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Churches receive good news on PPP loans

WASHINGTON (BP) — Churches that received small loans as part of a coronavirus (COVID-19) relief program learned Wednesday (May 13) they will not face the risk of a federal government challenge to their certification of the loans’ necessity.

The good news for houses of worship and nonprofit organizations came in a new guidance from the U.S. Small Business Administration (SBA) regarding the Paycheck Protection Program (PPP), which is designed to help employee retention by small businesses, a category that includes churches. Congress designated $349 billion for the PPP in a $2 trillion relief package approved in late March in response to the economic fallout from the pandemic and followed with another $310 billion in late April when the earlier funds were depleted.

The U.S. Department of Labor reported Thursday (May 14) that more than 36 million Americans have filed for unemployment in the last two months.

A previous SBA guideline prompted many religious bodies and nonprofits that had received loans to contemplate returning the funds and not participating in the program because of unclear requirements, according to the Southern Baptist Ethics & Religious Liberty Commission (ERLC). In its latest guidance, the SBA resolved the question by providing a “safe harbor” for any borrower that received a loan of less than $2 million.

The ERLC is “pleased to see this guidance from the SBA giving critical clarification to a program that many churches and charities had already participated in,” said Travis Wussow, the ERLC’s general counsel and vice president for public policy, in written comments.

“We worked with the administration alongside a broad coalition of religious organizations to seek this clarity, and we’re thankful that faith-based participants can move forward with confidence, serving the spiritual needs of their communities and the most vulnerable among us.”

GuideStone Financial Resources, the SBC’s health and financial benefits entity, also commended the new SBA guidance.

“While we would never tell a pastor what he must do, [this] guidance is welcomed in light of the need for clarity around the Paycheck Protection Program and its intended purposes,” Harold R. Loftin Jr., chief legal officer at GuideStone, said in written remarks. “Those ministries that decide this is the proper course for their organizations, given their situations and convictions, will benefit from this information.”

In a post on the ERLC’s website Wednesday (May 13), Wussow said many nonprofits “have applied for PPP assistance based on incomplete information about giving trends and the medium-range economic impact of the COVID-19 pandemic.” With the SBA’s clarification, he wrote, “they need not worry about whether their certification that the application was necessary will be second-guessed with the benefit of hindsight.”

As an example of the uncertainty in the earlier SBC guidance, it left open the question of whether nonprofits would “need to deplete all unrestricted cash” before applying for loans, Wussow wrote.

It is uncertain how many Southern Baptist churches have applied for PPP loans, but it appears many have. Some congregations have chosen not to apply for the loans because of church-state concerns.

The ERLC has not advocated for the PPP in Congress because it desires for each church to be guided by its conscience in deciding whether to seek a loan. After the PPP was enacted, the ERLC provided guidance regarding the religious freedom implications of the program.

ERLC President Russell Moore has said he does not believe the program raises “a religious liberty or union of church and state problem.”

In its May 13 guidance, the SBA described the “safe harbor” this way: “Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.”

The “safe harbor is appropriate,” the SBA said, “because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtain larger loans.” This will foster “economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees,” according to the guidance.

Loans through the PPP are forgivable if certain stipulations are met.

The ERLC has also sought to help churches and other nonprofits by urging Congress to pass legislation that would encourage charitable giving.

Most recently, Moore wrote congressional leaders May 7 to ask them to include provisions such as a Universal Charitable Deduction (UCD) in what is known as the Phase 4 legislation under consideration in response to the economic loss brought on by the pandemic. The ERLC has been championing the UCD since March, but Congress refused to include it in a previous package.

The ERLC and other organizations have expressed concerns the pandemic will reduce giving to churches and nonprofits, possibly resulting in closures. Many Southern Baptist and other churches in the country have not met in person since the third or fourth Sunday in March.

In his letter, Moore called for an unlimited UCD that would be retroactive to 2019 and extend through 2020 and 2021. A UCD would “incentivize all taxpayers to give to nonprofits and charities,” and it would “help mitigate the economic impacts” of the pandemic, he said in the letter to leaders of the Senate and House of Representatives.