LIVE BLOG: This blog is updated regularly to reflect the rapidly evolving situation and emerging federal guidance related to COVID-19 and the related legislative and administrative response.
October 13, 2020 2:35pm EST
SBA unveils a simplified application for loan forgiveness of PPP loans. On October 8, the Small Business Administration (SBA) issued an Interim Final Rule ordering a simpler loan forgiveness application, the SBA Form 3508S, for most PPP loans of $50,000 or less. The new forgiveness application will streamline the PPP loan forgiveness process for eligible organizations, including religious nonprofits. Additionally, for most borrowers, under §§ 1106(d)(2) and (3) of the Coronavirus Aid, Relief, and Economic Security Act, the PPP loan forgiveness amount is reduced if the borrower decreased its number of staff members or staff salary and wages beyond a specific threshold. Under the new rule, many borrowers of loans $50,000 or less are exempt from this reduction in loan forgiveness, even if they have decreased staff or salary levels. For more information on the PPP, visit Napa Legal’s COVID page.
August 28, 2020 10:35am EST
Although talks between political parties continue, Congress and the White House have not reached an agreement on an extension or expansion of coronavirus relief. The next round of relief is expected to include an extension of the Paycheck Protection Program (“PPP”), as this extension is included in some form in both the Republican and Democratic proposals. Although the application window for the program closed on August 8, 2020, over $100B in earmarked PPP funds remain available.
On August 24, 2020, the Small Business Administration issued additional regulations related to the PPP loan forgiveness program. The updates include clarifications regarding forgiveness for organizations which sublease office space and loan forgiveness for rent payments to related parties.
July 7, 2020 3:50pm EST
The SBA recently released a list of PPP loan recipients. For recipients who received more than $150,000 in funding, the recipients’ names are included in the report, along with other data, such as the approximate loan amount. For loans of less than $150,000, recipients’ names are redacted. Visit our FAQ resource for best practices for PPP loan recipients.
As required by S.4116, which was signed into law on July 04, the window to apply for PPP loans has been extended through August 08, 2020. Organizations that decide to revisit the program should be sure to take into consideration our posts, SBA Religious Liberty Updates For Faith-Based CARES Act Loan Recipients and Known Unknowns: Faith-Based Organizations and the CARES Act Loan Programs. These posts discuss religious liberty considerations and other non-financial factors which can significantly impact the determination of whether a PPP loan would be in the best interests of the organization.
On June 05, the Paycheck Protection Flexibility Act was signed into law. The changes make the PPP loan terms and forgiveness program more favorable to borrowers. For more analysis on this Act, visit our blog post Change is in the Air: Updates to the Paycheck Protection Program.
May 12, 2020 4:45pm EST
The Department of Treasury and Small Business Administration recently issued a press release stating that: “[T]he SBA has decided, in consultation with the Department of the Treasury, that it will review all [Paycheck Protection Program] loans in excess of $2 million, in addition to other loans as appropriate, following the lender’s submission of the borrower’s loan forgiveness application.”
May 12, 2020 2:40pm EST
On May 08, 2020, the Small Business Administration (SBA) Inspector General released a report comparing the SBA’s administration of the paycheck protection loan programs with the requirements of the Coronavirus Aid, Relief, and Economic Security Act itself. The report recommends some modifications in the way SBA administers the loans and loan forgiveness program. Relevant recommendations from the Inspector General include a suggestion that SBA relax its requirement that 75% percent of the loan funds be used for payroll during the period of the loan. In the coming weeks, as the SBA reviews and implements the report, additional changes to administration of the loan program are likely.
May 4, 2020 5:30pm EST
On May 03, 2020, the Small Business Administration and the Department of Treasury issued updated FAQs addressing the eligibility of nonprofit hospitals to participate in the Paycheck Protection Program.
The updated guidance states that:
“..the Administrator will treat a nonprofit hospital exempt from taxation under section 115 of the Internal Revenue Code as meeting the definition of “nonprofit organization” under section 1102 of the CARES Act if the hospital reasonably determines, in a written record maintained by the hospital, that it is an organization described in section 501(c)(3) of the Internal Revenue Code and is therefore within a category of organization that is exempt from taxation under section 501(a).”
April 24, 2020 1:00 EST
Additional Funding Approved for CARES Act Loan Programs
Today, the White House and Congress passed the Paycheck Protection Program and Health Care Enhancement Act, which, among other provisions, replenishes small business loan programs originally funded under the Coronavirus Aid, Relief, and Economic Stability Act, Public Law No: 116-136.
The Senate approved the bill Tuesday, April 21, 2020 in a pro forma session, and the House of Representatives approved it on Thursday with President Trump signing the bill into law soon after.
The law adds an additional $310 billion for the CARES Act § 1102(b)(1) appropriations for the Paycheck Protection Program, bringing the total funding for this program to $659 billion.
The law also adds $10 billion for the CARES Act § 1110(e)(7) Emergency Injury Disaster Loan (“EIDL”) program appropriations, bringing the total funding for the EIDL program to $20 billion.
Please review NLI’s overview of the CARES Act Loan Programs, the Paycheck Protection Program, and the related religious liberty considerations. For information on the SBA regulations implementing these loan programs, please see NLI’s posts on the SBA interim final rule and frequently asked questions.
If your organization unsuccessfully applied for a paycheck protection loan during round 1 of the PPP, you may want to check with your lender to ensure that your prior application is still active for round 2 funding.
April 16, 2020 3:15 EST
The SBA issued a “lapse in appropriations notice” today stating that the EIDL and PPP loan funds have already expired. Congress may pump more money into these programs, but the speed at which these programs ran out of money illustrates the level of economic devastation this crisis is causing.
April 15, 2020 2:50 EST
On April 09, 2020, the IRS issued Notice 2020-23 extending the filing and payment date for certain tax obligations to July 15, 2020. The filing deadlines are listed in the notice itself and in Revenue Procedure 2018-58. The extended deadlines may apply to several exempt organization filings, including the IRS Form 990.
April 15, 2020 10:10am EST
On April 13, 2020, the Small Business Administration (SBA), with support from the Department of Treasury, added Questions 21-25 to the Paycheck Protection Program Loans Frequently Asked Questions (FAQ), and on April 14, the SBA added FAQ Questions 26-28. Read NLI analysis here.
April 8, 2020 5:55pm EST
This past weekend, the SBA issued interim final rule and related guidance regarding participation of faith-based organizations in the CARES Act loan programs. The update contains new information and supersedes the SBA's previous statements on this subject. NLI's analysis can be found here. Updates are also available on the Treasury Department's Assistance for Small Businesses page.
For information on Implementing the Families First Coronavirus Response Act, read NLI working group member, Lee Cotugno's analysis.
Additional insight on how to manage your faith-based organization is given in Alan Sear's latest piece in which he discusses five duties that every faith-based leader owes their board to maximize their potential, especially during a time of crisis.
April 2, 2020
In just a few short weeks, the Coronavirus pandemic has become a national crisis with widespread effects. In addition to creating a public health crisis, COVID-19 is causing an economic downturn that is unprecedented in its scope and uncertainty. For both big business and small business, both for-profits and non-profits; the negative effects of this pandemic are widespread and indiscriminate. Among those impacted are the thousands of U.S. faith-based organizations now trying to figure out how to continue operations when their services are needed most. The loan programs in the recently passed CARES Act offers potential assistance for these organizations, but, as described in the post “Known Unknowns,” current regulations seem to suggest that accepting these funds may jeopardize certain religious liberty protections. [New guidance has been issued. See April 8th update.]
The role of faith-based organizations in this time of crisis is more crucial than ever. As the Department of Justice acknowledges: “unlike their secular counterparts, many faith-based organizations are often uniquely suited to bring together residents and local leaders to address pressing challenges and to empower people to improve their lives, the lives of their family members, and their communities at large.”
The reason for this is that faith-based organizations have the grassroots relationships and community trust that secular organizations often lack. They embody subsidiarity, making them the threads that weave together the social fabric of countless communities across the United States, especially in places that are rural or underserved.
With services that care for both the transcendent and material needs of their communities, faith-based organizations are vital to the socio-economic recovery of our country. In fact, a 2016 study from Georgetown University discovered that religion contributes over $1 trillion per year to the socio-economic health of the United States through social services including, but not limited to, “education, healthcare, local congregational activities, charities, media, and food.”
To put this number into perspective, “this is more than the global annual revenues of tech giants Apple and Microsoft combined.” For this reason, our national and local leaders should look to the faithful for guidance and assistance on how we can make our way through this crisis.
There are already examples of these contributions taking place amidst the current coronavirus outbreak. Consider FOCUS, the Christian nonprofit in Georgia that’s “allowing families to pick up bags of food at their main location in Hamilton. But for those who can’t get out of their house, specifically the elderly, it delivers the food straight to their homes.” As one woman remarked of FOCUS, “it’s something wonderful the community can turn to and know they have something when they don’t have anything at all.”
Another example of the innovation and responsiveness of faith-based organizations during this time of crisis is Bella Health and Wellness in Colorado. In keeping with social distancing guidelines, they have launched not only telemedicine appointments but also a drive-thru clinic in order to serve their patients. Without these creative solutions, many of their patients would have been left with few healthcare options.
There will be dozens more stories like these in the coming days and weeks as faith-based orgs do what they do best—serve those in need. Given their important role, it is essential that these organizations are properly protected both legally and financially. Without these protections, faith-based organizations are impeded in their ability to provide the social services that are indispensable to civil society.
To this end, it’s imperative that faith-based organizations understand both the strengths and weaknesses of the recently passed CARES Act, designed to “provide emergency assistance and health care response for individuals, families, and businesses affected by the 2020 coronavirus pandemic.” The Act contains remarkable and almost unprecedented financial relief for small business, including nonprofit organizations, but this relief may have some serious drawbacks.
The Act's promise of financial relief for 501(c)(3) organizations comes through Economic Injury Disaster Loans (EIDL) and Small Business Loans (or “Paycheck Protection Loans”). Unfortunately, as we describe in this post, current regulations suggest that accepting these funds may conflict with an organization’s freedom to pursue its religious mission and identity.
For example, faith-based exempt organizations can only use EIDL funds for secular purposes, according to the last page of the current EIDL application. Because the EIDL form existed before the CARES Act was passed, it’s hard to tell if this restriction was left in as an oversight or was kept intentionally.
Moreover, the recently released Paycheck Protection Program loan application requires the borrower to certify compliance with the Small Business Administration's broad nondiscrimination requirements, which may conflict with an organization’s religious identity. Both the Department of Treasury and Small Business Administration are publishing updates daily, but it’s unclear when and whether faith-based organizations can expect to have their concerns addressed.
While both loan programs offer benefits, it’s important not to treat the programs as blank checks. Instead, leaders should think strategically about these religious liberty concerns and the optimal financing structure for their specific organization. In addition to considering the religious liberty issues, nonprofit executives should work with their board of directors and counsel to understand how loans under either or both programs would apply to their specific organization, not just during the next few months, but for the entire lifespan of the loan. The way the Paycheck Protection Program will look in application will vary widely from organization to organization because both the loan amount and the forgivable amount are calculated as a function of the organization’s unique past and present expenses. The best decision for one organization may not be the best decision for another.
NLI will be tracking these issues in the coming weeks as more information is available. In the meantime, we recommend you read our first post of this series examining the CARES Act and how it impacts faith-based organizations:
Leaders should first take action to protect their employees and organizations in accordance with state and federal guidelines related to the specific crisis. This is important because while faith-based organizations are called to action during times of crisis, it’s imperative that they understand the threat and how it could affect the way they carry out their mission to address it:
Faith-based organizations should then remember what leadership looks like during a crisis. Leadership is not an abstract concept. It is action-oriented and requires the possession and practice of particular virtues. NLI Board Member Alan Sears, who founded the largest religious liberty organization in the world, outlines 5 key principles of crisis leadership:
Finally, faith-based leaders should begin planning and inspiring their team to think beyond the immediate horizon of the crisis. As President Abraham Lincoln said when ordering the continuation of the construction of the Capitol Building during the crisis of the Civil War:
“If people see the Capitol going on, it is a sign we intend the Union shall go on.”
If you stay true to your vision, then your mission shall evolve and adapt to unforeseen circumstances. Napa Legal Institute stands ready to serve you and your faith-based organization during this time of great uncertainty, and we hope you are ready to do the same for those you serve.
Known Unknowns: Faith-Based Organizations and the CARES Act Loan Programs, by John Peiffer (President & General Counsel) &
Maggie Beecher (Research Fellow & Staff Attorney)
Leadership: Leading Your Faith-Based Organization Through a Crisis, by Alan Sears, NLI Board Member
Compassion: Protecting Employee Health During A Crisis, by Louis Brown, Chairman for NLI's Healthcare Working Group