Implications of CARES Act for religious communities

The CARES Act has implications for religious institutes and their members. New guidance is continuing to be issued by various federal agencies, including the Small Business Administration (SBA) and the IRS; the information presented below reflects the most recent guidance as of April 6, 2020.

The purpose of this article is to provide an overview of the areas of this highly technical legislation, about which we have been fielding inquiries, so that you might gain a basic understanding of those areas and to alert you to potential resources for your religious institute. Additional information is available through our website, so please feel free to contact our CARES Act experts through this form.

There are three particular areas of interest to religious institutes:

Paycheck Protection Program (PPP)

The Paycheck Protection Program provides a low-interest forgivable loan to qualified organizations, including certain not for profit organizations, who maintain their payroll during this emergency.

Why it is the Paycheck Protection Program attractive?

This program provides forgivable low interest loans if:

• Funds are used to cover payroll costs, mortgage interest, rent, and utility costs over the eight-week period after the loan is made
• Employee count and compensation levels are maintained

Who can apply for the Paycheck Protection Program?

A 501(c)3 organization with 500 or fewer employees qualifies for the program. The CARES Act requires not-for-profit organizations to follow the SBA’s affiliation rules to aggregate all employees from certain affiliated organizations in determining whether the threshold is exceeded; however, additional guidance was recently issued by the SBA which exempts faith-based organizations from these affiliation rules. Institutes should consult their legal advisor for assistance in interpreting these rules with respect to the Institute and its affiliated entities, including sponsored ministries.

How to we obtain the loan through the Paycheck Protection Program?

Application is made through an approved SBA lender, federally insured depository institution, or federally insured credit union. Contact your banker to see if they are such a lender. The banker will be able to provide you with information as to the documentation that will be needed to obtain the loan. The application and additional information about the program can be obtained at sba.gov. A link to the FAQ for faith-based organizations can be found at SBA FAQ for Faith-Based Organizations Participating in the PPP and EIDL.

Recovery Rebates

Most individuals, including members religious institute are entitled to receive a rebate check of up to $1,200.

Who qualifies for recovery rebates?

This is a direct payment program for individuals earning less than $75,000. Members who only receive social security income are also entitled to receive a payment. The amount of the stimulus check will be reduced for a single individual earning over $75,000. An individual earning over $99,000 is phased out of the benefit.

How to apply for recover rebates?

The IRS will be distributing checks or making direct deposits based on information from the most recently filed tax return (either 2018 or 2019). For those who do not file tax returns but have received social security income during the year, the IRS will use the Form SSA 1099 to identify recipients.

For members filing tax returns, the rebate may adjusted based on their 2020 tax return.

Charitable contribution deduction

Historically, members who file income tax returns and contribute all of their income to their institute have not been able to claim an itemized deduction for cash charitable deductions in excess of 60% of their adjusted gross income. However, the limitation has been suspended for the 2020 calendar year, allowing individuals to claim unlimited charitable contribution deductions. Please keep this change in mind when preparing tax returns for members for the 2020 calendar year.