but not to a faith-based organization’s ministry activities within its own faith community. For example, SBA’s regulations will require a faith-based organization that operates a restaurant or thrift store open to the public to serve the public without regard to the protected traits listed above.

But SBA’s regulations do not apply to limit a faith-based organization’s ability to distribute food or clothing exclusively to its own members or co-religionists. Indeed, SBA will not apply its nondiscrimination regulations in a way that imposes substantial burdens on the religious exercise of faith-based loan recipients, such as by applying those regulations to the performance of church ordinances, sacraments, or religious practices, unless such application is the least restrictive means of furthering a compelling governmental interest.

Affiliation Rules

Finally, churches and religious organizations are not necessarily disqualified from the CARES Act loan programs due to affiliations with other religious organizations. The SBA states:

- If the connection between your organization and another entity that would constitute an affiliation is based on a religious teaching or belief or is otherwise a part of the exercise of religion, your organization qualifies for an exemption from the affiliation rules.

- For example, if your faith-based organization affiliates with another organization because of your organization’s religious beliefs about church authority or internal constitution, or because the legal, financial, or other structural relationships between your organization and other organizations reflect an expression of such beliefs, your organization would qualify for the exemption.

- If, however, your faith-based organization is affiliated with other organizations solely for non-religious reasons, such as administrative convenience, then your organization would be subject to the affiliation rules. SBA will not assess, and will not permit participating lenders to assess, the reasonableness of the faith-based organization’s good-faith determination that this exception applies.

In light of this April 3, 2020 development and further development, where it was previously held that nonprofit organizations were subject to SBA’s affiliation standards, this is no longer necessarily the case. In other words, religious nonprofit organizations are not necessarily subject to SBA’s affiliation standards. Please note this change in RCRI’s April 2, 2020 document detailing the Phase 3 highlights in the section regarding the Paycheck Protection Program.

Affiliation Rules Practice Point

The SBA further states:

- If you believe that your organization qualifies for this exemption to the affiliation rules, you should submit with your loan application a separate sheet stating as much. That sheet may be identified as addendum A, and no further listing of the other organizations with which your organization is affiliated, or description of the relationship to those organizations, is required. You are not required to describe your religious beliefs.

The FAQ’s includes a sample addendum religious institutes may use. But they also state applicants can write their own statements which  “can be very simple.”

More on EIDL

In response to member questions regarding EIDL’s, members are reminded that most private nonprofit organizations, as well as small businesses and small agricultural cooperatives, may be eligible for an EIDL.

The SBA can provide up to $2 million to help meet financial obligations and operating expenses that could have been met had the disaster not occurred. Loan amounts are based on actual economic injury and a company's financial needs, regardless of whether the business suffered any property damage.

The interest rate on EIDL’s will not exceed 4 percent per year. The term of these loans will not exceed 30 years. The repayment term will be determined by the borrower’s ability to repay the loan.

EIDL assistance is available only to small businesses when SBA determines they are unable to obtain credit elsewhere. One can apply online for an SBA disaster assistance loan and must submit the completed loan application, as well as a signed and dated IRS Form 4506-T giving permission for the IRS to provide SBA one’s tax information.

For additional information, please contact the SBA disaster assistance customer service center. Call 1-800-659-2955 or e-mail disastercustomerservice@sba.gov.

500 or more employees

RCRI has received questions regarding available resources for religious institutes or sponsored works that have 500 or more employees.

One such program seems to be the EIDL program detailed above and in RCRI’s aforementioned documentation of April 2, 2020 highlighting the Phase 3 provisions. Additional programs in the CARES Act benefitting organizations with 500 or more employees include the Employee Retention Credit; Deferral of Payroll Taxes; and the Economic Stabilization Fund. Please see RCRI’s documentation highlighting the Phase 3 provisions for more details regarding the Employee Retention Credit and the Deferral of Payroll Taxes.

The Economic Stabilization Fund provides up to $454 billion (of the $500 billion total fund) in financial assistance to businesses, including nonprofit organizations.

·         US Department of the Treasury is given authority to develop the program to provide loans to nonprofit organizations with between 500 and 10,000 employees.

·         Loans cannot be forgiven

·         Could be direct loans or guarantees of private loans

·         Loans made under the program would be at an interest rate no higher than 2%, with no payments due in the first six months

·         Borrower must make a good faith certification with respect to several items, including (but not limited to) economic conditions made loan necessary; loan proceeds wtill be used to retain 90% of workforce as of February 1, 2020 and restore all compensation and benefits to workers no later than 4 months after termination of the COVID-19 public health emergency; and, the entity is domiciled in the United States with significant operations and employees in the United States.

·         Certain limits on executive compensation would apply

See: Title IV "Coronavirus Economic Stabilization Act (CESA)" Section 4000 ff.
https://www.congress.gov/116/bills/hr748/BILLS-116hr748eas.pdf

Unemployment Insurance

As previously discussed by RCRI, the question as to whether the employees of religious institutes may be eligible for unemployment insurance through the Pandemic Unemployment Assistance program (“PUA”) has been unclear.

However, on April 3, 3030 the Department of Labor (“DOL”) released Unemployment Insurance Program Letter No.14-20. The letter also includes a table of Summary of Programs for the Relief for Workers Affected by Coronavirus Act.

In the letter, the DOL reiterated that “operationally, [the PUA] will be administered similar to the Disaster Unemployment Assistance (DUA) program.” (Section 2102). In regards to emergency unemployment relief for nonprofit organizations (Section 2103), the DOL is authorized to issue guidance to allow states to interpret their state Unemployment Compensation laws in a manner that would provide maximum flexibility to reimbursing employers as it relates to timely payments in lieu of contributions and assessment of penalties and interest.

https://wdr.doleta.gov/directives/attach/UIPL/UIPL_14-20.pdf

As such, religious institutes may consider contacting their state to determine if funds for DUA from the Federal Emergency Management Agency (FEMA0 become available. In general, FEMA holds that individuals who become unemployed due to a major disaster, and otherwise would not qualify for state unemployment insurance, may be able to do so. In other words, while the availability for religious institutes regarding PUA remains unclear, it is worth checking with the local state.